Downsizing - Should You Close Your Credit Accounts

 

It really depends on your credit goals as to whether or not one should close an account or not.  If you are planning on making a major purchase, for instance, buying a house, then probably not.  If you are trying to improve your credit score then definitely not as this will have a negative impact on your score for a certain period of time.  If you have more open accounts than you need or can easily manage, then yes, consider closing some of them.  If you lack self-control and find yourself charging up those accounts on a regular basis, then definitely close them, pay them off and wait it out for your credit score to improve.

 

If you are like me with no intention of purchasing another home right away, have no credit issues, and are just looking to streamline your finances then it may be a good time to do some housekeeping.  I have a couple credit cards out there that I do not use at all and have no plans to use them in the future.  However, my credit card company offers me the option to lock those accounts so I am able to keep them open, but they are secured so no charges can be made against them.  I locked those accounts with the idea that I may go ahead and close one of them simply because I really don’t need it.  It has a small credit limit and likely won’t make much of an impact to my overall credit score.  And if it does I’ve got the time for it to recover so I’m not all that concerned about it.

 

I use credit quite a bit, but only if it benefits me.  I have one major credit card I use for small purchases like gas for our cars, some online bill payments, Amazon purchasing, groceries and small miscellaneous purchases.  I use it because I earn rewards points that I redeem at the end of the year for gift cards.  I also have a PayPal account, Home Depot account and recently a tire store account that offers six months same as cash on certain purchases.  With all of these accounts I am very careful to make sure I pay them all off so I do not accrue any interest charges.

 

While it may seem like I have a lot of open credit accounts, you are correct.  I do.  I personally do not have a problem managing them and I regularly check them and keep track of them.  The ones I don’t use are locked.  It is a process and it does require some of my time to do this, but I consider it prudent and a regular part of managing my finances.

 

As time goes on I know it will be a wise idea for me to streamline this process even more and I plan to start closing some of these accounts I no longer need or use.  In order to minimize the impact to my overall credit score I plan to start closing the accounts with the smallest credit limits first at about one account per year.  I do not plan to apply for a mortgage again nor do I plan to make any other major purchases in the near future so having a perfect credit score, although still important, is a little less important to me than it might be to someone else.  Streamlining my finances and protecting my credit will be my ultimate goal as I age.