Should I keep old credit cards or cancel them?
Old credit cards – Keep them or close the accounts?
Should you always cancel old credit cards that are no longer used when you open a new credit card account? The answer to this question depends on several factors that vary from person to person.
First, how much total credit do you have available to you? Too little credit can potentially be a bad thing. Make sure that you will be comfortable with your total available credit before closing an old credit card account.
However, too much credit can potentially be a bad thing, too. Do you really need the additional credit available through the new card and the old one? If you do, you might want to keep the old one. But be aware that more credit available now can lead to more debt down the road.
Finally, what other advantages do the old credit cards have? You may want to keep it to earn rewards or receive other special savings at a later time. Another possibility would be to have a credit card available only for emergencies.
In some cases, it can be beneficial to keep old cards and not cancel them. If you have a positive history with a specific credit card, paid off all balances and made every payment on time, keeping this credit card account active can potentially affect your credit score in a positive way. Even if you no longer use the card, your credit score can still benefit from the card’s positive history.
All things considered, it’s often best to keep — not immediately cancel — old credit cards when you get approved for a new card. Take a short time to look at all factors involved before deciding whether to keep the old card or not. Don’t make a quick decision without researching how closing an old account may affect your credit score.
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2 Responses to “Should I keep old credit cards or cancel them?”
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Nancy Buckwalter Says:
My husband I paid off two credit cards and one credit card loan several months ago with a low interest home equity loan to be paid off in three years. Will closing out these credit cards affect our credit scores? I remember Suze Orman once saying not to close them but I was just told that has changed and having all that line of credit available and not useing the cards could actually hurt our scores. What is the truth in this matter? Please advise us. Thank you
September 21st, 2009 at 10:01 am -
Matt Says:
The answer to this question varies from situation to situation. However, what you said can be true – it may be better to keep (and not close) those credit card accounts. Here is why many experts say this:
The Fair Isaac Corporation (FICO) site explains What’s in your FICO score. Scroll down to “Amounts Owed” on this page and take a look at the 4th bullet point: “Proportion of credit lines used.” According to this page, part of what determines your credit score is “proportion of balances to total credit limits on certain types of revolving accounts.”
So, if you leave these credit card accounts open, you will have access to more credit, and will therefore be using a lower proportion of your total available credit. And using a lower proportion of your available credit can reflect positively on your credit score.
Again, it is hard to answer specific questions without knowing the complete credit picture, but the above explanation should give you some insight into why many experts advise keeping (and not closing) unused credit cards and other revolving lines of credit.
September 22nd, 2009 at 10:38 am
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