If you have ever been in a position where you needed to improve your credit score, you have probably been warned against closing any credit cards you have, as doing so could actually have a negative impact on your FICO score

This is because the score takes into account the percentage of all of the available credit you are using, and when that amount of available credit dwindles, the percentage used goes up. However, there are still situations in which you can cancel a credit card without doing damage to your score. In many cases, people decide to cancel a credit card because they wish to avoid spending too much money or because the terms of the card are no longer friendly to their budget. If the card is indeed costing you an unnecessarily high amount of money, then it does make sense to close the card.

It also makes sense to close a credit card account at the same time as you open a new one...especially if your credit limit is the same for each card.

This way, you will at least not take a hit in terms of the percentage of available credit you are using. Before you decide to close a credit card, it is important to consider any effect doing so could have on your credit score. For open accounts, the positive credit information you have will permanently stay on your credit report. Closed accounts that do not have associated negative information usually remain on your credit history for ten years after their closure. Therefore, you can at least be sure your positive information will outlast most negative information. This is a stipulation of the Fair Credit Reporting Act, which mandates that information such as foreclosures and late payments come off of your credit report after a seven-year period. Ultimately, whether or not it’s a good idea to close a credit card depends entirely on your own financial situation. Seek the advice of a credit and loan expert before you make the call to ensure you are doing the right thing.