Went searching about canceling unused credit cards and learned about the impact on your credit score:

Canceling a large amount of unused credit could actually hurt your credit score.

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This formula results in a fraction less than one. The lower the fraction the better. A score of one would mean your outstanding debt equals your available credit and you’ve maxed out your cards.

Let’s look at an example. Let’s say you’ve got $5,000 of debt and $15,000 in credit lines. By dividing 5,000 by 15,000 you get one-third. You’re using one-third of the credit available to you.

Now let’s say you cancel an unused credit card with a $5,000 limit. You’ve still got $5,000 of debt but only $10,000 in credit lines. By dividing 5,000 by 10,000 you get one-half. You’re now using one-half of the credit available to you.

The closer to one this fraction gets, the more it hurts your credit score.

So, in short, keep a few unused cards around, it helps your credit score. No harm in alleviating temptation by destroying the cards themselves though.

# 2007 Apr 11