Is it advisable to close unused credit card accounts?

Closing unused credit card accounts is not advisable if you want to maximize your credit scores. It’s actually better to keep these accounts open, even if you don’t use them. This is because of something called the utilization ratio, which plays a significant role in determining your creditworthiness. The utilization ratio is the amount of credit you’re using compared to the total credit limit available to you. By keeping your unused credit card accounts open, you increase the total credit limit available to you, which helps lower your utilization ratio. Ideally, you want to have multiple open credit cards with balances below 30 percent of the credit limit.

On the other hand, if you decide to close down an account, you lose that available credit and it no longer factors into your utilization ratio. This can potentially increase your utilization ratio and negatively impact your credit scores.

So, the bottom line is, it’s generally better to keep your unused credit card accounts open to maintain a healthy utilization ratio and improve your credit scores. If you’re looking for more guidance and tips on how to manage your credit effectively, consider joining the Credit Secrets program. Take control of your financial future and start building a better credit profile today.