Advantages

• You can have too much credit. While having some credit is a good thing, lenders are wary of a consumer's potential to overcharge with numerous lines of open credit. In such cases, closing a credit card may improve your creditworthiness with lenders. The Federal Deposit Insurance Corporation (FDIC) recommends limiting available credit to 20 percent of your annual income.
  
  

Disadvantages

• Closing credit cards with little or no balance while maintaining a balance on others alters your credit utilization ratio, potentially lowering scores. The amount of credit available compared to how much you owe determines 30 percent of your credit score. Depending on the total due on other cards, closing a high-limit card may tip the balance, indicating you may have more debt than you can pay down effectively.
  
  

Concerns

• Experian credit-reporting agency adviser Maxine Sweet recommends that consumers tempted to charge on cards with no balance close the accounts regardless of scoring. In such cases the credit scoring impact of closing the account is minimal compared to the dangers of going further into debt. Sweet also recommends focusing on paying down all balances to increase credit scores and benefit future lending possibilities.
  
  

Considerations

• When closing a credit card pay the balance in full and request the closure in writing. Check your credit report for accuracy after closing an account and make sure the account states that the account holder and not the issuer closed the card. By law, all three credit reporting agencies --- Experian, TransUnion and Equifax --- provide consumers with a free copy of their credit report once yearly. Your credit report may not show account closure until the lender's next reporting date. If your credit report shows the account as open a month after closing, contact the applicable credit-reporting agency and your credit card issuer to correct the mistake.