Trying to get out of debt? Did you vow to cut up all those credit cards? Wait! Don’t close all those credit card accounts at one time! Here’s why: part of what makes up your credit score is your percentage of available credit. The more available credit you have, the better for your score. So, say you have credit limits between all your cards that total $10,000. And you have two cards maxed out at $6,000. That indicates you are using 60% of your available credit. If you close all the cards with no balance in an effort to raise your credit score, and only leave open the accounts with the $6,000 balance, you are now using 100% of your available credit. This lowers your credit score. Another part of your credit score is your length of credit history. Closing out your oldest cards shortens your length of credit history.
So what should you do? Leave all the credit card accounts open. If you think you’ll be tempted to use them, cut them up. But leave the accounts open. Once you’ve paid down your debt or paid it off, then you can close out the newest accounts if you want to. According to Dani Arthur at Bankrate.com, you want to keep revolving debt around 50% of your available credit. See 5 steps to do-it-yourself credit repair for more information.