Hang on to Older Cards

• You might think that canceling an old and unused card is a good idea, but it can have negative impacts. The longer your credit history, the better. The reason: FICO factors in the length of your credit history as part of its formula. If you cancel a card you've had for 10 years, that history is gone and you will be scored based on your newer cards. This can cause your scored to drop, especially if the cards you keep are less than two years old. If you are concerned about identity theft by keeping the account open, or if the creditor charges an annual fee, then it may be best to close the account, regardless of the impact.
  
  

The Consolidation Myth

• If you are considering a home equity line of credit to consolidate your credit card debt, think again. Consolidating loans and closing one or more credit accounts might actually cause your utilization ratio to climb, making your score go down. Creditors prefer 30 to 35 percent or less credit utilization. This means you should use no more than $1,050 per every $3,000 of credit you have available. If you close out credit cards and consolidate those balances on a HELOC, you run the risk of exceeding your 35 percent credit utilization rate.
  
  

Applying for Major Loans

• If you intend to apply for any major loans within the next year or two, you should not cancel any credit cards. Decreasing the amount of credit available to you, or decreasing the length of your credit history, can have negative impact in your ability to get a car loan or a mortgage. To increase your chances of getting a major loan, use your credit cards wisely. Put small purchases on your card and pay them off each month. Or make payments greater than the minimum amount due in order to bring down your balance.
  
  

Close Accounts Properly

• If you are intent on closing credit card accounts, close them one at a time over a prolonged period. Pay off any debt you currently have on the accounts you wish to close. If you ask a creditor to close an account while you are still paying off, there is a chance the company may raise your interest rates while you still carry a balance.
  
  Close accounts with annual fees first. Close newer accounts and department store accounts. Keep your oldest accounts and those accounts that charge the lowest fees.
  
  Call your card's customer service line and ask for the card to be canceled. Follow up with a letter in case the phone representative makes a mistake. Keep thorough notes and printouts of the process in the event a problem arises.