Closing
Inactive Accounts is Smart: Any credit card that you don't plan to use again
is like an open window to identity theft. These are the cards that end up in a
drawer and are forgotten about. "Out of sight--out of mind" can make
you vulnerable to unauthorized activity. Consider closing your unused cards.
Check
Out Your Credit Report: Your credit report can help you choose which cards
you should close. Look for negative signs associated with your accounts - late
payments and high interest rates - and consider closing these accounts. Even credit
cards carrying a balance can be closed, if necessary. New charges will not be
authorized while you pay down the balance.
Maintain
a Manageable Number of Accounts: Closing all your credit card accounts can
be viewed negatively by the credit bureaus. You need to maintain enough open accounts
so that your debt-to-available-credit ratio is below 50%--or in other words, never
spend more than 1/2 of the credit available to you. For example, if you have total
available credit of $10,000 and have charged $7,500 of that amount, you have used
75% of your available credit. As odd as it sounds, your credit score will improve
if you accept another credit card offer to bring the ratio back up to 50% or less.
Keep
Aging Accounts = Valuable Credit Score: Long-standing accounts that you have
responsibly managed in the past carry a great deal of positive weight in determining
your credit score. It's in your best interest to maintain these accounts and to
use them occasionally to maintain an active status.
Cancel
in Moderation: A red flag is raised when you cancel several credit card accounts
at one time. Credit reporting agencies will be leery of these actions because
they may reflect a change in your financial status, i.e.: employment termination,
layoff, etc. If you see a need to eliminate several accounts, close them over
time - spacing them to avoid a negative reaction to your credit score.
Steps to Close an Account
