In the world of credit scores, credit card accounts fall into the category of revolving debt. So if you have a blemish on your credit report, you should start closing credit card accounts, right? Especially if you’re not using them? Not so fast. Danny Rosario, credit repair expert, says the opposite is true.
Here’s why you can actually hurt your score when you close a credit card.
Say you have an American Express card you’ve been using for 30 years and you don’t like it any more. Maybe the terms of your more recent credit cards, acquired within the last 10 years, are more favorable. The problem with killing off the old account is that part of the FICO score is determined by giving positive weight to the time span over which an account has been open. If you close the hypothetical American Express account then it’s going to look like you’re a young person with limited credit history.
That’s not good.
You want to keep longer credit cards and not be so fast to switch companies. You don’t want 20 different revolving credit cards coming out of your wallet at once. It’s easy to fall into the trap of applying for department store cards that you use once to get a 10% discount on one purchase and then you never pull the thing again.
A better strategy is to have three to five credit cards and use each one at least every six months. That’s important. A dormant card doesn’t help your credit score any. Rotate through your cards to make sure you don’t let any of them go past the six month limit.
Take that, credit card ignorance!
