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Question: I have recently cleaned up my credit report all on my own after a bankruptcy by applying for, and getting, three small credit cards. I have paid them religiously over the course of 4 years. I recently applied for a mortgage and was told I had a high score. Now that my credit report is positive, I just received an offer from my bank for a FEE-LESS credit card, with a lower interest rate than the ones I have, and a much higher credit limit. I accepted the offer, and would like to close my 3 accounts that are in good standing that helped repair my credit score. My question is, what happens if I close all those accounts that are in good standing? Do I lose that “good history”? I’d like to just keep the one with no fees and low interest rate and decent credit limit. The other three cost me $59 dollars each a year for membership and have a rather high 14.9 percent interest rate.

Or should I hold on to them, not use them, and pay the annual fee, so I can retain them as “good history”?

Answer: Congratulations on rebuilding your credit! It’s tough to get your credit back on its feet after bankruptcy.

The answer to your question depends on how much you value the credit score boost that those accounts provide. You seem to completely understand the issues involved, but maybe I can provide some extra insight.

Your old accounts do two things to improve your score. Firstly, they show a good, four year payment history. Secondly, their untapped credit lines improve your debt-to-available-credit ratio. Closing these accounts would indeed put a ding in your credit score by unfavorably changing your debt-to-available-credit ratio. Your payment history for closed accounts is not erased. However, closed accounts have less weight than open accounts in calculating your credit score. This re-weighting will cause the effective length of your credit history to shorten. In most cases, it’s best to keep old accounts open.

But these old accounts cost you almost $180 a year. That’s a high price to pay for cards you never plan to use. And four years is not a particularly long payment history. Most financial advisors caution against closing accounts that are super-old, say 15-20 years. The longer you keep the accounts open, the larger the drop in your credit score when you finally close them.

Are you expecting to make any more major purchases, like a house or car, in the near future? If not, I would close the cards. The drop in your score should recover fairly quickly. And if there are no major transactions looming ahead, it won’t really matter. You now have a mortgage and a new credit card working for you to improve your score. Moreover, the biggest negative item on your credit report is your bankruptcy, which should drop off in about three years. Once the bankruptcy is removed from your record, your score should jump much higher.

Have you tried calling the companies to negotiate your fees? They may be willing to drop the fee or upgrade you to a fee-free account. If not, ask them to close the account. The threat of closing accounts usually works wonders. If they eliminate the fee, you absolutely should keep the card open. Otherwise, I say close them.

Finally, you should check your credit report & score yourself. The bank telling you that you have a “high score” could mean anything. The bank may have said this to lead you to believe you were getting their best rate. You may be able to get a free copy of your credit report at www.annualcreditreport.com. Otherwise, you can order a 3-in-1 credit report with FICO score from MyFICO.