Many people believe that all they need to do to boost their credit score is to pay off certain debts and close some accounts. This is not entirely true. Consider your options carefully before cancelling your accounts for a number of reasons.

Firstly, you’ll have to reapply for credit if you close an account you need to keep open (like all of your credit card accounts), and all those credit inquiries will actually lower your score.

Secondly, most bureaus give high favorable points to those who have a good long term credit history. That means that closing the account you have had since college may actually hurt you in the long run. If you have credit accounts that you don’t use or if you have too many credit lines, then by all means pay off some and close them.

Doing so may help your score – but only if you don’t close long-term accounts you need. In general, close the most recent accounts first and only when you are sure you will not need that credit in the near future. Closing your accounts is a bad idea if:

1) You will be applying for a loan soon. The closing of your accounts will make your score drop in the short term and will not allow you to qualify for good loan rates if your utilization spikes.

2) Closing your accounts could make your overall debt balance too high. If you owe $10 000 now and closing some accounts would leave you with only $1000 of possible credit, you are close to maxing out your credit – which gives you a bad rating.

In the short, closing accounts may lower your score due to utilization, but in the long run it can be beneficial.

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