Should I Close Down Some Cards?

Consider this example: You have 6 credit cards total. Five of those cards have been active for 5 to 8 years. Your sixth card is a new card that you just received with 0% on balance transfers and purchases for 12 months. You are thrilled with the new card, and feel that you should close down the other five cards you own. FICO-wise, this is not a good decision. When FICO computes your score it is now seeing a two-month credit history, rather than your 5 to 8 year history. So you are better off leaving the other five cards open and placing them somewhere that you are not likely to access or use them.

Keeping those five other cards open also lowers your available credit ratio, which is very important from a creditor's viewpoint. Suppose you do close the other 5 credit cards and just go with your new card. If you max that card out - reach the credit limit on it, your ratio is now 100%. Why? Because you have closed down the other cards you had.

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See Also: FICO Scores
FICO Scores: How important are they?

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