Reduce your credit utilization, also known as ‘balance to credit ratio’ and improve credit scores.
Balance to credit ratio is the amount that you charge to the credit and the actual amount of credit that is available to you. If you utilize a small part of the credit that is available to you then your credit to balance ratio is said to be high which reflects favorably on a credit report.
When people give the advice of closing down extra credit accounts that are not being used such as unused credit cards you must consider you credit to balance ratio as well. Closing down extra unused accounts may result in the amount of credit available to you falling drastically. This in turn will reduce you credit to balance ratio and reflect poorly on your credit report.
The way to maintain a good credit to balance ratio is to use your credit wisely. If you have one card, do not use it to its full limit. If you do need to utilize the limit of the card, make weekly or bi-monthly payments on your card. This will help your credit score in two ways. First, it will keep the credit to balance ratio high. Secondly, the creditor will report more than one payment per month against your credit, which may also reflect favorably on your credit score.
If you have more than one card then instead of using one to its limit, use both cards equally.
There are both advantages and disadvantages of keeping extra lines of credit open. In order to fully understand what impact this is having on your credit report, try getting your credit report, credit score and an analysis of the score from the national credit bureau. Experian has something called the triple Advantage Plan that includes credit monitoring as well as a breakup of all the accounts and transactions that show how each of them are impacting your credit score. What is true for one credit bureau should also be true for others.