By Rodney Anderson
One of the most ridiculous myths being circulated is that the responsible thing to do is cut up your credit cards and close your accounts. Nothing could be further from the truth, or more damaging to your credit. I’ve seen firsthand the devastation this can cause to your credit score.

Let me explain. Thirty percent of your credit rating is what is called “credit capacity.” Simply stated, your credit capacity is the amount of available credit versus how much you owe. For example, if you have a thousand dollar limit on your credit card, with a two hundred dollar balance, you are at twenty percent capacity. But if you cut up that same credit card, and close your account, you now have a balance of the same two hundred dollars, but an available credit line of zero, which means you have no credit line available. You are maxed out, with no capacity which will lower your credit score.

Bottom line: Understanding credit capacity is the key to maintaining a higher credit score. Keep your credit cards open, and do not close your accounts.

Rodney Anderson is a financial leader, credit expert, and consumer advocate for over 25 years. Learn more at: www.rodneyanderson.com.