You might feel like you've dug yourself into a hole and canceling your credit card will prevent you from digging any deeper.
And while it's a great idea to stop digging, canceling your credit card could potentially make the hole collapse in on you.
Perhaps your credit card is nearly maxed out and you might have defaulted on your monthly payment, which caused your interest rate to rise dramatically.
The first thought might be to cancel the card and pay it off, but if you're trying to repair your credit score, the best thing to do is keep the account open and give yourself a payoff date that's in the near future, sticking to it diligently.
Credit scores are partially based on how long a credit card account has been open and the credit limit extended to you.
If you opened a card five years ago that had an initial credit limit of $500 and you've worked it up to $5,000, it's advantageous to keep that card open.
One strategy is to "keep it in the freezer," meaning don't touch it unless it's you absolutely have to.
If you are going to use this approach, it would be wise to inquire with your credit issuer as to their policy on inactive accounts.
Some issuers require that it's used at least once a year, especially if you're not paying a monthly service fee.
Some people are reporting online that their issuers are canceling their accounts without prior notice, leaving them with an unintended and undeserved dent in their credit score.
The simplest way around this is to use your card and pay it off in full each month.
This will ensure that your account remains open and there will be continuous positive reporting on your score.
For some of us, that's just not practical.
But if you can resist the urges of impulse buying and save money to pay with cash, you'll save yourself from maxing out your credit card and thus lowering your score, but more importantly, you'll save money.
Keeping and maintaining credit accounts will demonstrate that you have a long history and even if you've made a late payment once or twice, it still looks better to have some history of recent positive reporting with a blemish in the past rather than none at all.
Another idea to consider if you're dead set on canceling the card is to open another one around the same time.
Balance transfer cards are a good way to save yourself from getting bogged down by accumulating interest.
Many credit issuers offer 0% APR for a brief introductory period, which can give you a head start on paying it off without added interest.
Regardless of what you choose to do, if you are looking to repair your credit, you must commit to it and follow through.
Each month of positive reporting will bring your score up ever so slightly and over time your score will slowly crawl back up to normal, or higher if you have a great strategy.