Managing Revolving Accounts
As you learned in Part II of this guide, you must always keep your credit accounts open. If your goal is to improve your credit score then avoid closing credit card accounts and any other kinds of revolving accounts. Doing so can really hurt you.
The reason closing down your revolving credit is so damaging is that your credit score puts a large emphasis on your total available credit. Factored into that figure are total balances so the elimination of any credit source makes any balances appear larger.
You should especially avoid closing older accounts because the FICO scorecard formula also notes the age of your oldest account and the average age of all our accounts. It is particularly crucial to keep your oldest account active as getting rid of it can make your credit history look years younger than it actually is.
Just keeping the account open might not be enough either. If you don’t charge something on the account every now and then the lender might decide that the account is inactive and close it for you. No matter who closes it this reflects negatively on your credit report.
One way to keep an older revolving credit account active is to charge something small, recurring and simple on it such as a magazine subscription and arrange that the bill be paid off automatically each month.