Credit Reports

When trying to repair credit and get on top of financial trouble, many credit card owners consider canceling their credit cards. This may not be a wise decision and could actually lower a credit score. Before taking the scissors to the credit cards, sit down and do a little research on the truth about the effects of canceling credit cards. Also evaluate your individual situation.

The reasons to keep credit cards open:

* Available credit is a factor when your credit score is calculated. The reason this is a factor is that if you get in trouble, having a “backup” in the form of available credit makes debtors more comfortable lending. Debtors don’t see that you have a comfortable savings account to cushion any unexpected financial situations when they look at your credit report.
* On time payments are important to a credit score. Using your credit card once a month for a purchase and immediately paying it off is one more month of an on time payment added to your credit history.
* Use for unexpected expenses so that you can spread the cost over a few months. The interest paid and the added temporary payment can prevent other bills from not being paid on time and damaging credit.

The reasons to close credit card accounts:

* Too many cards can count against your credit. Two to three open credit cards can be beneficial, more than that can hurt you.
* Unable to resist temptation and no matter how hard you try, once you pay down your credit cards you allow the balance to creep back up again.
* Replacing credit card with a lower interest card. Don’t close the account until you have been approved and have the new card activated

Credit cards can be a blessing and a curse to credit scores. It is up to you to take control and decide which it will be.