Q. Is it better to close credit cards you no longer use or leave those available lines of credit open? I have heard both sides of this story.

A. Your credit score is computed using a formula created by Fair, Isaac and Co., a firm started by Bill Fair and Earl Isaac. Nearly 50 years ago, they figured out that if they could collect enough information about a person's credit history, they could calculate how likely that person would be to miss a payment or default on a loan.

That risk is represented by what is called your FICO score. The higher the score, the lower the risk. While it is theoretically possible to earn a "perfect" 900, a score in the 700s is considered good or excellent. If your FICO stands in the low-600s, however, you have trouble.

Each score is calculated using 22 different variables from your credit history. One of those variables is how much of your available credit you have used. So if you have five credit cards with a total balance of $10,000, your score will be higher if you have $30,000 in available credit than if you have only $20,000 in available credit.

It's impossible to know how much higher, however, because the exact formula is a closely guarded secret. You know what goes in. And you know what comes out. But what goes on in between is impossible to tell. So, if you have a good score and never carry a monthly balance, then why not cancel an unused card? Even if your available credit falls, the percent of available credit you've used will remain zero.

If you have an above average score and are carrying a modest balance of a few thousand dollars, canceling an unused card could hurt you a little. Your available credit will drop and the percent of available credit you've used will increase. But it could still be advantageous to close unused accounts because the fewer credit cards you have, the lower your risk of identity theft. And identity theft is a big problem.

If you have below average credit and are carrying a substantial balance on your cards, then don't cancel unused cards. You shouldn't do anything that might further lower your score.

Q. I am planning to buy a house within the next six months. I make about $4,800 a month after taxes, but credit card and auto loan payments take about half of that. I am thinking about getting an interest-only mortgage. By the time I have to start repaying the principal I should have my other debts paid off. Is this the right move or should I wait?

A. If half your take-home pay is being gobbled up by credit card and auto loan debt, that's a lot. It’s really a lot if you’re only making the minimum payments on your cards.

Here's how we look at your budget: You bring home $4,800 a month after taxes and $2,400 goes to credit card and auto debt. Lets say you need $1,200 a month, or $300 a week, to cover everyday expenses like food, clothes, phone and electric bills, auto insurance and gas for your car or truck. That would leave $1,200 a month for a mortgage payment.

If you qualified for an interest-only loan with a 6% initial rate, you could borrow about $180,000 -- figure $900 a month in interest and $300 a month for taxes and insurance. Is that enough to buy the kind of house or condo you had in mind? And can you live on $300 a week without running up additional credit card debt?

We don't know enough about your finances to have all the answers, but those are definitely the questions you need to address.

Have a question about your finances? Ask us at editors@interest.com.

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