16 Apr Should I close some credit card accounts?

 Q. I’m trying to decide if I should cancel some of my credit cards. I only really use one of them, and the others are sort of inactive. Is there a reason to hold on to the other cards?

A. You’re smart to ask the question rather than just cancel the cards.

There can be good reasons to leave credit card accounts you don’t use open.

One reason is they can help your credit scores, said Gerri Detweiler, director of consumer education for Credit.com.

“One factor many scoring models look at is your debt usage ratio which compares your balances to your credit limits,” Detweiler said. “Open accounts increase your amount of available credit, and as a result can help this ratio.”

She said the debt usage ratio is calculated both on each individual account and in the aggregate. So if you close those accounts, you have less credit available, and as a result, your debt usage ratio increased.

Paying your balances in full doesn’t always help here, she said. Your balance is typically reported around the statement closing date, before you pay your bills.

Detweiler said one option here is to check your debt usage ratio and see where you stand.

“If it’s already super low, closing an account or two might not hurt,” she said.

The other issue is the age of the credit history. It’s to your benefit to show you’ve had credit for a long time. But when you close an account, while it won’t immediately disappear from your credit reports, eventually, it may. When it does, if the account was an older account, your credit history could be shortened, which could affect your credit scores.

Even though you’re only using one card now, Detweiler said you may want to keep a second account open as a backup plan.

“This issuer could do something she doesn’t like — close her account, raise her interest rate going forward, etc. — and then she’s stuck having to scramble for a new account,” Detweiler said. “The same thing applies if her card is compromised. She’ll have to wait for a new card, and in the meantime, may be stuck.”

It’s nice to have an extra card as a back up or leverage when needed, she said.

If you do decide to close the accounts, Detweiler said you may want to do so slowly and selectively.

“She may want to consider keeping one of the oldest ones open — and use it from time to time to keep the account active — then watch her credit scores in between to see how they are affected,” she said.

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This story was first posted in April 2015.