Would hurt my score if I cancel Credit Cards that I am not using?

DO NOT CLOSE YOUR CREDIT CARDS!!!

Credit scores are comprised of five factors. Points are
awarded for each component, and a high score is most
favorable. The factors are listed below in order of importance.

PAYMENT HISTORY - 35% IMPACT
Paying debt on time and in full has the greatest
positive impact on your credit score. Late payments,
judgments and charge-offs all have a negative
impact. Missing a high payment will have a more
severe impact than missing a low payment, and
delinquencies that have occurred in the last two
years carry more weight than older items.

OUTSTANDING CREDIT BALANCES -30% IMPACT
This factor marks the ratio between the outstanding
balance and available credit. Ideally, the consumer
should make an effort to keep balances as close to
zero as possible, and definitely below 30% of the
available credit limit when trying to purchase a home.

CREDIT HISTORY - 15% IMPACT (this one is for you)
This portion of the credit score indicates the length of
time since a particular credit line was established. A
seasoned borrower will always be stronger in this
area.

TYPE OF CREDIT - 10% IMPACT
A mix of auto loans, credit cards and mortgages is
more positive than a concentration of debt from credit
cards only.

INQUIRIES - 10% IMPACT
This percentage of the credit score quantifies the
number of inquiries made on a consumer's credit
within a six-month period. Each hard inquiry can cost
from two to 25 points on a credit score, but the
maximum number of inquiries that will reduce the
score is ten. In other words, 11 or more inquiries
within a six-month period will have no further impact
on the borrower's credit score. Note that if you run a
credit report on yourself, it will have no effect on your
score.

Remember that the credit score is a computerized calculation.
Personal factors are not taken into consideration when a credit
report is generated. It is merely a snapshot of today's credit
profile for any given borrower, and it can fluctuate dramatically
within the course of a week.

It's never a good idea to close credit cards as a strategy to improve your scores, even if you're not using them. Here are the reasons (incidentally, the answers posted already aren't accurate.)

1 (This is a very bid deal) - You will likely spike your aggregate revolving utilization by closing unused cards. This can be complicated but I'll try and make it easy to understand...

Within all credit scoring models there is a very important measurement called "revolving utilization." In English, it's the relationship between your credit card balances and the limits on those cards. This measurement is done on a "one off" basis and also an aggregate basis. Here's an example of aggregate...

You have 5 credit cards...each with a $20,000 credit limit. So, you have a $100,000 aggregate credit limit, right? Let's say that you are maxed out on 2 of those cards, which means you have $40K in balances. That would make you 40% utilized ($40K divided by $100K is .4). If you closed down the three cards that you are not using then you have to recalculate and take out the closed card's credit limits. So, now you have $40,000 in balances and $40,00 in limits and instead of being 40% utilized you're now 100% utilized and your scores just seriously tanked.

2 (This isn't as important as #1 but still worth mentioning) - By closing the cards you just started the clock ticking and eventually those cards will be purged from your credit reports. If they are in good standing you NEVER want them removed because they will always help your scores.


Here's the take away....

Leave them open, and use them periodically so the lender doesn't close them because of inactivity (this is becoming more common). Every few months buy socks or fill up your car and then when the bill comes pay it in full. This way you don't pay any finance charges and you reset the clock and don't give the credit card issuer a reason to close your account.

I'm going to disagree a little bit. I think you also need to consider the practical aspects of having a card versus simply the credit aspects...

Some cards charge fees for not having a balance - their "annual" maintenance fee. We got pounded by AmEx in fees for not carrying a balance on our cards; similarly with two store cards.

Additionally, there are a lot of folks who have good intentions of paying off a balance accrued just to keep the card in circulation but don't because it's easy to pay something else first.

I get worried when I see statements like "don't close your credit cards" because while I understand the theory, the reality may be different... It may make the most sense to have this conversation with your mortgage broker who can take a look at your financials and give you some tailored advice. Just because it makes sense on paper doesn't mean that it will work for you.

Credit scores are used to evaluate the likelihood that you will pay an account as per the agreement. The best way to improve your credit score is to continue paying all of your accounts as per the agreement for a very long time. This means making on time payments, never late, of at least the minimum payment (and preferably more than this) on every account. Canceling an account, even one with a few late payments or other derogatory events, does not do you any immediate good because the credit history continues to be counted for many years even on canceled accounts.

Credit scoring algorithms usually involve conditional probabilities. For example, to calculate the probability of a delinquency, one would divide the number of delinquencies in a given timeframe (say, 7 years) by the total number of events (payment, delinquent payment, nonpayment) in that timeframe. If you were delinquent 30 times in the 7 years on two accounts that were open for the full 7 years, that would yield a probability of 30 / (2 x 7 x 12) = 30 / 168 = 17.9%. Canceling a good card will eventually cause the denominator to decrease, which then causes the probability of a delinquency to increase. This is a simplistic example, as credit scores involve combinations of many conditional probabilities both for the individual account history and marketplace baseline statistics (usually as a weighting factor). But the takeaway is that it is very easy to get a bad credit score, but a long slow process to build a good credit score.

The bottom line advice is (1) don't constantly chase better credit card deals, (2) stick with a few credit cards, (3) pay off the balance in full at the end of the month, (4) keep your other cards open, but cut them up so you'll resist the urge to spend more than your means and (5) make sure you pay at least the minimum payment on every card on time.

3 years is a pretty thin credit history. Most of my cards have credit histories of 10-20 years, never late with a payment. (Actually, I was a few days late on a payment 5 years ago, when I was hospitalized for more than a week for cancer treatment. The credit card issuer considered this extenuating circumstances and did not report the late payment. It helped that I had never been late in a decade with that credit card.) I always pay off my balance in full at the end of the month (never spending more than I can afford to repay in full each month). Since I don't carry a balance, interest rates don't matter to me. Instead, I focus on cards that do not involve an annual fee, and usually also ones that provide a rebate of some kind.

If you carry a balance, you'll prefer cards with lower interest rates. But then don't carry too many cards, as the annual fees can add up. Also, if you carry a balance, you need to work on reducing that balance. This means cutting up the cards to stop spending money on new purchases until you can pay off your old purchases.