Closing a credit card account can lower your credit score even if you’ve recently paid off your balance. The good news is that if your score does take a hit, it’s usually a small, temporary one. And credit scores tend to rebound fairly quickly.
Here’s what happens to your credit score when you close a card, when (and why) it could make sense to do it and how to minimize the hit to your score.
- Closing a credit card can lower your score by raising your credit utilization ratio and reducing your average account age.
- A closed account in good standing stays on your credit report for up to 10 years, so the damage isn’t always immediate or severe.
- Sometimes closing a card is the right financial decision, even if it shaves off a few points from your score temporarily.
- Downgrading to a no-fee version of the same card may be a better option than closing your account outright.
Why Closing A Credit Card Can Hurt Your Credit
Parting ways with your plastic can bring your credit score down a few notches, but the impact is usually minimal and temporary. So why is closing a credit card potentially bad, especially if you’ve paid off your balance?
For starters, it raises your credit utilization rate, or the percentage of your available revolving credit line that you’re using. Credit utilization accounts for 30% of your FICO score, second only to payment history. So when you close a card, you lose that card’s credit limit, which reduces your total available credit. If you’re carrying balances on other cards, that pushes up your utilization ratio.
Example: Let’s say you have three cards, two with $5,000 limits each and one with a $20,000 limit. That means your total available credit is $30,000. If your outstanding balance on all three cards is $5,000, your credit utilization rate is 16.7%. But if you were to close the card with the $20,000 limit, that would push your utilization to 50%, which is 20 percentage points above the 30% utilization threshold that most financial experts recommend.
Closing a credit card also reduces the average age of your accounts, which comprises 15% of your FICO score. The scoring model looks at the age of your oldest account, your newest account and the average history length of all accounts.
Other credit score factors
Closing a card does not directly impact the other elements of how your score is calculated, including:
- Payment history (35%): Past on-time payments remain on your report for up to 7 years.
- Credit mix (10%): This is only impacted if the account you close is your only revolving account.
- New credit (10%): Account closure doesn’t trigger a hard credit pull the way that opening a new card does.
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How Long Does A Closed Account Stay On Your Credit Report?
If you’re thinking of shutting down a card, you might wonder: Does closing a credit card hurt a credit score for a long time? A closed account doesn’t vanish from your credit report the moment you shut it down, but the timeline depends on how you managed the account.
- Closed in good standing: This account remains on your report for up to 10 years from the date of closure.
- Closed with negative history: If you had late payments or charge-offs, these negative marks stay on your report for 7 years from the date of the initial delinquency.
While a closed account remains on your report, closing a credit card isn’t always bad. In fact, it can contribute positively to your payment history and credit age. The score damage from a closure tends to be most acute in the months after closing. Over time, that impact fades as you pay down other balances and open new accounts.
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When Closing A Credit Card Makes Sense
Closing a credit card isn’t always bad – it may be a wise move in some cases. Here are situations where it can be beneficial, even if it knocks a few points off your credit score.
Your annual fee outstrips the card perks
If a card charges $95 – $500 a year (or more) in annual fees and you don’t earn enough rewards or benefits to offset that cost, closing the card might make sense. If the card’s perks are not paying for themselves, you lose money by keeping it open. But before closing the account, see if you can downgrade the card to a no-fee version first (more on that later).
You can’t curb your spending habits
A card you consistently charge up and overspend with is a liability. The credit score hit from closing the account is far less damaging than accumulating high-interest balances. If you don’t trust yourself to avoid the temptation of using it, canceling it may be smart.
You were a victim of fraud
A history of fraud on an account is a legitimate reason to close and replace an account to avoid credit damage, even if the company automatically issues a new card number.
You’re simplifying after a life change
Divorce, estate management or limiting financial complexity are all valid reasons to close accounts. Managing fewer cards is sometimes worth a temporary dip in your score, but keep in mind that you’re also reducing the age of available credit.
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How To Close A Credit Card Responsibly, Step By Step
If you’ve decided to close your account, do it with intention. A rash closure can cost you more money and points than necessary.
- Redeem all rewards: Points, miles and cash-back perks typically expire when an account closes. Use them or transfer them before closing the account for good; otherwise, in many cases, you’re leaving money on the table.
- Pay off the balance: You can close an account with an outstanding balance, but you’ll still need to pay it off.
- Consider timing: Don’t close a card right before applying for a major loan such as a mortgage, auto loan, personal loan or any major credit line. Wait until after you’ve closed on those loans before closing your credit card to avoid sabotaging your chances of approval.
- Call the issuer: Ask to close the account directly. Sometimes, card issuers offer a retention deal, such as a fee waiver, a statement credit or a product change to a card with no or lower fees. You’re not obligated to accept, but hear them out.
- Follow up in writing: After the call, send a brief email or letter to the issuer confirming the closure. Chances are, most companies will provide this in writing, both via email and postal mail, but make sure you get the confirmation in writing for your records.
- Check your credit report: Wait 30 – 45 days after closing your account to verify that the account appears as “closed by consumer” (not the issuer) on your credit report. Check for free at AnnualCreditReport.com.
- Monitor your utilization rate: If your score dips, pay down balances on remaining cards on time to bring the utilization rate back down.
Alternatives To Closing A Credit Card
Before you cancel, explore other options that might help solve the underlying challenge without your credit score taking a hit.
Downgrade to a no-fee card
Many issuers offer a no-annual-fee version of their premium cards. A product change – also called a card downgrade – lets you keep the same account number, the same credit limit and the same account age. Your credit score won’t see an impact, and there’s no credit inquiry. A downgrade is usually the best solution when the annual fee is your main issue.
Keep the card open with minimal use
A card you rarely use still does its job by contributing to your utilization ratio and increasing your account age. Add a small recurring charge, such as a streaming subscription or a monthly utility bill, and set up auto-pay. This keeps the account active without requiring much attention. Be careful, though: Issuers can close dormant or inactive accounts without notice. Low activity is better than none.
Negotiate the annual fee
If you really love a card’s perks but not its sky-high annual fee, call the issuer and ask if there’s anything they can do about lowering it. Some issuers will waive it, reduce it or offer a statement credit to keep you as a loyal customer. It costs nothing to ask and is worth a try.
When To Close Vs. When To Keep: How To Decide
Still unsure of when to close a credit card and when to keep it open? Ask yourself these questions.
| Close | Keep (Or Downgrade) | |
|---|---|---|
| Is the card’s annual fee worth the benefits? | No | Yes |
| Are you carrying balances on other cards? | No | Yes – utilization risk is higher |
| Is this one of your oldest accounts? | No | Yes – losing it hurts your credit age more |
| Is overspending on this card a problem? | Yes | No – unless you have discipline to avoid using it |
| Are you applying for a major loan soon? | No | Yes – wait until after the loan closes |
| Does a no-fee version of this card exist? | No | Yes – downgrade instead |
| Was the card involved in fraud? | Yes | No |
FAQ
Bottom Line: Close Credit Cards With A Plan, Not On Impulse
Does closing a credit card hurt credit scores in most cases? Yes, but the pain doesn’t usually last long – and it still may be the right call in your case. The key is knowing the tradeoffs and closing the account deliberately. Redeem your rewards, pay off the balance, consider downgrade options and be mindful of timing.
If you’re trying to decide whether a card belongs in your wallet, compare it against other card offers to make sure you’re getting the most value from your credit cards.
Looking for a card that’s worth keeping open? Learn more about how credit cards can help you meet your financial goals.
Deborah Kearns
Deborah Kearns is an award-winning independent journalist with more than 15 years of experience covering real estate, mortgages and personal finance. Her work has appeared in the Wall Street Journal, Kiplinger, U.S. News & World Report, Quartz, CNN, Forbes, Fortune, Newsweek, The Associated Press and dozens of other outlets. She previously led content and communications at a Top 15 national mortgage company and held writing and editing roles at Bankrate, NerdWallet, LendingTree and RE/MAX. She holds a bachelor's degree in journalism from the University of Florida and a master's degree in public relations from Ball State University.
