Originally part of an article printed in the Columbus Dispatch on November 16, 2008
Your FICO credit score is made up of five factors of varying importance. How your credit card use can affect each of the components:
• Payment history. This accounts for 35 percent of your FICO score. If you have any late payments, the score will take into account how late you were, how much was owed and how many late payments there were. If your overall report is strong, a few late payments shouldn't be a score killer.
• Credit use. Thirty percent of your score is determined by your credit utilization ratio, which measures your outstanding balance against your available credit. So if you have outstanding debt and cancel a credit card, losing that line of credit will mean you're using up more of your credit, which will raise your credit utilization and thus lower your score.
Experts say it's best to use less than 30 percent of your available credit.
• Length of credit history. This determines 15 percent of your score. So if you're closing credit cards, keep the card you've had the longest.
One alternative to closing your accounts is letting them sit. But you should check on them occasionally to make sure identity thieves aren't using them.
If you want to make sure your credit cards are counting toward your credit utilization ratio, you should use them at least once every six months or so. Otherwise, that account will show up as being inactive on your report and the credit line won't be factored into your utilization ratio.
• New credit. This makes up 10 percent of your score. And signing up for new credit cards doesn't always boost your score because you're adding to your line of credit. Instead, it can lower your score because you might appear to be a bigger risk.
• Types of credit in use. This makes up the final 10 percent of your score, and looks at whether you have a mix of different types of credit, such as installment loans or mortgages. It's good to have a history of revolving accounts, so think twice before giving up your credit cards.