Should I Close My Revolving Credit Card Accounts If I Don't Use Them?

While credit cards do not make up your entire credit profile, it's likely they represent a major proportion of your credit history. Your credit report includes summaries of all your financial transactions, including how long you've had a particular account, your payment record and how much, if anything, you still owe. Credit cards also figure into the calculation of your FICO score, which is a numerical representation of your payment history, the total length of your credit history, the types of credit you have, any new accounts you've opened and the amounts you owe on each account.

If you've had a a credit card account since your freshman year of college and you've managed never to miss a payment or exceed your credit limit, that's an account you should never close. Likewise, if you have credit cards with high credit limits, but have maintained low balances, you should retain those credit cards as well. A long history of good credit, plus a low credit-utilization ratio both boost your credit rating and your FICO score. You should also keep credit cards with low interest rates.

If you're carrying a credit card with a 29 percent interest rate and you have decent credit, try shopping for a credit card with a lower interest rate. Likewise, closing a credit card account with a low credit limit may be a wise move. However, if you don't use an account because you've maxed it out, or because the credit card company has suspended your account for nonpayment, simply closing the account won't solve your problems. The account will remain on your credit report and drag down your FICO score until you pay off the balance or otherwise settle the account with the credit card company.

Closing credit card accounts can take a toll on your credit profile. However, you can minimize the potential damage by closing accounts. Pay down the balances on the cards you intend to keep to maintain as low a credit-utilization ratio as possible. If you intend to close several accounts, space out your account closures rather than closing several accounts at once. Don't close any credit card accounts immediately before you apply for any type of credit, including a mortgage. If you're worried about inactivity fees or lowered credit limits on dormant accounts, make small purchases periodically and pay off the balances right away.