By Sabrina Karl

Regularly paying attention to your credit score is a smart move for anyone wanting to maximize their finances. Because higher scores will lead to lower interest rate offers on mortgages, loans, and credit cards, as well as potentially cheaper insurance premiums, working to incrementally raise your score is a worthy endeavor.

One of the first ideas many people have when considering how to boost their score is to close a credit card. While it may seem like reducing your existing access to credit will look good to future creditors, they actually look more favorably on those who have credit available that they’ve refrained from using.

That’s why one of the top three factors impacting your score is your credit utilization rate. This calculation indicates how much of your available credit you’re currently using. Someone who is maxed to their credit limit on every card would have a credit utilization rate of 100%, while someone who barely uses their cards would have a rate close to 0%. To earn the highest credit scores, you’ll want to use less than 10% of your total combined credit limits.

When you have a card you aren’t using, its limit counts toward your total credit available, yet with no balance on the card, your utilization rate on that account is 0%. Keeping it open therefore helps bring your overall credit utilization factor down. Conversely, closing the card would drop your total credit limit, which will in turn increase your utilization ratio and lower your score.

If you opt to keep a card open but unused, make sure you aren’t paying an annual fee (and if you are, call the card issuer to negotiate a waiver). You may also need to use it for a transaction once every year or two to keep the account active.