Category: bank

Myth No. 3:

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Closing old account that you don’t use anymore will boost your score

It is true that having too many accounts can put a dent in your credit score, but by the time you realize that, it’s too late. The problem lies in opening too many accounts in a very short time span. And closing them will not help your score. Especially not with the older accounts. In fact, it could result in more harm.

How it can cause more damage:
Closing your oldest accounts will result in making your credit history seem shorter than it actually is. And when it comes to credit histories, size does matter. FICO looks at the age of the oldest account, the latest account and the average age of all your accounts when deciding on a length of your credit history. The history is 15 percent of your total score. Besides, closing these accounts would mean shutting the door on the untapped credit potential you have, which in turn makes your current debt appear larger. This is reflected in the debt-to-credit ratio.

Keep your old accounts, but make sure they don’t have any annual fees or costs associated with them. Also, hide the cards somewhere you won’t use them. If you still wish to close accounts for any other reason, close the latest one with the lowest credit limits.

Just be aware that it will not increase your score.