Beware of Debts and Credit You Do not Use

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It is easy today to apply for a store credit card that you forget about about in three years – but that account will remain on your credit report and affect your credit score as long as it is open. Having credit lines and credit cards you do not need makes you seem like a poor credit risk because you run the risk of "overextending" your credit.

Also, having lots of accounts you do not use increases the odds that you will about an old account and stop making payments on it – resulting in a lowered credit score. Keep only your used accounts and make sure that all other accounts are closed. Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.

However, realize that when you close an account, the record of the closed account remains on your credit report and can affect your credit score for a while. In fact, closing unused credit accounts may actually cause your credit score to drop in the short term, as you will have higher credit balances spread out over a smaller overall credit account base.

For example, if your unused accounts are adjusted to $ 2000 and you owe $ 1000 on accounts that you have now (let's say on two credit cards that total $ 2000) you have gone from using one fourth of your credit ($ 1000 owed on a possible $ 4000 you could have borrowed) to using one half of your credit (you owe $ 1000 from a possible $ 2000). This will actually cause your credit risk rating to drop. In the long term, though, not having extra temptation to charge and not having credit you do not need can work for you.

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Source by Michael Travis

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