Should I Close My Unused Credit Card Accounts?

Consider this example: You have 5 credit cards total. Four of those cards have been active for 5 to 8 years. Your fifth card is a new card that you just received with 0% on balance transfers and purchases for 15 months. You are excited upon receiving your new card, and feel that you should close the other four accounts in your name, since you no longer want to use them.

FICO-wise, this is not a good decision. When FICO computes your score, it now sees only a two-month credit history, rather than your 5 to 8 year history, and consequently, your FICO score will suffer.

You are better off leaving the other four cards open with a zero balance and placing them somewhere that you are not likely to access or use them. The 5 to 8 year history that you worked hard to build will continue to work in your favor only if the accounts remain open.

Keeping those four other cards open also lowers your available credit ratio, which is very important from a creditor's viewpoint. Suppose you do close the other 4 credit card accounts and only use your new card. If you reach the maximum credit limit on the new card, then your debt ratio is now 100%. Why? Your other accounts are now closed!

Furthermore, leaving unused accounts open is a good idea simply because credit card companies will often apply special offers and low or 0% interest rates to dormant accounts. Credit card companies want dormant accounts to be used, as it is cheaper for them to entice holders of dormant accounts to begin using them again, than it is for them to obtain new account holders.