We have an article that details the benefits of canceling old, unused credit cards, but is this always a good idea? The answer to that is no. There are times when keeping a credit card line open is actually more beneficial to your overall credit health than closing it.
One occasion when you might want to hold off on canceling those older credit cards is when you plan to apply for a major loan. Major loans include such things as a home loan, car loan, boat loan, or other loans in excess of a few thousand dollars.
The reasoning behind this is that closing credit line accounts, especially those that you paid on time and in full, can actually lower your credit score.
Paying down accounts that still have a balance is important to your credit score, but simply closing paid off accounts will not help you improve your credit score at all. As mentioned above, canceling a large amount of unused credit may actually hurt your overall credit score.
You may be saying to yourself: That doesn’t make sense!
Here is how this works. It has to do with how credit bureaus calculate your score.
The reporting agencies use many different factors when...
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