Does closing a credit card hurt your credit score?
Closing a credit card can hurt your credit score. And when your score drops, it can become harder to qualify for a loan, get a good interest rate, or even rent an apartment.
That doesn’t mean you shouldn’t ever close credit cards — sometimes, the benefits outweigh the drawbacks. But before you close any accounts, understand how it’ll affect your credit.
If you’re wondering how closing a credit card impacts your credit, here’s what to know.
How closing a credit card affects your credit score
When you close a credit card, you might see a drop in your credit score. This is primarily due to an increase in your credit utilization, which measures the percentage of available credit you’re using. Generally, maintaining a lower credit utilization benefits your credit.
Closing a credit card can also impact your average credit age. The longer your credit history, the better for your credit score. While your credit score typically includes both open and closed accounts, closed accounts eventually fall off your report (usually 10 or so years after the account closure). When an older account is removed from your report, your average credit age and credit score could drop.
Pros and cons of closing a credit card
Here are some pros and cons to weigh before closing a credit card:
Pros
- Lowers risk of fraud
- Simplifies bills and budgeting
- Reduces temptation to overspend
- Eliminates annual fee charge (if applicable)
Cons
- Increases credit utilization
- Might eventually lower your credit age
- Will lose access to the card’s perks and benefits
- Reduces available credit
Why your credit score may drop
Closing a credit card can lead to a decrease in your credit score. Primarily, this has to do with your credit utilization and the length of your credit history.
Find out: What affects your credit score?
Raises your credit utilization
Your credit utilization is the amount of available credit you’re using, measured across all of your revolving accounts (like credit cards and lines of credit). A lower credit utilization is typically better for your credit score, as it shows lenders you aren’t too reliant on your available credit. Many experts agree that a credit utilization of 30% or less is a good target to aim for, but 10% or below could be even better.
When you close a credit card, your credit utilization increases, potentially hurting your score. For example, say you have the following credit cards and credit limits:
| Credit cards | Credit limit |
|---|---|
| Credit card A | $2,000 |
| Credit card B | $3,000 |
| Credit card C | $5,000 |
| Total | $10,000 |
Your monthly spending across all three cards is $2,000. That would make your credit utilization 20% ($2,000 / $10,000).
But say you close credit card C. Your total credit limit would drop to just $5,000. If you continue to spend $2,000 per month, your credit utilization would jump to 40% ($2,000 / $5,000).
Learn: How to increase your credit limit
Impacts your credit history
Your credit history refers to how long you’ve been using credit. Part of this includes your average credit age — the older your credit age, the better for your credit score. This is because lenders want to see a long history of responsible credit use.
It’s a common misconception that when you close an old credit card, your credit history will immediately drop. In reality, your credit score reflects both open and closed accounts. But when the closed account eventually drops off your credit report — usually after 10 years — your credit history could shorten.
In general, closing an older account will have a bigger impact on your credit score, especially if you don’t have many other accounts.
How much can your credit score drop once you close a card?
While closing a credit card can cause a dip in your credit score, the precise impact is hard to predict. How much your score might drop depends on several factors, including:
- Your credit utilization
- How many other revolving credit accounts (including credit cards and lines of credit) you have
- Your credit history length
- Your overall credit profile
In some cases, the drop in your score can be minor and temporary. But if closing a card results in a big spike in credit utilization or significant drop in your average credit age, the impact will likely be bigger.
How long does a closed card stay on your credit?
A closed account can stay on your credit report for several years, but exactly how long depends on the status of the account.
Accounts that were past due when you closed them generally stay on your report for up to seven years. In comparison, if you close an account in good standing, it can stay on your credit report for up to 10 years.
When it makes sense to close a credit card
Even though closing a credit card can ding your credit score, there are scenarios when doing so makes sense. Here are some examples:
- You have a low credit utilization. Closing a card might affect your score less if your overall credit utilization stays relatively low after the card closure.
- The card has a small limit. Closing a lower-limit card will have less of a negative impact on your score because it removes less available credit from your profile.
- The card has a high annual fee. A card with an annual fee you can’t afford might not be worth keeping open, especially if you rarely use the card.
- You don’t use the card. Keeping unused cards open can create more administrative hassle — particularly when it comes to monitoring your account for fraud.
When you should avoid closing a credit card
There are also times when closing a credit card can have a bigger negative impact on your credit score. Think twice before closing a credit card if:
- You have high balances on other cards. Closing a card will lower your available credit, which could make your credit utilization higher than recommended.
- It’s your oldest account. When the account eventually falls off your credit report, your average credit age will likely drop.
- You have a limited credit history. Without a long credit history, every account carries more weight.
How to close a credit card without hurting your credit score
While you can’t fully control how closing a credit card will affect your credit score, here are some strategies to minimize the negative impact:
- Pay down your balances first. A closed account with a balance can still contribute to your credit utilization. If possible, pay off your card balance before closing an account.
- Keep your utilization low. A jump in your credit utilization is a concern when closing a credit card. You can minimize this risk by keeping your utilization low across your cards. This way, even a decrease in your available credit won’t cause your utilization to rise too much.
- Avoid closing your oldest cards. Eventually, closed accounts fall off your credit report — and the older the account, the bigger the potential impact on your credit score. If possible, keep your oldest account open if there’s no expensive annual fee or other issues with the card.
Is it bad to close a credit card you don’t use?
Closing a credit card might hurt your credit score, especially if it causes a big jump in your credit utilization. And eventually, a closed account will fall off your credit report, potentially lowering your credit age. However, the impact on your credit score depends on your overall credit profile.
Despite a potential drop in your credit score, closing a card can still be a good idea if it eliminates an expensive annual fee, reduces the temptation to overspend, or simplifies your finances.
Keep reading: Does opening a new credit card hurt your credit score?
Frequently asked questions
It might, primarily because it can raise your credit utilization. The specific impact depends on other factors, including your overall credit profile. Additionally, a drop in your credit age could eventually hurt your score.
Yes, closing a credit card — even with a zero balance — could hurt your credit. This is because closing a credit card reduces your available credit and can increase your credit utilization.
It depends. Closing your oldest credit card might eventually have a big impact on your average credit age, especially if you don’t have many accounts. In general, a higher average credit age is better for your credit score. On the other hand, if you have several other accounts that have been open for a while, closing one account might not have as big of an impact.
There’s no perfect time to close a credit card, as it depends on your goals and financial situation. But there are certain times when the benefits of closing a credit card outweigh the potential negative impact on your credit score. For example, closing a card could be worth it if:
- The account is relatively new
- You’re paying a high annual fee
- The credit limit is low
- You’re concerned about fraud
It depends. Closing a credit card can cause your credit utilization to rise, which negatively impacts your credit score. But sometimes closing a card might be worth a small drop in your credit score. For example, if you’re paying a high annual fee for a card you don’t use, it might be better to close that card.
