Do Not Close These Credit Cards

1. Don't close any credit card that still has a balance

When you close a credit card that has a balance, your total available credit is reported as $0. Since you still have a balance on that credit card with no credit limit, it looks like youíve maxed out. A maxed out credit card, or one that appears to be maxed out, can have a very negative impact on your credit score since your level of credit card debt is 30% of your credit score.

2. Don't close your only credit card with available credit

Closing out this card will decrease total available credit and, subsequently, increase your total credit utilization. Just like closing a credit card with a balance, closing one without a balance can also affect your credit score.

3. Don't close your only credit card

Since part of your credit score is based on the different types of credit you have, keeping a credit card in the mix will add points to your credit score. You could get turned down for a credit card or loan in the future because the bank thinks you donít have enough experience with credit cards. You might close a credit card that suddenly raises your interest rate or introduces an annual fee.

4. Don't close your oldest credit card account

Lenders tend to view borrowers with short credit histories as riskier than borrowers with longer histories. So closing out your old credit cards shortens your credit history although it won't impact your credit score immediately. However, once the credit card falls off your credit report 10 years down the road, you might see an unexpected credit score drop. You can close out a newer credit card that you no longer use as long as the card does not have a balance and you have other credit cards.

5. Don't close the credit card with the best terms

If you have a credit card that has a low interest rate, no annual fee, and other perks like travel insurance, keep it open. A credit card that charges you less for making purchases is far better than one that charges you more.