Think Twice Before
Closing Old Accounts

When people order their credit reports, they almost invariably find accounts on their credit report that are listed as open when in fact they haven't used them for a long time, and don't intend to use them again. Revolving accounts such as credit cards are rarely closed unless you specifically ask the lender to close them. You can call or write to the lender (the contact information should be in your credit report) and tell them you want to officially close the account and have it listed on your report as closed at consumer's request. They must, by law, honor your request.

But before you close all your old inactive accounts, consider the impact doing so may have on your credit worthiness. Sometimes closing old accounts can actually hurt your credit rating because it will shorten the average length of accounts on your credit file, making it appear you have a shorter credit history than you actually have. It may also decrease your available credit so if you carry balances you may have a higher ratio of current balances to available credit, which may be harmful. It can also affect a positive mix of credit references.

I know you've heard that having too much available credit can hurt your credit rating. That may be true of some individual lenders, but Fair Isaac Co., creator of the popular FICO scores, says they do not consider the amount of available credit as a stand-alone factor. In fact, FICO says that closing old or inactive accounts can never help your credit but can only hurt it. If you do want to close out old accounts, do so slowly and selectively. And make sure you leave some of the older ones open for good measure.

Gerri Detweiler is a consumer advocate and the author of The Ultimate Credit Handbook ultimatecredit.com

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