As per the experts, closing out old credit card accounts that you are no longer using can be detrimental to your score. It is far better to let an old credit card sit on your credit report than it is to close it out. It may not sound reasonable to keep old information hanging around but it is something that can help your score.
You are not alone in thinking that closing an old credit card account out will bump you up a few points. Many people believe that it will and in turn close out the account on old cards that they are not using anymore. It’s a big mistake. When your credit score is being computed one of the factors that the formula considers is the “length of credit history”. That old card that you are not using anymore is a prime example of your long credit life. The length of your credit history accounts for 15% of your score and, while it is not way up there on the importance ladder, it can add some points to your score. Consumers often think that less is more when it comes to their credit but that is not always true. Showing less accounts can also ding your credit score negatively. Getting your credit act together does not necessarily mean closing out old accounts. As a matter of fact, it rarely means that. Keeping your accounts open, even if you are not using them. can bump up your score.
What You Should do Instead
Instead of kicking that account to the curb and closing it out, you should:
- Use it occasionally and pay it off at the end of the statement cycle
- Keep it open
- Only use a small amount of the available credit (9% is good)
Even if the card is not great (high interest, fees etc.), you are still better off using it for small purchases like gas and then paying it off when the statement comes because it is going to help your credit tremendously. Showing that you have been creditworthy for a long time will be reflected in your score.
Check Your Reports
Another way to boost your score is to keep your eye on your credit reports. Check for accuracy frequently and fight back if you think something is wrong.