Does Closing a Credit Card Hurt Your Credit Score?
Key takeaways
- Closing a credit card can negatively impact your credit score by reducing your average age of accounts and increasing your credit utilization ratio.
- Cardholders with shorter credit histories and smaller lines of credit are more likely to have a large credit score drop from closing a credit card account.
- Unless you’re trying to get out of an annual fee, you’re likely better off keeping cards open even if you don’t use them.
If you have credit cards in your wallet that you haven’t touched in a while, you might be tempted to close them. However, you’re probably better off with them open. Closing a credit card won’t always hurt your credit score — but it potentially can, depending on the card.
You can hurt your credit score by closing a credit card if it’s your oldest or only account — or if closing it affects how much of your overall credit you use. There’s usually no benefit to closing a credit card, unless it has an annual fee.
How does a closed credit card affect your credit score?
Closing a card impacts two important components of your credit score: the overall age of your accounts and your credit utilization ratio.
How closing a credit card impacts your credit utilization ratio
When you cancel a credit card, you reduce your available credit. This can drive up your credit utilization ratio if you’re carrying balances on any other credit cards — and a higher credit utilization ratio makes you look like a riskier borrower.
Your credit utilization ratio is measured by the amount you owe on credit cards divided by your credit limit. Your utilization ratio is measured per card, as well as across all your cards. It’s the second most important credit scoring factor, making up 30% of your overall FICO credit score (with payment history carrying the most weight).
Track your credit score for free with LendingTree Spring.
Most experts recommend that you keep your credit utilization ratio well below 30%, but closer to 0% is even better.
Here’s a quick illustration of how canceling a card could negatively impact your credit utilization. Let’s say you have three credit cards, two carrying a balance around half of the available credit limit and one carrying no balance:
Current utilization
| Card | Balance | Credit limit | Credit utilization ratio |
|---|---|---|---|
| A | $0 | $1,000 | 0% |
| B | $250 | $500 | 50% |
| C | $800 | $2,000 | 40% |
| Total | $1,050 | $3,500 | 30% |
If you closed the card with the $0 balance, your credit utilization would jump to 42% — well over the recommended ratio of 30%.
Utilization after closing a credit card
| Card | Balance | Credit limit | Credit utilization |
|---|---|---|---|
| B | $250 | $500 | 50% |
| C | $800 | $2,000 | 40% |
| Total | $1,050 | $2,500 | 42% |
You can do four things to reduce your credit utilization ratio before deciding to close a card:
- Request a credit limit increase on any of the cards you choose to keep.
- Downgrade to another card from the same issuer and move that credit limit to the new card.
- Pay down existing balances on the cards you aren’t closing.
- Apply for a new card before closing the old card.
How closing a credit card impacts the age of your credit accounts
Closing a credit card can also negatively impact your credit score by reducing the average age of your accounts. FICO and other credit scoring models consider the length of your credit history when calculating your credit score. The longer you’ve been using credit responsibly, the more creditworthy you are in the eyes of lenders.
The average age of your accounts counts toward 15% of your FICO Score, and it’s calculated by adding together the age of all your accounts by the number of accounts.
Average age of accounts:
Card A = 5 years old
Card B = 10 years old
Card C = 2 years old (5 + 10 + 2) = 17 ÷ 3 = 5.7 years
Let’s say you closed the card with the longest credit history (card B) from the example above. This would significantly lower the average age of your accounts:
Average age of accounts:
Card A = 5 years old
Card C = 2 years old (5 + 2) = 7 ÷ 2 = 3.5 years
The good news is that closed accounts in good standing stay on your credit reports for 10 years, so the length of your credit history won’t be negatively affected for a decade unless you decide to open a new credit card account (which will then reduce your average age of accounts).
How to close a credit card without affecting your credit score
There are ways to ensure that closing a credit card won’t hurt your credit score. If you do these things before shutting your account, your credit score will likely be OK:
- Don’t close your oldest accounts. If you close your oldest accounts, you risk lowering the length of your credit history, which accounts for 15% of your FICO Score.
- Pay off all your credit card balances. It’s important to pay off all your credit card balances before closing a credit card — not just the one you’re closing. This will ensure that your credit utilization (which makes up 30% of your FICO Score) isn’t impacted.
- Call your credit card issuer to confirm your balance is paid off. It’s best to call your issuer to confirm you’ve paid the card’s balance off, to reduce your credit utilization and also ensure that you aren’t carrying debt that could be reported as a default to your credit report.
- Check your credit report in the months after canceling. Keep an eye on your credit report for the next two months or so, as that’s how long it may take for your credit report to reflect that the card has been canceled.
- Destroy the card after canceling. Once you’ve decided to close the card and confirm the cancellation went through, you should shred the card.
Learn more about how your credit score is calculated.
When will closing a credit card cause minimal damage?
How long you’ve been using credit and how much debt you’re carrying will determine any negative impact of closing a credit card. In general, the longer and more varied your credit history is, the less likely you are to feel the impact of a closed credit card.
People who have tons of available credit and little debt may find that their credit score only drops a few points after closing a credit card account. However, someone who is utilizing a large portion of their available credit and only has a couple of years of credit history may see a much bigger impact.
Consider someone who has a $70,000 credit limit spread across five credit cards. If that person has an average balance of $10,000, they have an overall credit utilization ratio of 14%. Closing a credit card with a $10,000 limit will only increase their utilization ratio to 17%. Such a small increase in credit utilization will have a minimal effect on their credit score.
Conversely, if a person has two credit cards with a combined credit limit of $5,000 and an average balance of $1,500 across both cards, their overall utilization rate is 30%. If they close one card without paying off their balances, losing $2,500 of their original credit limit, that utilization rate will climb to 60%.
| Person A (Long credit history) | Person B (Newer to credit) |
|---|---|
| Balance = $10,000 | Balance = $1,500 |
| Prior credit limit = $70,000 | Prior credit limit = $5,000 |
| Prior credit utilization = 14% | Prior credit utilization = 30% |
| New credit limit = $60,000 | New credit limit = $2,500 |
| New credit utilization = 17% | New credit utilization = 60% |
Should you close your old credit cards?
Keeping old credit cards open and active will help preserve your credit score, but holding onto old cards isn’t always the right choice. For example, you may have a card with a high annual fee that you aren’t using — closing your account could be the best move in this case.
Tip
Holding onto credit cards that you don’t use or check on may also pose a security risk. A thief could steal the account details and make charges on the account without your knowledge. Even though you generally aren’t liable for credit card fraud, you’ll still have to spend time reporting and resolving the charges.
Another reason to cancel a credit card is to remove the temptation to overspend and rack up debt. If you’re unable to control your spending on a credit card, closing the account may be a wise move.
Tip
What to do before closing your credit card account
Before closing down an old credit card, take these five steps:
1. Request a fee waiver or card conversion
Some credit card companies will waive an annual fee, or convert a card that has an annual fee to a no-annual-fee account. Before you cancel your credit card, call the lender to see if they can downgrade you to another card.
2. Redeem or transfer rewards
When you close down a credit card, you may lose accumulated rewards. Before you cancel your card, make sure to redeem those rewards. In some cases, you may be able to transfer your points or miles to another card, or to an airline or hotel loyalty program. Check the fine print on the credit card rewards program to learn your options.
3. Apply for loans, mortgages or new credit cards
Canceling an old card could drop your credit score and limit your chances of qualifying for a great rate on a loan. You should hold off on closing any current cards until you’ve closed on your mortgage or your loan has been approved.
4. Transfer or pay off the balance
You can shut down a credit card with a balance, but that’s not ideal. Try to pay off the card’s balance before shutting it down. If that’s not possible, transfer the balance from a high-interest card to a new 0% balance transfer credit card.
5. Consider credit counseling
A nonprofit credit counselor or accredited credit repair company can help you design a plan to eliminate credit card debt and live within your budget. Credit counseling could be more helpful than canceling credit cards without a plan.
Canceling a credit card to look for one with better benefits or rewards? Check out the best credit cards of 2024.