August 17
Category: Playbook
There are times when a rookie is the better choice—but not on your credit report! If you have old credit card accounts or revolving credit lines, it’s best to keep them open. Although both open and closed accounts contribute to your credit score, closing an old account could cause it to drop off your report. As a result, your credit history may appear shorter. When it comes to credit, age matters—an older history works in your favor.
Watch Your Credit Utilization
Using too much of your available credit can hurt your score. If you spend more than 50% of your credit limit on a revolving account, your score may start to drop. FICO looks at utilization levels both per account and across all your revolving credit. Having extra available credit helps keep your debt ratio low, which supports a higher score.
Debunking the “Too Much Credit” Myth
You may have heard that too much available credit could lower your score. However, that’s not true. Available credit isn’t a stand-alone factor in credit score calculations. In fact, FICO recommends leaving unused revolving accounts open.
If you still want to close some, start with the rookie cards—newer retail accounts and those with low limits. Don’t touch your oldest accounts. Those are the ones that help you win the credit game!
Offensive Tip: Keep Old Accounts Active
If you haven’t used an account in years, make a small charge to keep it active. Buy gas, grab lunch, or pick up a birthday gift. Choose something inexpensive so you can pay it off easily when the bill arrives.