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Close Unused Credit Cards and Credit Advice

Mark Cappel
UpdatedOct 23, 2008

Will closing unused credit cards improve my credit score?

Here is my situation. About a year and a half ago I applied for 2 credit cards through Citi bank to begin to establish positive credit, knowing that I would be purchasing things under my name in the near future. I was approved for a Citi dividend card which I have been using. I called Citi with a question in regards to my most recent bill and found out that I have two other cards open. The representative I spoke with said I was approved for the second card as well, although I never received any card or information. For the past year or so I just assumed I was not approved for it. I can understand how that could have happened as it could have been thrown out by mistake. I have NO idea how the 3rd card was opened, as I did not apply for it and did not send anything accepting a card offer. They are currently looking into this and neither of the cards have been used. My question is what should I do with these three cards? I have been told that it looks bad to close a credit card, but does it look bad to have three cards? The representative said that I could consolidate the three cards into one with the combined higher credit limit, thus making my existing balance a very small fraction of my limit. Or should I just leave all three open and not touch them?

The answer to your question depends on which one of your accounts has been open the longest. The account you have had for the longest period of time, and kept in good standing, has the strongest positive effect on your credit score. Now, if Citi is going to consolidate all of your lines into the one existing account, at an attractive interest rate, then go ahead and do it. As you have not had any transactions on these other accounts, and because they were opened after your original account, it is not going to impact your credit dramatically if you close them. In addition, the fact that you will be using a fraction of your consolidated credit limit, is going to counter the slight dings that the account closures are going to cause. As you are interested in improving your credit, let me give you a little information on how your score is calculated.

The most important step in understanding your credit score is to know what a credit score is and how it is determined. A FICO credit score comes from the Fair Isaac Company. Three quarters of all lenders use the FICO credit score when considering requests for loans or credit which is why this is an integral part of understanding your credit score.

Given below is a rough formula used to calculate your score:

~ 35% on your payment history

~ 30% on the amount you currently owe lenders

~ 15% on the length of your credit history

~ 10% on the number of new credit accounts you've opened or applied for (fewer is better)

~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The most important item is your mortgage. Make sure you pay it on time every month in order to maintain a good credit score. Installment loans, where you borrow a set amount to buy new furniture or appliances, for example, are given more weight than credit cards.

Keep your spends well below your credit limits, because your FICO credit score will definitely be lower if you are maxed out on your credit cards. Don't have more than two or three credit cards because a large number of credit cards also lowers your FICO score. Don't apply for several credit cards at one time; it makes lenders nervous and will lower your FICO score. Other factors also affect your score, such as home ownership, which raises it, and moving frequently, which lowers it. has comprehensive information about credit scores and articles on how to understand credit scores.

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