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It used to be when I spoke at financial seminars, most of the audience would raise their hand when I asked if they agreed that closing credit card accounts they don’t use anymore would help boost their credit. Now, though, most people know better than that.

Instead, I find they are terrified of closing an account for fear it will ruin their credit. And as a result they hang onto cards that they should have closed long ago.

While it is true that closing an account may affect your credit scores (more on that in a moment), there are times when it makes sense to close an account. Here are five of them:

You are Splitting Up

If you are separating or getting divorced from someone with whom you share a joint account, go ahead and close it. Otherwise, as long as the account is open, you are fully responsible for any bills your soon-to-be-ex runs up. (That’s true even if your divorce decree says he or she will be responsible for that bill. Your issuer can still look to both account holders for payment as long as there is a balance.) In this situation, it may be much better to be safer than sorry.

You Don’t Want to Pay the Fees

If your credit card company is charging an annual fee that you don’t want to pay, ask them to waive it. The same thing is true if you are accidentally late with a payment and get hit with a late fee. (As long as it is a once-in-a-blue-moon occurrence, you should be able to get a late fee removed.) But if your issuer won’t budge, especially on a hefty annual fee, it may be time to take your business elsewhere.

The Card no Longer Makes Sense

When I lived in Washington, DC and traveled fairly often for business, my US Airways credit card was a great way to earn extra miles. But once I moved to Florida and found myself flying Delta or Southwest almost exclusively, it no longer made as much sense. Most airline reward cards carry hefty annual fees after the first year, so you may find it necessary to close one of these accounts and switch to a card with a more useful reward program.

You’re Done With Debt

Sometimes you get to the point where enough is enough, as our reader Bryan recently pointed out on our blog:

I used to have 3-4 credit cards, a car note, a personal loan, and of course the department store cards. But once I hit a certain income level ANNNNND decided to act responsibly with my money, I paid them all off one by one and no longer own a credit card, car note, nor any other type of revolving credit. I have a mortgage and that’s it. I got rid of my cards about 3 years ago if I remember correctly and if I can’t afford to pay for what I want in cash, guess what? I can’t afford it.

While it may be best for your credit score to keep a credit card or two open and simply pay in full each month, that approach may not work for you. You know yourself. If the temptation that piece of plastic offers is too great, then get rid of it.

The Card Has Been Used Fraudulently

If your credit card has been lost or stolen, in most cases the card issuer will automatically close the account and issue you a new card. But that’s not always the case. Suppose, for example, you bought one of those diet products off the Internet, and despite your best efforts to cancel, keep getting hit with a monthly charge for more. Or you gave a debt collector your credit card number to make a monthly payment on a debt, and then discovered they were taking larger payments than agreed. Or you let your daughter use your account once and now she uses it whenever an “emergency” arises. In situations like that, you may want to close your account rather than risk having to fight to get charges reversed in the future.

How to Exit Gracefully

So if you do decide it’s time to say adios to your credit card company, what’s the best way to minimize potential damage to your credit scores?

“If a credit card is in good standing, there is a lot of positive credit history that goes with that account, which will stay on your credit report longer if you keep it open,” says Barry Paperno, Credit.com’s Community Director. A closed account doesn’t disappear from your credit reports, he explains. “One misconception is that once you close it that account will no longer contribute to your credit score.”

However, when an account is closed, you lose the benefit of the available credit associated with that account when your balance-to-available-credit (a.k.a. “utilization”) ratio is calculated. To understand where you currently stand in this aspect of your credit report, you can get a free Credit Report Card that will give each part of your report a grade. That ratio looks at how much of your available credit you are using on all of your credit cards as well as your cards individually. If you are using a significant portion of your available credit, you lose points when your credit score is calculated.

So when you do close an account, Paperno recommends you:

1. Make sure you keep your overall utilization as low as possible. That way losing that available credit won’t hurt much, if at all. (10% utilization is ideal, but you can still have a good credit score if you use up to 25% or so of your available credit.)

2. Keep as many of your accounts open as possible. If you already have several old accounts, for example, and you close one that won’t impact your score the way it would if you only had a couple.

3. Keep your oldest accounts open if you can. Scoring models take into account the age of your accounts, including the age of your oldest account, your newest account, and the average age of all accounts. A seasoned credit history is best when it comes to this factor.

Closing an account can hurt you down the road, warns Paperno, because eventually a closed account will “come off your credit report and you lose all the positive history associated with that account.”

But he’s in agreement that there are times when it’s OK to tell a card issuer you don’t want to do business with them anymore. No one should feel like they are being held hostage by a card they don’t want anymore.

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