Does closing a credit card hurt your credit score?
August 11, 2022 8 min read
There are many reasons you might be considering closing a credit card account. You may be trying to limit your amount of revolving debt. Or you might not be using a particular card any longer.
Whatever your goal, one question you might consider: Does closing a credit card hurt your credit score? The answer varies based on your personal circumstances, but there are things to keep in mind before deciding.
- Before closing a credit card, you may want to be aware of any impacts it may have on your credit report.
- Closing an account can affect the age of your credit and your credit utilization ratio, which may hurt your credit scores.
- Exploring the pros and cons of closing a card can help you make an informed decision about what’s right for you and the impacts on your credit scores.
How does closing a credit card affect your credit score?
Closing your credit card can affect several factors that go into your credit score.
For starters, how long you’ve had credit can impact your credit scores. For instance, both FICO® and VantageScore® consider the age of your oldest account as well as the average of all your accounts. The older your credit history, the better. And closing an account can make your credit history younger.
Another primary factor that could be affected is your credit utilization ratio, which is the amount of available credit you’re using across all your accounts.
You can get your utilization ratio by dividing the total amount of your credit balances by your total credit limits. Then, multiply that number by 100 to calculate your ratio as a percentage.
By closing a credit card, you’re decreasing the total amount of credit available to you. And that increases your credit utilization ratio. Here’s one scenario to help explain.
Say you have two credit cards:
- Card No. 1 has a $1,000 credit limit and $0 balance.
- Card No. 2 has a $1,000 credit limit and $1,000 balance.
In this scenario, your credit utilization ratio is 50%, because your total balance across both cards is half the available credit. But by closing card No. 1, your credit utilization ratio would spike to 100%. That’s because you would be left with a $1,000 total balance and $1,000 credit limit. This could negatively impact your credit.
According to the Consumer Financial Protection Bureau, experts recommend keeping your credit utilization below 30% of your available credit to avoid a negative impact on your scores.
How much does closing a credit card hurt your credit?
While closing a credit card can affect your credit scores, it’s hard to say by how much. That’s because there are other factors—such as the length of your credit history and whether you have a record of making payments on time—that also play a role in your scores. The actual change to your scores after closing a card will be unique to your individual circumstances.
Generally, though, closing a credit card shouldn’t have a major impact on your credit scores—especially if you demonstrate responsible credit use with the accounts you keep open.
Choosing to keep your card open
There are some important reasons to consider when deciding to keep accounts open:
- Managing credit utilization. If the card you’re considering closing has available credit, keeping it open could help lower your credit utilization ratio.
- Keeping a solid credit history. If your credit card is one of only a few sources of credit, closing the account could give you a thin credit file. This means you may not have enough credit history to be scored. In this case, you may want to keep your card open to continue building your credit while paying the balance in full.
- Maintaining a mix of credit types. Your credit scores can also benefit from having more than one credit type. This can include things such as revolving credit, personal loans or mortgages. If your credit card is your only form of revolving credit, you may want to keep it open to diversify your active credit.
- Preparing to make a big purchase. If you’re planning to purchase something such as a house or a car, it helps if your credit is at its best—especially when it comes to applying for a loan. In this situation, keeping your credit card open could be in your best interest.
Although keeping your card open and paying it off could be the right move, it also depends on your unique circumstances. Therefore, before deciding to close an account, it’s important to look at the pros and cons of your situation and determine whether there may be any negative impact on your credit.
If your circumstances determine that closing the account is best, there are ways to help minimize the impact on your credit scores.
Ways to safely close your credit card
Closing a credit card may seem simple enough. But before you break out the scissors to snip your card in two, here are some things to consider:
- Pay down your balance first. While you can close a credit card with an active balance, you may want to consider paying down your balance first. Even if you close your account, you’re still responsible for any remaining balance, interest and fees that might be charged. Plus, paying down your balance first will help keep your credit utilization under control. And that can help minimize impacts on your credit scores.
- Double-check your payoff amount. In some cases, the payoff amount for your card may be more than just the statement balance because of fees and interest. Be sure you check with your credit card issuer to confirm what you owe.
- Get confirmation of your cancellation. With some credit card companies, you can simply sign in to your account to close it. Or you may be able to call your card issuer to make the request. Either way, consider getting confirmation in writing. That way, you have a permanent record in case anything gets called into question.
- Check your credit report. After closing your card, you might also want to check your credit report. You can get free copies of your credit reports with credit scores from all three major credit bureaus—visit AnnualCreditReport.com to learn how.
If you still have questions about closing your account, check your cardholder agreement for more details.
Alternatives to closing your card
Before you make the decision to close your credit card account, other options could be worth considering:
- Upgrade to a new card. If you feel like you aren’t using your current card very often or that it’s not meeting your needs, you may be able to upgrade to a different card with the same issuer. Depending on how your issuer treats upgrades, you may be able to keep your existing account history while potentially getting new benefits and rewards.
- Transfer your balance. If you’re hoping to consolidate your debt or potentially lower your interest rate, you might consider a balance transfer. Just be sure to factor in any fees or terms involved.
- Use your card for small purchases. If your card hasn’t been getting much use, consider setting up a small recurring purchase. This will help keep the card active.
- Lock your card. If you want to limit spending, see whether your lender offers a card lock feature. Capital One lets you instantly lock your card to prevent it from being used for purchases. It takes just a few taps on the Capital One Mobile app. And if you decide you want to use the card in the future, you can unlock it just as easily. Just remember that your account may eventually be closed due to inactivity, so be sure to contact your lender for details.
Closing a credit card in a nutshell
The decision to close your credit card account is a personal one. One way to help make a more informed choice is to routinely monitor your credit scores.
CreditWise from Capital One is a free tool that allows you to monitor your VantageScore® 3.0 credit score. Using CreditWise to keep an eye on your credit won’t hurt your scores. And it’s free for everyone, not just Capital One customers.
It even has a tool called the CreditWise Simulator. It can help you understand how choices you make could affect your scores. That includes things such as canceling your oldest credit card and paying down your balance.