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Should I close the credit card accounts I never use?

March 27, 2012: 6:00 AM ET

I have a large number of open credit card accounts with $0 balances. I open them for the promotional offers, and then I pay them off and never use them again. I was advised that if I close them, I would lower my credit score. I only have one credit card that I use. How can I handle this without lowering my credit score?
–- Name withheld

You heard correctly—closing unused credit cards can lower your credit scores, but not in all circumstances. "If you keep the balance on the one card you use to less than 10% of the card's credit limit, then you're safe to close the other accounts," says John Ulzheimer, president of consumer education at SmartCredit.com. "If, however, your balance consistently makes up more than 10 percent of the credit limit, then consider leaving at least one of your unused cards open."

Basically, one part of your credit score is based on how much of your total aggregate credit you're using at any one time—or your utilization ratio. When you close other accounts, you essentially raise your utilization ratio, since there's less available credit to offset the charges you're making. But if you close your other cards and you're still maintaining a ratio of 10% or less on your remaining card, you should be in the clear.

--Kate Ashford

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