Closing a credit card does lower your credit score, but the damage is temporary and the size depends on how much credit you were using
When you close a credit card, your credit score typically drops. The drop happens when ready and is usually between 10 and 45 points, though it can be larger. The exact damage depends on three things: how much of your available credit you were using, how long you had the card open, and whether the card had a balance when you closed it.
The score recovers over time — usually within a few months to a year — if you keep paying other accounts on time and don't rack up new debt. The long-term impact is much smaller than the initial hit. But there are situations where closing a card makes sense despite the short-term score drop, and situations where it doesn't.
Key Takeaways
- Your credit score drops when you close a card because your available credit shrinks, which raises your credit utilization ratio.
- The damage is worst if you were using a high percentage of that card's limit, or if the card was one of your oldest accounts.
- Closing a card with a balance is worse than closing one you paid off, because the balance still counts against you.
- Your score usually recovers within months to a year if you keep other accounts in good standing.
- Keeping the card open but unused is often better for your score than closing it, unless the annual fee is high or you cannot resist using it.
Why closing a card hurts your credit utilization
Credit utilization is the percentage of your total available credit that you are actually using. If you have three cards with $5,000 limits each (total $15,000 available) and you owe $3,000 across them, your utilization is 20 percent. Credit scoring models treat lower utilization as a sign of financial health.
When you close a card, that card's limit no longer counts toward your total available credit. If you close a $5,000 card, your available credit drops from $15,000 to $10,000. If you still owe $3,000, your utilization jumps from 20 percent to 30 percent. The scoring model sees this as riskier, even though nothing about your actual debt changed. This is the main reason your score drops.
The impact is smaller if you were using very little of that card's limit. If you owed $100 on the card you closed, closing it barely moves your utilization. The impact is largest if you were using a high percentage of that card's limit, or if it was one of your oldest accounts.
How the age of the card affects the damage
Credit scoring models also care about the age of your accounts. Older accounts signal that you have managed credit responsibly over time. When you close an old card, you lose that history from your active accounts, and your average account age drops.
If the card you are closing is brand new, the score hit from losing account age is small. If it is one of your oldest accounts — say, you opened it 15 years ago — closing it hurts more. The damage is not permanent: the closed account stays on your credit report for up to 10 years and still counts toward your history, but it no longer counts toward your average age of active accounts.
This is one reason financial advisors often suggest keeping old cards open even if you do not use them. The score benefit of keeping the account active usually outweighs the risk of the card sitting unused.
Closing a card with a balance versus closing one you paid off
If you close a card that still has a balance, your credit score takes a bigger hit than if you close one you paid off. This is because you still owe the money — the card is closed but the debt remains — and your utilization ratio gets worse.
The right move is to pay off the balance before you close the card, or to transfer the balance to another card and then close the original. If you close the card first and the balance stays on your credit report, you are paying interest on a closed account and your score suffers more.
If you have already closed a card with a balance still on it, you can still pay it down. The score will improve as the balance shrinks, even though the account is closed.
When closing a card makes sense despite the score drop
A temporary score drop is worth it in some situations. If a card has a high annual fee and you are not using it, closing it saves you money. The score recovers in a few months, but the fee savings are permanent.
If you have a card you cannot stop using — one that tempts you to overspend — closing it may be worth the score hit. Protecting yourself from debt is more important than a 20-point dip that will recover.
If you have many cards and closing one simplifies your finances without raising your utilization much, that is also reasonable. For example, if you have 10 cards and close one you barely used, the utilization impact is small and the simplification is real.
When keeping the card open is the better choice
If the card has no annual fee, keeping it open costs you nothing and protects your score. Even if you never use it again, it helps your available credit and your average account age.
If the card is one of your oldest accounts, the score benefit of keeping it open is usually larger than the benefit of closing it. The same is true if you were using a high percentage of that card's limit — closing it would raise your utilization significantly.
If your score is already low or you are planning to explore for a mortgage or car loan soon, closing a card right before that process is a bad idea. Wait until after the loan closes, or wait several months after closing the card so your score has time to recover.
How long it takes your score to recover
Most people see their score start climbing again within a month or two of closing a card, assuming they keep paying other accounts on time and do not take on new debt. Full recovery — getting back to where you were before the closure — usually takes three to twelve months.
The timeline depends on how much damage the closure did. A small hit recovers faster. A large hit takes longer. It also depends on what else is happening with your credit: if you pay down other balances or keep accounts in good standing, recovery is faster.
The closed account itself stays on your credit report for up to 10 years, so it continues to help your credit history even after it is closed. You are not erasing the account — you are just stopping it from being an active account.
What to do before you close a card
Before you close a card, pay off any balance on it. Closing a card with a balance still on it makes the score damage worse and means you are paying interest on a closed account.
Check whether the card has an annual fee. If it does not, there is usually no reason to close it. If it does, weigh the fee against the score impact. A $95 annual fee might be worth a temporary score drop, but a $25 fee probably is not.
If you are planning to explore for credit soon — a mortgage, car loan, or new credit card — close the card after the process closes, not before. A recent closure can hurt your chances of approval.
Consider whether you can straightforward stop using the card instead. If you can leave it in a drawer and forget about it, that is usually better for your score than closing it.
Frequently Asked Questions
How much does my score drop when I close a credit card?
Most people see a drop of 10 to 45 points, though it can be larger depending on the card's limit, how much you were using it, and how old the account is. A card with a high limit that you were using heavily will cause a bigger drop than a card with a low limit that you barely used.
Does closing a card remove it from my credit report?
No. The closed account stays on your credit report for up to 10 years and continues to count toward your credit history. It just stops being an active account. You are not erasing the account or the positive payment history you built on it.
Should I close a card before or after explore for a loan?
Close it after the loan closes, not before. A recent card closure can lower your score right when a lender is reviewing your process. Wait until after you have been approved and the loan has funded, then close the card if you want to.
What if I close a card and my score is still low a year later?
The card closure itself should not keep your score low for a year. If your score is still low, the problem is probably something else — high balances on other cards, missed payments, or other negative marks on your report. Focus on paying down balances and making all payments on time.
Is it better to close a card or let it sit unused?
Letting it sit unused is almost always better for your score, as long as the card has no annual fee. An unused card helps your available credit and your account age. The only reason to close it is if it has a high annual fee or if you cannot resist using it.