Say you pay off one credit card completely and you don’t want to use it anymore or have one open that you never use. It might seem to make sense to close that account but, actually, when it comes to raising or keeping credit score high, the best thing to do is keep it open!
Why? Well, unused credit cards affect two of the factors that are used to calculate your FICO score: these are credit utilization and the length of your credit history.
If you have a credit card you’re not using with, say, a $3,000 limit, and you close it, your overall credit utilization has now gone up because your credit limit has decreased! That means your credit score could be lowered. Strange, but true.
Often, the credit cards people want to discontinue are old credit cards, but the older they are, the better for your credit score. Length of credit history accounts for around 15 percent of your FICO score and is calculated by the age of your oldest account, newest account, and the average of all accounts.
Canceling an old credit card, then, can adversely affect your credit score in this way.
All that being said, you have nothing to lose by keeping old, unused accounts open. You do have something to lose by closing them, however! So going forward, be sure to keep your cards open, and be sure to utilize a low percentage of the available credit on each of them. Be sure to pay it off at the end of every month.