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Canceling Unused Credit Could Diminish Your Score
Canceling a few barely used credit cards may seem like a smart move, but it could
actually hurt your credit score. Sometimes more really is better. The trick is to
know when.
Credit Score Calculation
The more credit you have available, even if you're not using it, the more it could
help when totaling your credit score. A credit score is calculated in part by taking
the amount of debt on all your credit cards and dividing it by the total amount
of credit available on those accounts. This formula should result in a fraction
less than one. In general, the smaller the fraction, the better your credit score.
Note: Opening a bunch of unused credit lines will not improve your score.
Hold 'Em or Fold 'Em
If you have some card debt and you plan to apply for a loan soon, credit experts
recommend holding on to all of your cards. On the other hand, if you don't have
a lot of credit card debt, feel free to cancel as many unused cards as you want,
starting with your newest accounts. It's important to keep older accounts open to
show a longer history. Note: You can cancel cards with an active balance. Simply
ask your creditor to close the account to new charges and continue paying down the
balance each month.
More Credit Information
