Q: We just found out that our credit score is not the best. We owe nothing but have five credit cards that we no longer use. We understand that it is very hard or involved to cancel them. Any ideas for us? Thank so much in advance.

Judy, New Prague

A: Closing credit card accounts you aren’t using anymore isn’t that hard, although sometimes it takes persistence and a sense of humor to succeed. In the short run, closing the accounts could hurt your credit score, although not for long.

First, I would figure out how many credit cards you need. For me, the answer is two: I have one for personal expenditures and one for business. I know many people who add a third card tucked away for emergencies. Personally, I don’t see any reason for most people to have more than three — at the most.

Second, I would close the credit cards accounts you’re no longer using. Not everyone agrees with me on this. Some financial advisers recommend keeping them open so your credit score doesn’t take a hit.

Others suggest only getting rid of credit cards with high fees or steep interest rates. My own opinion is sound personal finance says shutting them down is good money management over time.

Now, let’s look at the prospect or possibility of an additional hit to your credit score. If it happens, it stems come from a lower utilization ratio. The term captures the calculation of your total credit card balances divided by your total credit card limits. The calculation also looks at the ratio for each card. A reasonable rule of thumb is you should keep your utilization ratio at 30 percent and under. It’s far better if it’s 10 percent or less.

There is a timing issue with closing accounts. If you have a major purchase in your immediate future — perhaps buying a home or a car — leave the accounts alone. Once the purchase is completed, close the account.

Once the unused accounts are closed, you can improve your credit score by paying your credit card bill on time month after month while keeping the amount you borrow limited relative to your income and your limits. In other words, use your card regularly (say, paying for gas or groceries), pay the balance off in full at the end of the month, and don’t charge too much. Stay well below your credit limit.

By the way, from a credit-score perspective there isn’t a difference between carrying a small balance and paying off the bill. From a personal finance point of view, get rid of the bill every month. So long as you stick to this discipline, your credit score will be fine.

On the specifics of closing an account, you can’t do it until the balance is zero. Assuming you don’t owe anything, I would call the credit card issuer. Tell them what you want to do. Ignore their entreaties to keep the account open. Write a follow-up letter confirming the conversation. Ask for a receipt. If you type into your search engine “Cancel a credit card work sheet,” Creditcards.com offers a short, helpful work sheet for keeping track. Good luck.


Chris Farrell is economics editor for “Marketplace Money.” His e-mail is cfarrell@mpr.org.