Closing the credit cards that you don’t use will help boost your score…False!
It is a common myth that closing unused credit card accounts will be good for your credit score. In fact, it will actually hurt your credit score. It can negatively affect your credit score in two ways.
1. A large chunk of your credit score is determined by your utilization ratio. This ratio is created by comparing your credit in use to your available credit. Simply put, if you had only 1 credit card with a $1000 limit and you had a balance on the card of $900, your would be using 90% of your available credit. The closer you get to maxing out your cards and using a large percentage of your available credit, your credit score would be negatively impacted. For the sake of the credit score, it is best to keep your balances as low as possible.
When you close unused credit cards, you eliminate available credit. By eliminating available credit, you would likely increase your utilization ratio and negatively affect your credit score.
2. Another factor in determining your credit score is the history of your accounts. 3 years of history on a credit card gives a better idea of how you pay your bills than 3 months will. Because of this, the longer your history the better your score will be. When you close credit card accounts, you will eliminate this history. If you really are uncomfortable keeping unused credit card accounts open, close the accounts you have had for the least amount of time keep open the accounts you have had for a number of years.