Should You Close Some Accounts to Raise Your Credit Score?

Your credit score is calculated using a formula created by the Fair Isaac Corporation. Here's how it breaks down: Your payment history makes up 35 percent of your score. Your debt to credit ratio makes up 30 percent. The average age of your credit (closing old accounts and opening new ones lowers this number) makes up 15 percent. The different types of credit you use makes up 10 percent (having a mix of credit cards, mortgage and car loans raises this number). The last 10 percent is based on inquiries made (applying for credit and having your credit report pulled lowers this number).

Why Closing Accounts Hurts Your Score

Closing old accounts does not raise your credit score. In fact, closing old accounts actually has the opposite impact, it can lower your score. It does this by affecting two components of your credit score: the average age of credit and the debt to credit ratio. The other factors--payment history, inquiries and types of credit--are usually not affected by closing old accounts, unless you close the only credit card accounts that you have, thus reducing the variety of credit you use. You can raise your credit score by paying down debt, making payments on time and refraining from opening new credit cards. You cannot raise your credit score by closing old accounts.

Average Age of Credit

The length of your credit history makes up 15 percent of your credit score. This number averages the age of all of your credit accounts. When you close old credit cards, you lower the average age of your credit accounts. This can have an adverse impact on your credit score.

Debt to Credit Ratio

Your debt to credit ratio looks at how much of your available credit you use. The more of your available credit you use, the lower your credit score. So, if you have an old card with a high credit limit and no balance, when you close that account, the amount of credit available to you is reduced. Thus, since you still owe the same amount of money but the amount of credit available to you is reduced, it appears to creditors that you are using more of your available credit. This lowers your debt to credit ratio, lowering your credit score.