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March 4th, 2009

Should You Cancel Old or Unused Credit Cards?

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Financial expert Peter G. Miller says “in a word, no.”

“Imagine that over the years you have applied for a bunch of credit cards — you know, to get 10 percent off at a department store, or a gas card or maybe a major credit card that you no longer use,” explains Miller.

“While such cards may be dormant, they are listed on your credit report…”

“Part of your credit score is related to the amount of consumer credit that you have and the amount that you use. So, if you have five cards that each allow you to purchase up to $2,000 you then have $10,000 in credit lines. If you only use one card and have a $1,000 that’s relatively good news because you’re only using 10 percent of your available credit. (Better news would be if you paid off the $1,000 and did not pay interest and fees through the nose.)”

“Say you cancel the four cards you don’t use. Now your available credit limit is $2,000. You’re using 50 percent of your available credit, not 10 percent. That’s not so good. Your credit score will go down.”

Click here to read Miller’s article “Should You Cancel Old Credit Cards?” in its entirety. Peter G. Miller is a syndicated real estate and personal finance columnist who appears in more than 100 newspapers nationwide. Miller’s two blogs are DebtCity.com and OurBroker.com.

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One Response to “Should You Cancel Old or Unused Credit Cards?”

  1. Are Credit Scores Fair? Is the System Broken? | Mortgage Loan Refinance Guru Says: November 12th, 2009 at 6:20 am

    [...] have suggested that credit card customers not dispose of old or unused credit cards because their credit scores could suffer if they do. From a financial standpoint it makes sense, but is it fair that your credit score will drop if you [...]

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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