Should you close credit card accounts that you are not using?

Closing Credit Card Accounts

Here are answers and opinions from FAQ Farmers:

• To ward off fraud, yes, you should. Most companies don't penalize you for closing and you should be able to reopen the account at a later time if you decide. I would just call the credit card company and ask their policies, but working for a credit company in the past, you wouldn't believe how easy it is for people to commit fraud, and people don't know because they never see a statement. If you leave it open, just call to check on the account every so often, just in case.

• Yes, close the accounts.

• No, every time you close an account you are lowering your FICO SCORE by raising a flag that shows the percentange of credit debt you have seems to have increased. You should keep all lines open and not have more than seven of them.

• It is my understanding that you should close all credit cards you are not using. With open accounts "out there" your potential debt is high. That makes other creditors (house, car loans) nervous. You SHOULD close those accounts, BUT you should do so in writing. You also should make the CC company add to account notes "closed by customer request". This comment will be reflected on your credit report...which is a good thing.

• Depends on what is important to you. Some people demand their accounts closed because they had the last straw with a creditor. They find out later that their FICO score slumps from 15-25 points for an average score of 680 to a 40 point slump for people with a very high score of 800 or more. In some cases closing an account will allow you to avoid monthly maintenance fees some cards charge or the annual fee, although this is getting rare. Your credit report is a mirror of your ability to pay through good times OR BAD. Keeping accounts open is a good thing. You need OLD and seasoned accounts.

• If you aren't using the card, that doesn't mean you should close the account; in fact, doing so can hurt your credit score (i.e., the score that tells companies whether you are a good candidate to loan money to). These companies, when they look at your credit report, want to see a few things:

1) Do you have a history of credit being extended to you? They want to see a long history, which is why you should NEVER close the account for the credit card you've had the longest, even if you never plan to use it again, unless it charges an annual fee (and, even then, you should first call the credit card company, tell them you've been a long-time customer, and see if they'll waive the fee; it costs more to acquire new customers than to keep existing customers, so it's in their interest to help you keep the account open). Also, leaving the account open keeps it on your credit history, showing that you've have credit for a while. That helps potential lenders trust you--they can see that other people have been trusting you with credit for a long time.

2) Do you have multiple types of credit (credit cards, mortgage, car loan, cell phone, student loan, etc.)? They like to see a mix.

3) How much of your credit do you use? They like to see that you use no more than around 30% of the credit available to you. For example, let's say you have two credit cards--one with a $10000 limit, one with a $20000 limit--and so, you have $30000 of available credit. You owe $5000 on the card with a $10000 limit and $0 on the $20000 card. That means you're using about 17% of your available credit ($5000 of $30000). That's fine. But let's say you close your $20000 card. Now, all of a sudden, you're using $5000 of $10000 in available credit--50%. That looks horrible--like you are living beyond your means, getting by on credit, even though you owe THE EXACT SAME AMOUNT OF MONEY as you did when you had $30000 of credit. But, by closing the account, you jacked up your debt ratio past 30%, making you look like a poor manager of credit. People will be less likely to offer you credit now, and they'll offer you worse interest rates when they do.

First answer by anonymous. Last edit by Sheepgrape. Contributor trust: 247 [recommend contributor]. Question popularity: 306 [recommend question]