Was curious about the "myths" regarding closing CC accounts so did some reading. Length of time an account has been open has little bearing on the credit score. Credit limit does. Available credit to outstanding balance is a major factor in credit score. If you have 0 or near 0 balance having 2 or 12 open accounts will be similar.
First there's this from BOA:
Fiction: The more credit cards you have, the better.
Fact: You don't need to restrict yourself to just one card, but refrain from opening credit cards too frequently. The number of credit cards you carry makes up about 10% of your credit score, so having a large number of credit cards may negatively impact your credit score.
Then this from gobankrates.com
How Closing Accounts Affects Your Credit ScoreThis is not to say that closing an account can’t have a negative impact on your credit score. However, the relationship between open or closed accounts and your credit has nothing to do with how long you’ve had those accounts.
One of the biggest factors that affects your credit score is your
credit utilization ratio — a technical term for the amount of debt you owe versus the total amount of credit extended to you. Credit bureaus view a high ratio as a red flag, as using too much credit at one time is a sign you’re financially strapped and in danger of default. A low ratio — having very little debt in comparison to your total credit available — demonstrates that you have no problem meeting your financial obligations.
This means that when you close an account, you’re reducing your available credit while your total debt remains the same, thus raising your credit utilization ratio to a potentially harmful number.
For example, say you have two credit cards: One has a limit of $2,500 and you are currently carrying a balance of $1,000, while the other card has a credit limit of $1,000 with no balance. This means your total debt is $1,000 and your total credit available is $3,500 — your credit utilization ratio is about 28 percent.
Now, imagine you close the card with the smaller limit because you aren’t using it and want to “clean up” your credit. This reduces your available credit to just $2,500 (you still owe a total of $1,000), and raises your credit utilization to 40 percent. It’s recommended that you keep your credit utilization below 30 percent — so by closing this account, your credit score will likely take a hit. Note, however, that you could have owned that credit card for six months or six years; the age of the account is irrelevant.
When Is It a Good Idea to Close a Credit Card Account?While closing an account rarely helps your credit score, it makes no sense to keep one open simply due to the fact that it’s old. Here are a few scenarios in which closing an old credit card, or other revolving credit accounts, is okay:
- Annual fee: If you’re hanging onto a card that you rarely use or don’t need, and are also paying an annual fee to keep it, you’re just wasting money. As long as the credit limit is not very high, go ahead and close it.
- Spending problems: Some people control their spending better than others — if you regularly struggle with overspending or debt issues and an old credit card in your wallet is more temptation than you can handle, get rid of the card and save yourself trouble down the line.
- You’re debt free: When you don’t owe any money, your credit utilization is zero. At this point, it’s fine if you want to close an account because that ratio will remain at zero regardless of the amount of credit you have available.
Again, you really can’t improve your score by closing an account, and generally, the more credit you have to your name (that’s not being used, of course), the better your credit profile looks. That’s why it’s usually best to go ahead and keep your accounts open, unless there’s a reason like one of the above that would make closing an account a smart move. Know that in any case, though, you can’t negatively affect your credit history by closing an older account.
Imagine if you had to pay for things using real money! Oh, the horror!
