Managing my credit score

Dear Dr. Don,
I currently have a good credit rating (I believe it's in the low 700s), but I was curious if canceling one of my credit cards will help improve my rating. I have a credit limit of approximately $10,000 on this card, but I haven't used it in about two years. Will canceling it help, or does it not matter?
-- Joe Jumpstart

Dear Joe,
Fair Isaac & Company (FICO) recommends on its Web site, www.MyFICO.com, that canceling credit cards isn't a good way to improve your credit score, at least over the short term. The fact that you haven't used this credit line in two years demonstrates a level of responsibility toward using credit that reflects favorably on you, and the unused credit line keeps the ratio of outstanding balances/available credit low, one of the factors in having a high credit score.

What's the planned acquisition, loan or refinancing? Managing your credit score for the sake of having a better score is somewhat pointless unless you're planning on doing something with that score. Bragging rights in your golf foursome isn't a reason. If you've got a goal in sight and a higher credit score will help you reach that goal, then get busy on improving your score. Otherwise, leave things alone. A score in the low 700s is better than most. You're likely to be on the cusp of being an A credit if you're not already an A credit, so let it be.

Fair Isaac & Company offers a credit score simulator when you purchase a credit report and credit score on its Web site. It'll let you construct some what-if scenarios concerning actions you can take with your credit accounts and balances. It costs $12.95, but you get to use the simulator for a full month after the purchase of the credit score and report.

Bankrate also offers the FICO Score Estimator on its Web site that will give you a quick idea of how lenders are likely to rate your credit based on how you answer a few questions. There's no charge at all for using it.

-- Posted: Aug. 20, 2004