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Topics addressed on September 20, 2006:
Credit scores aren’t the only factor to consider when closing accounts
We have a great credit score, but we want to reduce the amount of credit cards we have. We would like to cancel two of them, which we have had for several years. We never missed any payments, but we only want to use our more recent cards. Will canceling these older cards hurt our credit? Since we do not use these older cards we want to remove risk of theft, etc.
Closing the accounts can negatively affect credit scores because doing so increases your balance-to-limit ratio, making it appear that the total balances you owe compared to your total available credit has suddenly and dramatically increased.
The standard advice today is to leave unwanted accounts open and to simply not use the cards. You can lock them away in a safe, put them in a drawer, or shred them.
Because you have a very good credit score, closing a couple of the accounts for peace of mind probably won’t affect your credit scores in a meaningful way, especially if the balances on your other cards are very low.
When you have very good credit scores, the numbers can change but still indicate you are a very good credit risk, so you can continue to get the credit you want at the rates you want.
Closing accounts only becomes a factor when your credit scores indicate you are already near a lender’s cutoff point. A shift in your scores caused by closing the account could result in slipping below that cutoff causing your application to be declined or forcing you to pay higher interest rates or fees.
If a person is a borderline credit risk, they might want to close the accounts anyway if they are great temptation to over spend. Doing so might cause their credit scores to temporarily prevent them from qualifying for new credit. But, in the long term removing that temptation could keep them from getting into deep credit trouble.
The bottom line is that you should do what is best for your financial future, not chase a number.
Thanks for asking.
- The "Ask Experian" team