Many people believe that keeping credit cards they don’t use is a liability to their credit score, so they close them. In fact, hanging on to cards that you rarely or never use can boost your score.
“A key component of your score is to practice self-control from tapping into all of your available credit,” says Dorothy Barrick, a group manager and financial counselor at GreenPath Debt Solutions. Lenders want to see that you have access to credit but the financial discipline not to exploit it. Closing open accounts will actually hurt your score by skewing your credit utilization ratio, which is the percentage of your available credit being used at any given point. “The smaller the percent, the healthier your score will be,” Barrick says.
The exception to this, says Lohrenz of the Consumer Credit Counseling Service of Orange County, is if you’re unable to control the urge to splurge. Her advice is to leave accounts open and use each one at least once a year for the highest score effect. “However,” she says, “if you can’t use self-control and closing accounts is the only way to stop yourself from incurring too much debt, the credit-score impact is worth it.”