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Dear Dr. Don,
If I have credit cards that I don't use, should I keep them or should I close the accounts and destroy the cards?
-- Robert Rescind
Dear Robert,
If you're not paying an annual fee on the cards and you have a safe place to keep the cards, either at home or in a
safe-deposit box, my recommendation would be to hold on to the credit cards for the contribution they make toward your
credit history and credit score.
Your credit score is based on the information in your credit report. As the graphic below shows, there
are five different categories of information on your credit report that go into your credit score:
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| Elements of your credit score |
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When you close an account with a zero balance, you lose the length of credit history from those account
relationships. You also lose the credit lines in the calculation of amounts owed/credit available.
The payment history, however, stays on the credit report -- with negative information staying on for seven
years. The Bankrate feature "Closing credit
card dings credit score" explains the issues in greater depth.
Managing your credit score helps you qualify for the best possible interest rate when applying for credit.
Your credit score also may be used in setting your insurance rates, and for renting or employment decisions.
If you are uncomfortable with the number of credit cards you have, pruning a card or two from your portfolio
is OK if you have a good to excellent credit history and no immediate plans to apply for credit or rent, or to seek employment.
The Bankrate feature "Closing your credit card
account" can help you with that process, including a template for a letter to send the credit card provider.
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