Does Closing a Credit Card Hurt Your Credit Score

You’ve been eyeing that old credit card, maybe it’s got a high annual fee or you just don’t use it anymore. A little voice whispers, "Just close it!"

But then a louder voice screams, "Wait, will closing a credit card tank my credit score?" It’s a super common question, and honestly, the answer isn’t a simple yes or no.

What This Actually Means for Your Wallet

Thinking about your credit score is really thinking about your financial flexibility down the road. A good score opens doors for better loan rates on a car, a house, or even lower insurance premiums.

A dinged score means you could pay hundreds, even thousands, more over the lifetime of a loan. It’s a big deal, so understanding how closing a card impacts it is key.

The Credit Score Breakdown: What Really Matters

Your credit score isn't just one thing; it's a recipe with several ingredients. Each one plays a part in that three-digit number lenders use to judge you.

Understanding these ingredients helps you see why closing a card can be a bit of a tightrope walk. You’re affecting multiple parts of that recipe at once.

How Closing a Card Impacts Each Part

Imagine your credit score is like a financial report card. Each section below is a grade, and closing a card can change some of those grades.

For instance, let’s say you have four credit cards with a total limit of $20,000. You carry about $4,000 in balances across them.

• Credit Utilization: This is how much credit you're using compared to your total available credit. It’s a huge factor, making up about 30% of your score. If you have a total credit limit of $10,000 and you owe $3,000, your utilization is 30%.

Closing a card reduces your total available credit. Suddenly, that $3,000 balance on a $10,000 total limit might look like $3,000 on a $5,000 limit if you close a card with a $5,000 limit, pushing your utilization up to 60%. This is usually bad for your score.

• Length of Credit History: The older your accounts, the better this looks. It shows you’re a reliable borrower over a long period, accounting for about 15% of your score. Your score loves seeing those long, stable relationships.

If you close your oldest card, that long history disappears from your active accounts, though it stays on your report for about 7-10 years. Still, it stops contributing to the "average age of accounts" calculation, which can shorten your overall credit history average.

• Payment History: Did you pay your bills on time? This is the absolute biggest factor, roughly 35% of your score. Missed payments are devastating, while consistent on-time payments build trust.

Closing a card doesn't erase your payment history; those records stay on your report. However, you lose an active account that could continue demonstrating positive payment behavior.

• Types of Credit: Having a mix of credit (like a credit card, a car loan, and a mortgage) shows you can handle different kinds of debt. This makes up about 10% of your score. Lenders like to see you're not a one-trick pony.

If closing a card significantly reduces your overall variety of credit, it might have a minor impact. For most people with multiple cards and perhaps a loan, this usually isn't a major concern.

• New Credit: Opening a bunch of new accounts in a short period signals higher risk. This accounts for about 10% of your score. Lenders get nervous when they see a sudden flurry of applications.

Closing a card doesn't directly impact this, but if you close one only to open another immediately, the new inquiry and account can have an effect. It’s better to space out your credit decisions.

When It Makes Sense to Close a Card (And How To Do It Smartly)

Alright, so we know closing a card can hurt. But sometimes, it's totally the right move. You just have to be strategic about it.

I’ve definitely closed cards before, mostly ones with high annual fees that I wasn't using for their benefits anymore. Here’s my playbook.

Step 1: Understand Your "Why"

Why do you want to close this specific card? Is it a high annual fee, too much temptation, or just clutter in your wallet?

Knowing your reason helps you weigh the potential credit score impact against the financial benefit or peace of mind.

Step 2: Check Your Credit Utilization First

Before doing anything, look at your overall credit usage across all your cards. If you have high balances on other cards, pay them down first.

You want your total utilization to be as low as possible, ideally under 10-20%, before you reduce your total available credit by closing a card.

Step 3: Pay Off the Balance Completely

Never, ever close a credit card with a balance on it. You’ll still owe the money, and it can cause headaches.

Pay it down to zero, then wait for that statement to close and reflect a zero balance before you call to close the account.

Step 4: Consider a Product Change

Sometimes, you can convert a card with an annual fee into a no-fee version from the same bank. This is often called a "product change."

You keep your credit history with that account and avoid the annual fee, getting the best of both worlds. I've done this several times with success.

Step 5: Confirm the Closure & Monitor Your Report

Once you’ve decided to close, call the issuer, tell them you want to close the account. Get confirmation in writing if you can.

Then, check your credit report in a month or two to make sure it shows the account as "closed by consumer" with a zero balance. You can get free copies from AnnualCreditReport.com.

The Numbers Game: How Closing Affects Your Score (Real Examples)

Let's look at a few scenarios, because this isn't just theory; it's how your score really behaves.

Scenario 1: You have a card with a $5,000 limit, and it’s your newest card. You also have two other cards with $10,000 limits each, carrying a total balance of $4,000. Your total available credit is $25,000. Your utilization is $4,000/$25,000 = 16%.

If you close that new $5,000 limit card, your total available credit drops to $20,000. Your utilization then jumps to $4,000/$20,000 = 20%. That's a small jump, probably not a huge hit to your score, maybe a few points.

Scenario 2: You have one old card from 15 years ago with a $2,000 limit, and a newer card from 2 years ago with an $8,000 limit. You carry a $1,000 balance on the newer card. Total available credit is $10,000, utilization is 10%.

If you close that 15-year-old card, your average age of accounts drops significantly, and your total limit drops to $8,000. Your utilization jumps to $1,000/$8,000 = 12.5%. This could be a more noticeable hit, perhaps 20-30 points, especially if that was your only very old account.

Quick math: If you invest $300/month at 8% for 10 years, you'll have roughly $54,000. That's $18,000 in pure gains.

Scenario 3: You have five cards, all with solid limits and a good payment history. One of them has a $7,000 limit, no annual fee, and you just never use it. You have minimal balances on your other cards.

Closing this unused card might have a very minimal impact, if any, because your overall credit picture remains strong and diversified. Your utilization might tick up slightly, but if it stays under 20-30%, you're likely fine. This is often a good candidate for closure if you don't need it.

What to Watch Out For When You Close a Card

There are definitely some pitfalls here. I’ve seen friends make these mistakes, and it’s always a scramble to fix them.

Common mistake #1: Closing your oldest card without a backup plan. That old card is gold for your credit history. If you absolutely must close it (say, due to a massive annual fee), try a product change first. If not, make sure you have other long-standing accounts to support your average credit age.

Common mistake #2: Forgetting about credit utilization. Many people just think, "I'll close the card, then I won't have to worry about it." But if you still have high balances elsewhere, closing a card with a high limit will immediately make your utilization ratio worse. Pay down those other cards first, always.

Common mistake #3: Closing too many cards at once. If you go on a credit card closing spree, it can look like you’re in financial distress, even if you’re just trying to simplify. Lenders get nervous when they see a lot of activity like that.

Space out any closures you plan to make, giving your credit score time to adjust between each one. Maybe one every six months or so, if necessary.

Common mistake #4: Not confirming the closure. You call, you "close" the account, but sometimes due to a mix-up, it doesn’t actually get processed. Then you check your report months later and it’s still open, or worse, shows an unexpected balance or activity.

Always follow up. Get a confirmation email or letter. Check your credit report to ensure the card status is accurately updated as "closed by consumer" and shows a zero balance. This small step can save you a big headache.

Common mistake #5: Closing a card with rewards points. Many rewards programs mean you forfeit any unredeemed points when you close the account. I learned this the hard way once, losing a chunk of points because I didn't think to redeem them first.

Always redeem all your points or transfer them if possible before you even consider closing the account. You don't want to leave free money on the table.

Common mistake #6: Assuming an unused card is harmless. While an unused card doesn't hurt your utilization (because it has no balance), it can sometimes be closed by the issuer due to inactivity.

This "issuer initiated" closure can still impact your average age of accounts and total available credit. If you want to keep an unused card open, just make a small purchase on it once every six months or so and pay it off immediately to keep it active.

Frequently Asked Questions

Is closing a credit card always bad for your score?

Not always, but it often has some negative impact, especially if it's an old card or one with a high credit limit. The key is to weigh the potential harm against the benefits, like getting rid of an annual fee or too much temptation.

Sometimes, the negative impact is minimal and temporary, especially if you have a strong overall credit profile. It's about being smart and strategic, not just closing on a whim.

How much money do I need to start paying attention to utilization?

You should pay attention to your credit utilization no matter how much you owe. The golden rule is to keep your total balances across all cards under 30% of your total available credit.

For example, if you have $10,000 in total credit limits, try to keep your balances below $3,000. Ideally, aim even lower, like 10%, for the best scores.

What are the main risks of closing an old card?

The biggest risk is shortening your average length of credit history, which is a significant factor in your score. You also reduce your total available credit, which can cause your credit utilization ratio to jump up on your remaining cards.

This double whammy can sometimes lead to a noticeable drop in your score. Think very carefully before you close your oldest account.

How does closing a card compare to just letting it sit unused?

Leaving a card open and unused is generally better for your score than closing it. It contributes to your total available credit, keeping your utilization low, and adds to your average age of accounts.

Just make a tiny purchase every few months and pay it off immediately to prevent the issuer from closing it due to inactivity. This maintains your credit history and available credit.

Can I lose all my good credit if I close a card?

No, you won't lose all your good credit just by closing one card. Your payment history and other open accounts will still be reported.

However, if it's your only card, or one of very few, the impact will be much more significant. For most people with multiple accounts, it's usually a temporary dip rather than a catastrophic loss.

Should I close a card with an annual fee?

This is where the "why" really comes in. If the card's benefits (like travel points or cash back) outweigh the annual fee, keep it. But if you're not getting enough value, it's often a good candidate for closure or a product change.

Always try to product change to a no-fee card first. If that’s not an option, and you’re not using the benefits, then closing it makes sense after checking your utilization.

What if I have an authorized user on the card I want to close?

When you close a primary account, any authorized users on that card will also lose that account from their credit report. This could affect their credit history, especially if it was one of their older accounts.

It's always a good idea to have a conversation with your authorized user beforehand. Give them a heads-up and explain why you're making the decision.

How long does it take for a closed account to disappear from my credit report?

A closed account with a positive payment history will typically remain on your credit report for up to 10 years from the date of closure. This means the positive history continues to benefit you for a long time.

Accounts closed with negative marks (like late payments) usually stay on your report for about 7 years. So, even closed accounts still play a role for a while.

The Bottom Line

Closing a credit card isn't inherently evil, but it's rarely a neutral move for your credit score. You've got to be smart about it, especially when it comes to utilization and the age of your accounts.

Before you make that call, weigh your options, check your numbers, and make a plan. Your future self (and your wallet) will thank you for being prepared.