 Closing
accounts to manage credit score
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 Dear
Dr. Don,
My wife and I are in the process of buying a home. We have a very
large number of credit card accounts that have been inactive for
at least a couple of years. We primarily use only two of our cards,
pay off balances each month and the balance rarely exceeds 10 percent
of our limits on the card. We have been told to close all of the
other accounts. Is that a good idea, and how quickly should we close
them if we should. Will closing them all at once have an adverse
affect on our credit?
-- Matthew Manage
 Dear
Matthew,
Closing the accounts isn't a good idea. Even though you're not using
the accounts, they do show up on your credit report, and the length
of credit history on open accounts is one consideration in your
credit score.
Besides bringing down the average age of your open
accounts, closing accounts works against you in credit scoring by
reducing the ratio of outstanding balances to credit available.
According to myFICO.com,
your FICO score is based on five variables in the following proportions:
- Payment history equals 35 percent
- Amounts owed equals 30 percent
- Length of credit history equals 15 percent
- New credit equals 10 percent
- Types of credit in use equals 10 percent.
The myFICO site also specifically recommends against closing accounts
as a short-term strategy for raising your credit score. The site
also recommends against getting new cards to increase the amount
of credit available or to increase the types of credit in use.
The Bankrate feature, "How
credit scores work, how a score is calculated," explains
credit scoring in greater depth.
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