Should You Close a Credit Account?

Image Credit: ajfletch/iStock/GettyImages

This is a tricky one! If you have an old account hanging around and collecting dust, what should you do? Closing it could mean a hit to your credit score, and that's not good. But leaving it open might cost you a few bucks a year or open the door to identity theft.

Use this quick test to decide if you should close that old account:

It is your oldest account?Does it have a good, low interest rate?Is it fee-free?

If you answered "yes" to these, then just leave the account alone! Your older accounts are important to your credit history. And who knows when you'll need to take advantage of a low interest rate. If your card doesn't charge an annual fee, just leave it be.

If you answered "no" to these questions, then have at it. You will have to call and cancel the card after paying off the balance in full. Cut up the cards and go on your merry way. Don't forget to check your credit report in a month or so to make sure that your actions have been reported properly. If you paid off your balance and initiated the account closure, that should be reflected. If your closure has been reported as simply "closed" then that indicated you've fled into the night without paying your creditors. You'll have to file for a change with one of the three credit reporting agencies.