I disagree with this advise and here is why. I followed that suggestion some years ago after I paid off the entire amount. But, credit card companies have found new ways to make money!! If you don't use it for a certain period of time, they charge you a fee. Or an annual fee is charged ect.... I purchased my first home, November of last year and my score was 728. It didn't hurt my credit at all. I know every situation is different, but in my case I had no debt left and I paid the "fees" and closed the accounts. They will never get any more money out of me! jd

This link seems to simplify what I think Clark is saying.
http://credit.about.com/od/toughcreditissues/a/closecards.htm

I did this recently, with a loan from my 401K. I closed a few of them, due to duplication & some were charging fees. I'm glad they are closed. I also agree with Nancy who said, they will close them if you don't use them. This happened to me last year with a number of them. It seems like an evil curse to have to have these cards & use them to keep a good credit score. My plan is to not use the cards I have left, unless I absolutely have to, which I hope I don't. I guess if they close them, so be it! I also agree with those that hope these Credit Card companies go bankrupt with all of garbage that they have done to so many people over the past number of years!

Would I want to closed these cards if I want to buy a house. My credit score now is about 720 and I still have about 4 gas cards and two vise/mc and I may used sometimes. My realtor tell me to closed these out well should I ?

credit card companies will close your account if you are not using it.

3 years ago we had our visa number stolen and we closed all of our accounts that we did not use. it did not change our crdit score a bit. still in the 800s

I had a credit card that wasn't used for a year and when I tried to use it about three weeks after a year for a special it was closed on me and the bank charged me $35. So I got it reopened and got the $35 that was charged to me back into my pocket with a 3% cash back for 6 months then it goes down to 1% cash back after that. I think I'll just use that card about once a month just to keep it going. I did get a credit reduction from $11,500 down to $2,500 but that will increase again. Besides I kind of like my Star Trek card.

I believe you can call the credit card company and most of the time they will replace your annual fee card with a no fee card. Granted this will probably be a no points/rebate card but you'll still have the open credit.

I feel that having credit cards is just playing with fire.

If you pay them off and then leave them open, it's just opening up the possibility for you to just call up the provider and ask for another one!

And then begins the cycle of spending and debt all over again. Maybe most people think they can be responsible with cards...

Don't make that mistake. Sooner or later you'll get bitten. I've spent the last year of my life paying off credit card debt. Once I'm out, I'm cancelling all my cards. I never want to owe anyone ever again.

why pay yearly fees on an account you won't use???

I finally got lots of debt paid off. I had two cards cancel on me once I paid them off due to inactivity. I now rotate my cards. I use primarily one that pays back up to 4% on things and rotate the others once a month for a tank of gasoline or whatever. Pay then off as soon as the amount shows on the website before the statement comes out and I hope I'm playing the game and rebuilding my credit score for when I have to buy a car or whatever.

Clark, I recall your advice on "paid off" credit cards that was not included here: your advice was: "Use paid off credit cards once every six months so the credit card company won't cancel the card holder and ruin a cardholder's credit rating." Perhaps, you should amend this advice to include the whole package of advice for us all on "how to handle paying off creit cards and maintaining a good credit rating."

Love your show and emails: we love you, Clark!

Jean M. Ferrara, Lawrenceville, GA

Debt free 9 years and loving it. No credit cards. No credit score. Money in the bank. Not wealthy. Just smart.

Recently I got a copy of my credit report. I was elated to find it was up to 815. Looking over it, I found a lot of really old credit cards that hadn’t been used in over 10 years. So, wanting to show a true representation of my current credit and thinking I was doing the right thing, I proceeded to close all these old zero balance accounts. Now, so you get an idea of my credit, over the last 8 years I have worked very hard to always pay credit card balances in full each month. The only thing I allow to revolve now is my mortgage. After closing all the old inactive credit card accounts, my credit score dropped 25 points!!!! Yes, I know 790 is still considered a good credit score. But, it was 815 before!!! I agree with Clark. DO NOT close old credit card accounts. It will take me a really long time to get it back to 815.

I too am a disciple of the guy down the dial from Clark. I don't care anymore about my FICO. I will never finance another car, or buy anthing I can't pay cash for. If I were younger and needed good credit for a mortgage, I might rethink that, but not now. I can pay cash for my next house, so I don't care. I can find an insurance broker that doesn't use FICO to rate me. I wouldn't work for anybody that uses FICO in hiring decisions. I'm an engineer and my reputation is my industry means far more than having a FICO score to a potential employer. Any employer using FICO is too stupid for me to work for anyway.

I'm surprized that so many people are clueless about the effect of CC's on credit score...there are many articles out there on what they base the scores on and what good and bad things count..look it up, do a search on yahoo or google, this is the information age, if you rely on Clark to tell you everything your a moron.
First closing a CC does not affect your score in a negative way IF you request it to be closed and you had a good history on it. the free credit report you can get (see clarks info) will show cards for the last 10 years and it will note if they were paid on time and if you requested the account to be closed. The ONLY ways it is bad to close a CC account is if you still owe on it, it is a old CC (older, more established cards rate better than newer accounts) or it takes your available credit down a big chunk (if you only have 2 cards and close 1)...you do not have to use them every month, that doesnt help or hurt but nowadays they may be cancelled for inactivity...they can sit in the safe for 6 months or a year at a time without negatives...on the other hand if you have balances every month that hit more than 20-40% of your available credit on your card that can be negative...they want you to have credit, but they don't want you close to maxing it out. The main thing that counts in the CC game is paying on time, dont miss a payment and pay your balance off every month if you can and your credit score will soar...pay late or miss a payment or 2 and watch it sink. That is the main thing the rest is nit picky crap that doesnt really count for much.

Mom always said (40+ years ago )credit cards would be the "destruction of the banking system" Boy was she right ! We did it with CASH back then not plastic. If you didn't have the cash you didn't do it period !

What does a person do? Either way you pay. If you have no credit, you will pay higher car insurance, deposits for things.

If you have a credit card. You will pay interest on balances, yearly fees, and run the risk of credit card fraud. Plus, your name is out there in "sell your name land".

It's simply crazy that there is no way in FICO land to tell that a customer fired a credit card. It's just plain wrong!

Why would you ever have a credit card with a fee? Sounds ridiculous to me.

I have been in the process of paying off my credit cards. On one I had paid, I received a letter stating they were closing the account. This really made me furious since I paid over the min payment and was never late. They said the reason for closing was due to other revolving accounts with high balances. This is not fair when you are trying to pay off your cards and would like to keep them open for your credit history. I did not plan on ever using this card again even though I know it's a good idea to keep them active once in a while. By-the-way, it was a store credit card...

This issue with closing credit accounts is not as much your credit history, that should stay intact after the card is closed. However, the reporting agencies do figure in your outstanding debt in regards to the available credit that you have.

When you close paid accounts the amount of debt that you have increases in regards to your available credit.

For instance:
-a $300 balance against $1000 availble credit means that you are using 30% of your credit (pretty good).
-if you close a $500 card you now have a $300 balance against $500 available credit. You are now using 60% of your credit (not so good).
If, however, a card is charging fees or you (or your wife) can't control themselves in the presence of the plastic, it will be more damaging to your score to rack up the debt, make late payments, and/or increase the amount of credit used in regards to what you have available.

Keeping too many open makes you a potential risk as well. Some inquirers may assume that you could easily put yourself into too much debt. 30% is good to shoot for.

Regarding Frank's post: The stores, insurance companies, etc, are using your score to protect themselves. You must be informed when your scores will be accessed. You control who gets the information. If you don't want the company to get your scores don't sign the dotted line. However,the company may not be willing to do business with you.

My credit card went into litigation which I am negotiating into a monthly payment. Will I be able to keep it open in this case?

Bob's CNNMoney link below is a good one - I have seen that info before. I think Clark is wrong on this one. Your closed cards count as part of your credit history. They don't just "go away" when you close them.

As long as you have no debt, closing a card makes little if any difference in your credit score. It only matters when you do have debt outstanding, in which case closing a card can inadvertently raise your credit utilization ratio.

And for anyone who thinks they don't need a credit score, dream on. Your score is used in auto and home insurance, employment, and even to sign up for a cell phone plan. Good thing or bad thing, it's the reality.

Businesses should not have the right to access your credit report whenever they please. The only time a business should be able to access your report is (1) with your permission and (2) only when an account is first opened. I know that the 3 credit bureaus profit from businesses constantly accessing our reports and scores... this is wrong.

We need laws to prevent companies from freely accessing our reports without our permission. Just as with our medical records, businesses should not be able to freely look at our credit reports.

The bottom line is it DOES affect your FICO score if you close an account. There are 4 factors in determining your score. 2 BIG factors are length of credit history and available credit. if you have 2 credit cards, 1 you have had 12 years and one you have had for 2 years. Currently your credit history on those cards is an average of 7 years. If you pay off and close that card you have had for 12 years. You have just gone from a 7 year credit history to a 2 year history, greatly reducing your score.
The same thing works for your balances. The bottom line is you want people to see you have available credit. If you close your cards you no longer have an established credit history. paying on time will only help you so much. It does make sense to close cards with an annual fee

The mantra among consumer specialists for years has been that closing a paid-off card will hurt your credit score. BUT (and notice that's a big ol' 'but') according to George Mannes at CNN Money, Fair Isaac has put paid to that old saw:
"The most important point made by spokesman Craig Watts is that it's a myth that if you close a credit-card account, all trace of it disappears from your credit score."
Watts also said that FICO uses *payment history* more than open lines... 10 years for good info; 7 years for bad.
Anyone wanting the full skinny can cut and paste the following in their address bar:
http://moremoney.blogs.money.cnn.com/2010/03/02/dont-sweat-it-canceling-a-credit-card-wont-hurt-your-score/
BTW, to give due credit, I heard about this from consumerist.com...

Kelsey, often credit card issuers have other cards with no annual fee / minimum to spend to which you can re-brand your existing account. Just give them a call and ask to do just that.

what if your card is paid off, but you have an annual fee? woul dyou still recommend keeping it open?