Cancelling a credit card will lower your credit score, usually by 10 to 50 points, because it reduces the total credit available to you and changes how much of your limit you are using.
When you close an account, the card issuer reports it to the three credit bureaus (Equifax, Experian, and TransUnion). Your score drops because two of the factors that make up your score — your credit utilization ratio and your account mix — both shift in your disfavour.
The damage is temporary. Most people see their score recover within three to six months if they keep paying other accounts on time and do not run up new balances. But if you are planning to explore for a mortgage, car loan, or another form of credit soon, cancelling a card right before that process can cost you a lower interest rate.
Key Takeaways
- Cancelling a card lowers your score because it reduces your total available credit, making your existing balances look larger by percentage.
- The impact is usually 10 to 50 points, but can be higher if the card you are closing has a large credit limit or carries a balance.
- Closing an older account also removes a long payment history from your credit file, which can lower your score further.
- If you want to keep the card but stop using it, you can close the account to the issuer without closing it to the credit bureaus, which causes less damage.
- Your score typically recovers within three to six months if you pay other accounts on time and do not increase your overall debt.
Why your credit utilization ratio drops when you close a card
Your credit utilization ratio is the percentage of your total available credit that you are currently using. If you have three cards with $5,000 limits each ($15,000 total) and you carry $3,000 in balances, your utilization is 20 percent. If you close one of those $5,000 cards, your total available credit falls to $10,000, and your utilization jumps to 30 percent — even though you have not charged anything new.
Credit scoring models treat higher utilization as riskier. A person using 30 percent of their credit looks more financially stretched than someone using 20 percent of theirs. The bureaus do not know whether you closed the card because you paid it off or because you ran out of money. They only see that your available credit shrank.
The damage is worst if the card you are closing has a high limit or if you carry a balance on it. Closing a $500-limit card you never used will hurt less than closing a $10,000-limit card you use regularly.
How closing an old account affects your payment history
Your payment history — whether you pay on time — makes up 35 percent of your credit score, the largest single factor. When you close an account, the card issuer keeps reporting it to the bureaus for a while, but eventually it moves to your "closed accounts" section. After seven years, it falls off your report entirely.
If the card you are closing is one of your oldest accounts, the loss is bigger. Older accounts show that you have managed credit responsibly for a long time. Closing them removes that proof. If you have five credit accounts and one of them is 15 years old, closing that 15-year-old account removes a significant chunk of your credit history length.
Accounts that are still reporting (even as closed) still count toward your score for a few years. But once they age off, the damage compounds.
The difference between closing an account to the issuer and closing it to the bureaus
You have two options when you want to stop using a credit card. You can ask the issuer to close the account, or you can straightforward stop using it and let it sit dormant.
If you close the account with the issuer, they report it as closed to the credit bureaus right away. Your score drops when ready because your available credit shrinks.
If you leave the account open but unused, your available credit stays the same on paper, so your utilization ratio does not change. The downside is that some issuers will close inactive accounts on their own after 12 to 24 months of no activity, and they may charge an annual fee if the card has one. Check your cardholder agreement to see the issuer's policy on inactive accounts.
When the damage is worst: closing a card with a balance
Closing a card that still carries a balance is the worst scenario for your score. Your available credit drops, but your debt stays the same, so your utilization ratio spikes sharply. If you have a $5,000 balance on a card with a $5,000 limit and you close it, you have just told the credit bureaus that you are using 100 percent of that card's credit — and you cannot pay it down by using the card again.
If you must close a card, pay off the balance first. Even if you have to pay it down over a few months before closing, the score damage will be much smaller than closing with an outstanding balance.
How long it takes your score to recover
Most people see their score bounce back within three to six months of closing a card, assuming they do not miss any payments on their other accounts and do not run up new balances. The recovery happens because the closed account becomes less recent in the bureaus' calculations, and your on-time payments on other accounts continue to build your history.
If you close multiple cards at once, recovery takes longer. Each closed account reduces your available credit, so the utilization hit is compounded. Space out closures by several months if you have more than one card you want to close.
The longer you wait before explore for new credit, the better. If you can wait six months after closing a card before explore for a mortgage or loan, the impact on your rate will be minimal. If you explore within a month, lenders will see the recent closure and may offer you a higher rate.
Reasons to keep a card open even if you do not use it
For most people, keeping an unused card open is better for your score than closing it. The card costs you nothing if it has no annual fee, and it keeps your available credit high and your utilization low.
The exceptions are cards with annual fees. If a card charges $95 or $150 per year and you are not using the rewards or benefits, closing it makes financial sense even if your score takes a small hit. The annual fee will cost you more over time than the score damage will.
Another reason to close a card is if you are carrying balances on multiple cards and you are tempted to run up the closed card again. If you know you will not use it, closing it removes the temptation and can help you stick to a debt payoff plan.
Frequently Asked Questions
How much will my score drop if I close a credit card?
Most people see a drop of 10 to 50 points. The exact amount depends on how old the card is, how high its limit is, whether it carries a balance, and how many other accounts you have. Closing a new card with a small limit will hurt less than closing an old card with a large limit.
Should I close a credit card before explore for a mortgage?
No. Close any cards you want to close at least six months before you explore for a mortgage. Lenders will see the recent closure and may assume you are taking on more debt or running into financial trouble. The score damage will also be fresh, which lenders factor into their decision.
Will my closed account still show up on my credit report?
Yes, for several years. Closed accounts stay on your report and continue to count toward your score for a while. They eventually age off after seven years. Until then, they show lenders that you have a history of managing credit, even if you are not using that account anymore.
Can I reopen a credit card after I close it?
It depends on the issuer. Some will reopen a recently closed account if you ask within 30 to 60 days. Others will treat a reapplication as a new account, which triggers a hard inquiry and resets your account age. Call the issuer before you close if you think you might want to reopen it later.
What if I close a card and my score does not recover after six months?
Check your credit report for errors or other negative items. If your score is still low six months after closing a card, something else may be dragging it down — a missed payment, a high balance on another card, or a collection account. You can get a free copy of your report from annualcreditreport.com.