Maybe your credit cards are still “smoking” from holiday overuse.
Canceling them may sound like a good idea. After all, eliminating them may abolish your desire to shop. But heed this warning: Closing a credit card can damage your credit score. The director of education for a national non-profit counseling agency explained why.

“It takes credit to earn credit,” said Mike Sullivan of Take Charge America, which is headquartered in Phoenix, Ariz. “If your goal is to increase your credit score, canceling your credit cards may actually work against you in the short-term.”

Closing cards decreases the amount of available credit you have and increases your debt utilization ratio. For example, if you have $50,000 in available credit and owe $10,000, then you owe 20 percent of your available credit. If you close one account with a $30,000 credit limit, you will then owe the same $10,000, but it will be 50 percent of your available credit. This can lower your credit score. Sullivan suggests talking with a credit counselor before making rash moves.

“There are right and wrong ways to close credit-card accounts,” he said. “Everyone has a different financial situation, so what’s right for you may not be right for your friend, neighbor or co-worker.”

Here are five other factors Sullivan said to consider before closing your cards:
How long you’ve had your credit cards. The longer you have a credit card, the more credit history you have. For example, if you have two cards — one which has been open for five years and another for 10 years — closing the card that has been opened for 10 years reduces your credit history to five years. That can lower your score, regardless of your balances.

Risky behavior. Five billion credit-card solicitations are sent to Americans every year, many wooing consumers with low- or no-interest rates. If you try to control your debt by opening multiple low-interest cards, transferring your balances and closing cards along the way, you could be sending the wrong signal to potential lenders. Not only can this lower your credit score, but also many lenders consider it to be a risky credit move. It’s best to pay off your debt, rather than to transfer it to other cards.

Fee overload. Many credit cards carry yearly or monthly fees. Closing those accounts can save you money and prevent you from accumulating more debt. It’s important to read the fine print when applying for credit cards. Fees that seem small accrue over time and can ultimately prove to be very costly, especially when interest is involved.
Your temptation to spend. Sometimes, just knowing that you have available credit is a temptation to spend. If you can’t stop spending, close the card once the balance is paid off, regardless of how it might impact your credit score.
If you’re looking to buy a house. Mortgage lenders look at available credit as a possible risk. If you have multiple cards, lenders consider whether you will charge up those cards and be unable to make your mortgage payment.