When it comes to maintaining good credit scores, closing a credit card account is a bad idea.
When you close a credit card account, you hurt — not help — your credit.
Your credit score looks at a variety of factors including: the length of credit history, which includes the amount of time all of your credit card accounts have been opened; and your credit utilization, which is the amount of available credit that you are currently using.
Maintain the length of your credit history
Length of credit history accounts for 15 percent of a credit score. And when you close a credit card account, the account and its history will eventually disappear from your credit report. (This usually happens within 10 years of closing an account.) And once it’s gone, it can no longer bolster your credit score.
So resist the urge to clean up your credit file by closing credit card accounts. Keep them open and enjoy the benefits of all your years of being a credit customer.
Keep your “credit utilization” low
Your amount of debt makes up about 30 percent of your credit score, and that calculation includes your credit utilization — the percentage of available credit you’re using on each credit card account that you carry, plus the total credit limits and balances of all of your revolving credit card accounts.
You want to keep your overall credit utilization and your credit utilization on each individual revolving card account as low as possible. And that’s why keeping credit card accounts with low balances and big credit lines is so good for your credit score — it keeps your total credit utilization low.
If you a struggling under a mountain of credit card debt, the best thing to do for your credit score and your wallet is to pay down your balances and keep all your current credit lines open.
Wondering about your credit score now that you understand just how important account length and credit utilization can be? Use Credit.com’s free Credit Report Card to monitor your score. It’s updated every month so you can check your progress as you pay down credit card debt and move your credit utilization to 10 percent or lower, which is ideal.