I would like to clean up my credit, but want to know if it is beneficial to close revolving credit accounts that I am not using or will never use again or if I should leave them open. I have never missed a payment on multiple accounts and usually pay more than the minimum payment due. However, I was recently denied increases in limits as well as declined for new accounts. The reason given was "the amount of revolving balances on credit report is too high."
It is good to hear that you are working on improving your credit. If you were declined credit because your revolving balances are too high you should focus on reducing those balances instead of opening or closing accounts. Closing existing credit card accounts could actually hurt your credit scores.
In addition to how much you owe, one of the most important factors in credit scores is how close your balances are to your credit limits. If you close some credit cards, you lose those open credit limits and your overall balance-to-limit ratio, also called your utilization rate, will go up even more.
The only way to remedy the amount of revolving balances being too high is to pay them down. Closing open accounts or lowering your limits on existing accounts would likely harm your credit scores by leaving you with less available credit.
If you really want to repair your credit, your goal should be pay off your balances completely and then continue to use your credit cards for routine expenses which you can pay in full each month. That way you add lots of positive points to your scores by demonstrating that you can manage credit, you never spend more that you can afford, and you never pay finance charges.
Thanks for asking.
- The "Ask Experian" team