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Does Closing a Credit Card Affect Your Credit Score?

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Does Closing a Credit Card Affect Your Credit Score

If you’re thinking about cleaning up your credit report by closing a credit card account or two that you haven’t used for years, you probably want to reconsider that plan. That’s because closing a credit card account can actually lower your credit score. How? One, by potentially reducing the length of your credit history, especially if you’ve had the account for a long time, and two, by reducing your available credit. Let’s break it down further.

Does Closing a Credit Card Hurt Your Credit?

The length of your credit history makes up about 15% of your major credit scores, including your FICO credit score. It looks at how long you’ve had credit by looking at the opened dates on all of your accounts. And your available credit has a direct impact on your credit utilization rate, which is how much debt you owe versus your total available credit limit(s). Your credit utilization rate is another important component of your credit score, accounting for 30%, for instance, of your FICO credit score. So in terms of your credit score, closing credit card accounts that you don’t use is one of the biggest mistakes you can make.

Should I Close a Credit Card?

With those points in mind, Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said he advises clients to weigh their options carefully when it comes to closing a credit card.

“It’s important to remember that most of your credit score is based on payment history, so if you have an account with a long history of good payments you should generally keep it open,” Nitzsche said. “If the card does not carry a fee or have a high balance, I usually recommend that they keep the account open, particularly if they have had the account a long time.”

If the annual fee is the issue, Nitzsche said you can contact your issuer to see if they’ll waive it in exchange for keeping the account open. However, “if the client is in high credit card debt, then it could be in their best interest to close the account in exchange for a lower interest rate, as in a Debt Management Plan or creditor financial hardship plan,” he said.

If you’re considering closing a credit card account, here are some important things to keep in mind.

Why Closing a Credit Card Account Hurts Your Credit History

Positive credit information, such as a long-established credit card account with a positive payment history, may stay on your credit report indefinitely. But when you close an account, it is usually removed from your credit report within 10 years.

Once that account is wiped from your credit report, you lose the credit history associated with the account. So do your credit score a favor and very carefully consider keeping old credit card accounts open. You may want to check your credit scores before you close an account. You can get two free credit scores, updated every 14 days, on Credit.com.

And if you think you’ll be tempted to use that card if it’s still open, you can always cut it up, put it in your safety deposit box at the bank or even put it on ice, literally, by freezing it like some people do in a block of ice.

Why Closing an Account Hurts ‘Credit Utilization’

The amount of revolving credit card limits that you are currently using is called your “revolving utilization.” Let’s say you have a credit card with a $10,000 limit and a $2,000 balance. You are utilizing 20% of your credit line.

To maximize your credit scores, you’ll want your revolving utilization to be as low as possible, with 10% or lower, being ideal for most people.

An open credit line with a roomy credit limit and zero balance will help to lower your revolving utilization, when you carry balances on other accounts.

So consider keeping your revolving utilization low by keeping old accounts open and balances low.

If You Do Close Your Credit Card

If you’ve decided that the hit to your credit scores is worth it — let’s say you have a joint credit card account with your spouse and you’re going through a divorce — there are a few things you’ll want to keep in mind.

Remember, you may be able to close a card with a balance, but you’re still going to have to pay off the purchases — and you’ll want to aim to do right away since that available credit limit will be gone once the card is closed, even if those charges aren’t. Of course, you can always transfer the balance to another card, preferably one with a 0% balance transfer offer (bear in mind you’ll likely pay a nominal transfer fee to do so) and then close the account.

Second, you’ll want to confirm with your issuer that your card does, in fact, have a zero balance once you turn a blind eye towards the account. Be sure to check your account to make sure there are no outstanding charges or fees that could go through and then show up later as missed payment — which can also do big damage to your credit score.

Finally, after you’ve canceled, it’s a good idea to get written confirmation that the account is closed and the balance is zero. You can send a certified letter to your issuer’s customer service department requesting a confirmation letter.

Lucy Lazarony contributed to this report.


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  • MarketingMelodie

    I’m glad I read this post. I was thinking of closing a credit card I have had for a while with a high limit just because I don’t use it anymore. Now I know to keep it open, especially since it’s not costing me anything.

  • MarketingMelodie

    You bring up a good point Tawnya. It’s very important to make sure you’re getting charged an annual fee that could cost you hundreds or thousands in the long run. If this is the case it might be better to close the account.

    • Annell Gibson

      Or call and see if you can get the annual fee removed.

  • Judy

    We just closed a credit card with an $11,000 amount to get a better rate to help pay it for 60 months. We have another credit card with $12K. They will not work with us at all. It’s a Chase card and they will not help. Sad because we can’t afford the high payment.

  • Mikey

    No, not true, I have a 30 year old credit card, hasn’t been used in 20. Now a Department Store or the like, absolutely they’ll close it. For instance, I no longer use credit at some store simply because every time I go, they want me to apply and get a new card. Too much risk for fraud that way. Sometimes I can go a year or better without going to this kind of Dept. Store.

  • Mikey

    Store cards will do that, but Banks won’t. I have a Chase for card for 30 years, but it hasn’t been used in 10, and they just sent me a new one. .


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