Canceling a credit card will lower your score, usually by 10 to 50 points, though the damage depends on which card you close and when
When you close a credit card account, your credit score drops because two of the factors that build your score shrink when ready: your available credit and your payment history length. The hit is not permanent — your score will recover over time — but it happens right away and the size of the drop varies based on your current score, how much credit you use, and how old the card is.
The damage is smallest if you close a newer card with a low credit limit and you already use very little of your available credit. The damage is largest if you close an old card with a high limit that you have paid on time for years, or if closing it pushes your credit utilization above 30 percent of your remaining available credit.
Key Takeaways
- Closing a credit card reduces your available credit, which usually raises your credit utilization ratio and lowers your score by 10 to 50 points.
- The longer you have held the card, the more your score will drop, because closing it shortens your average account age.
- If the card has an annual fee and you do not use it, the score damage from closing it is usually smaller than the cost of keeping it open.
- Keeping the card open but unused preserves your credit history and available credit without costing you anything if there is no annual fee.
- Your score will begin to recover within a few months as the closing fades from recent activity and your payment history remains on your report.
Why closing a card lowers your score
Your credit score is built from five factors. Two of them are affected when ready when you close a card: available credit (also called credit utilization) and account age.
Available credit is the total credit limit across all your open accounts minus what you currently owe. If you have a $5,000 limit card and a $10,000 limit card and you owe $3,000 total, your utilization is $3,000 divided by $15,000, or 20 percent. When you close the $10,000 card, your available credit drops to $5,000, so the same $3,000 debt now represents 60 percent utilization. Credit bureaus treat higher utilization as riskier, so your score drops.
Account age affects your score because a longer history of on-time payments is worth more than a short one. When you close an old card, you shorten your average account age across all your accounts. The older the card you close, the bigger this effect.
How much your score will drop
A typical drop is 10 to 50 points, but the actual number depends on your situation. If your current score is already low (below 650), closing a card may hurt less because you have less room to fall. If your score is very high (above 750), the same action may cost you more points because you have more to lose.
The drop is usually smallest when you close a card that is less than two years old, has a low credit limit, and you do not use it. The drop is usually largest when you close a card that is more than five years old, has a high limit, and closing it pushes your utilization above 30 percent.
If you have only one or two credit cards open, closing one will hurt more than if you have five or six, because the loss of available credit is proportionally larger. If you have ten cards open and close one, the impact on your utilization is smaller.
When closing a card makes sense despite the score drop
If a card charges an annual fee and you do not use it, closing it is usually the right choice. The score damage is temporary, but the fee is permanent. A $95 or $150 annual fee costs you real money every year, while a 20-point score drop typically recovers within three to six months.
Before you close the card, call the issuer and ask whether they will waive the annual fee or downgrade you to a no-fee version of the same card. Many issuers will do this to keep your account open. If they refuse, closing the card is reasonable.
Closing a card also makes sense if you are trying to reduce the temptation to overspend or if you have so many open accounts that managing them is difficult. The score recovery is worth the peace of mind if keeping the card open would lead you to carry a balance and pay interest.
How to minimize the damage if you must close a card
If you have decided to close a card, timing and order matter. Close the card after you have paid the balance to zero, not while you owe money on it. The issuer will report the closing to the credit bureaus, and if you still owe a balance, that will be reported too.
If you have multiple cards to close, close the newest ones first. Closing a card that is only one or two years old hurts less than closing one you have held for ten years. Spread the closings out over several months if you can, rather than closing multiple cards in the same month.
Before you close a card, pay down balances on your other cards so that your utilization is as low as possible. If you can get your utilization below 10 percent before closing the card, the impact on your score will be smaller.
Why keeping a card open (even unused) is often better
If the card has no annual fee, keeping it open costs you nothing and protects your score. An open account with a zero balance and a long payment history is an asset to your credit profile. It adds to your available credit, which lowers your utilization ratio, and it preserves your account age.
Many people worry that an unused card will hurt their score, but that is not how credit scoring works. An account with a zero balance and no recent activity does not damage your score. It straightforward sits there, helping you.
If you are concerned that an unused card will tempt you to overspend, you can ask the issuer to freeze the account or you can put it away in a safe place. You do not have to close it.
How long it takes your score to recover
Your score will begin to recover within a few months of closing the card. The closing itself is a one-time event that appears on your credit report, and its impact fades as newer activity takes its place. Within six months, the closing is no longer recent, and the damage is usually much smaller.
Your score will recover faster if you keep your utilization low on your remaining cards and continue to pay all bills on time. Every on-time payment adds to your payment history, which is the largest factor in your score. Within a year, most people see their score return to where it was before the closing.
The closed account itself will remain on your credit report for up to seven years, but it will be marked as closed and will have less impact on your score as time passes.
Frequently Asked Questions
Will closing a credit card hurt my score if I pay off the balance first?
Yes, closing the card will still lower your score even if you pay the balance to zero first. The damage comes from losing available credit and shortening your account age, not from carrying a balance. Paying off the balance is the right step before closing, but it does not prevent the score drop.
Should I close my oldest credit card or my newest one?
Close your newest card if you must close one. Your oldest card is worth more to your score because it lengthens your average account age. Closing a card that is only one or two years old costs you fewer points than closing one you have held for ten years.
What if I close a card and my credit utilization goes above 30 percent?
Your score will drop more than it would if your utilization stayed below 30 percent. Before you close a card, pay down balances on your other cards so that your total utilization stays low. If you cannot do that, consider keeping the card open instead.
Can I reopen a credit card after I close it?
You can ask the issuer to reopen the account, but they are not required to do so. Some issuers will reopen an account within 30 to 60 days of closing. If they refuse, you can explore for a new card from the same issuer, but it will be treated as a new account with a new opening date.
Does closing a card hurt my score more than missing a payment?
Missing a payment hurts your score much more than closing a card. A missed payment can lower your score by 100 points or more and stays on your report for seven years. Closing a card typically costs 10 to 50 points and the damage fades within six months. If you are choosing between the two, missing a payment is far worse.