Vision Credit Education, Inc.

If you have been told that you should close a credit card account, understand that the move will reduce your credit scores. Even Fair Isaac spokesperson Craig Watts confirms that credit scoring formulas do not reward consumers for closing accounts; rather the normal conclusion is a drop in credit scores.

The biggest scoring drops occur when your account is seasoned and you have a long positive payment history on that account. You will still benefit from the account for 10 years, but the benefits will fade as time goes by.

Additionally closing an account with substantial available credit can also lower your credit scores. This is especially true when you still owe debt on other credit card accounts.

What happens is that your total credit utilization rate goes up each time you close one of your credit card accounts while still maintaining debt balances on other credit card accounts. Your credit scores drop whenever your debt balances increase against your credit limits.

That being said, the drop in your credit scores for closing an account is miniscule in comparison to the damage that can be done by maxing out a credit card and failing to make minimum payments. If you are concerned about your ability to avoid using the card, then you might be better off closing the account.

Alternatively, you might consider cutting the card up while keeping the account active. This can help you still reap the credit scoring benefits without being tempted to use the account.