Myths abound about the effect of closing unused credit card accounts on your credit score. The truth is that the effect of closed accounts on your credit score often depends on your credit history.
Significance
It's essential to understand the significance of accounts to your credit score. While it would seem that having more credit available is a liability, MSN Money's Liz Pulliam Weston states, "the credit score looks at the difference between your available credit and what you're using... Shut down accounts, and your total available credit shrinks, making your balances loom larger, which typically hurts your score."
History
Closing an account with a good payment history can hurt your credit score years from now. "In the short run, you maintain that history," explains Bankrate's Leslie McFadden, "but once that comes off your credit report, you lose that good history." Good credit history is significant, considering that about 15 percent of your credit score is based on length of credit history.
Potential
While there is the misconception that having too much available credit means that closing accounts can improve a credit score, the truth is not as clear-cut. If you have a number of open accounts and a long credit history, closing one account is not necessarily detrimental. However, closing all of your oldest accounts could negatively affect your credit score down the line by giving the appearance that your credit history is not as well established.
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