Closing a credit card usually hurts your credit score, even if you pay off the balance first
Closing a credit card typically lowers your credit score, sometimes by 10 to 50 points or more, depending on how much credit you have open and how long you've held the card. The damage comes from two things: your credit utilization ratio (the percentage of available credit you're using) jumps when you remove available credit from the calculation, and your average account age may drop if the card is older than your other accounts. A card you've held for years is worth more to your score than a new one.
The score hit is temporary if you keep your other accounts in good standing. Most people see their score recover within three to six months. But if you're planning to explore for a mortgage, car loan, or other major credit in the next year, closing a card now could cost you a lower interest rate later.
Key Takeaways
- Closing a credit card reduces your available credit, which raises your credit utilization ratio and typically lowers your score by 10 to 50 points.
- The longer you've held the card, the more your average account age drops when you close it, which can damage your score further.
- If you want to close a card without the score hit, pay down your balance to near zero first, but keep the account open and unused.
- Annual fees, rewards you don't use, or cards tied to accounts you want to close are legitimate reasons to close a card despite the score impact.
- Closing a card does not erase late payments or other negative history already on your credit report.
How closing a card changes your credit utilization
Credit utilization is the total balance you owe divided by your total available credit across all cards. If you have three cards with $5,000 limits each ($15,000 total available) and you owe $3,000, your utilization is 20 percent. Close one of those cards and your available credit drops to $10,000, so the same $3,000 balance now represents 30 percent utilization — even though you didn't charge anything new.
Credit scoring models treat higher utilization as riskier. Most lenders prefer to see utilization below 30 percent. The closer you are to that threshold, the more your score will drop when you close a card. If you're already carrying balances near your limits, closing a card can push you over 30 percent and trigger a noticeable score decline.
The utilization hit is the main reason closing a card damages your score. It's also the reason why keeping a card open and unused — even if you never charge on it again — protects your score better than closing it.
Why account age matters to your score
Credit scoring models reward you for a long history of responsible borrowing. Your average account age is one factor in that calculation. If you close your oldest card, your average age drops when ready. A card you've held for 15 years is worth more to your score than a card you've held for two years.
The damage is worst if the card you're closing is significantly older than your other accounts. If all your cards are relatively new (one to three years old) and you close one, the impact is smaller. If you're closing a card you've held since your twenties and your other cards are recent, the hit can be substantial.
This is another reason to keep older cards open even if you don't use them. The longer your credit history, the higher your score tends to be, all else equal.
When closing a card makes sense despite the score impact
A lower credit score is a real cost, but it's not always the deciding factor. Close a card if you're paying an annual fee you don't use. A $95 annual fee on a rewards card you never charge on is money wasted. The score hit from closing is temporary; the fee is permanent and recurring.
Close a card if the rewards don't match your spending. If you have a restaurant rewards card but you never eat out, or a travel card but you don't fly, the card is not working for you. A small score dip is worth eliminating a card that serves no purpose.
Close a card if it's tied to an account you want to close — a joint account with an ex-spouse, for example, or a business account you're shutting down. The score impact is real, but the reason for closing is stronger than the reason to keep it open.
Close a card if you're carrying a balance on it and you can't stop yourself from charging on it again. If a card is a source of debt you keep adding to, closing it removes the temptation. The score hit is temporary; the debt cycle is not.
How to minimize the score damage if you decide to close
Before you close a card, pay the balance down to zero or as close as you can get. A card with a zero balance does less damage to your score when closed than a card with a balance. You're still losing available credit, but you're not also losing a paid-off account that was helping your score.
If you're not in a rush, close the card during a month when you're not planning to explore for credit. Don't close a card two months before you explore for a mortgage or car loan. The score hit will be fresh and highest at that moment. Wait until after you've locked in your new loan, or wait several months for the score to recover.
If you have multiple cards you want to close, close them one at a time, not all at once. Closing three cards in one month does more damage than closing one card per month over three months. Your score recovers between closures, so spacing them out softens the overall impact.
What doesn't happen when you close a card
Closing a card does not erase your payment history on that card. The account stays on your credit report for seven to ten years after you close it, and all the on-time payments you made on it continue to help your score during that time. Late payments or missed payments on that card also stay on your report and continue to hurt your score.
Closing a card does not remove you from the card issuer's records. If you owe a balance when you close the account, the issuer will still pursue collection. Some issuers will not let you close an account with an outstanding balance; they'll require you to pay it off first.
Closing a card does not affect your other accounts. Your other credit cards, loans, and payment history remain unchanged. The score damage is purely from losing available credit and potentially lowering your average account age.
The alternative: keeping the card open but unused
If you want to stop using a card without closing it, you can. Pay off the balance, put the card in a drawer, and leave the account open. You keep the available credit (which helps your utilization ratio), you keep the account age (which helps your average age), and your score stays higher than if you closed it.
The card issuer may eventually close the account for inactivity if you don't use it for a year or more, but this varies by issuer. Some cards stay open indefinitely with no activity. If you're worried about inactivity closure, charge something small to the card once or twice a year — a subscription, a tank of gas, anything — and pay it off when ready. This keeps the account active without building a balance.
Keeping a card open costs you nothing if there's no annual fee. If there is an annual fee, you're back to the choice: pay the fee to keep the account open, or close the account and accept the score hit.
Frequently Asked Questions
How much will my credit score drop if I close a card?
The drop typically ranges from 10 to 50 points, depending on how much available credit you have, how long you've held the card, and your current credit utilization. Closing an older card or closing a card when your utilization is already high causes a bigger drop. The impact is temporary; most people see recovery within three to six months.
Should I close a card before explore for a mortgage?
No. Close a card after you've locked in your mortgage rate, not before. Lenders pull your credit score during the process process, and a fresh score drop from closing a card could cost you a higher interest rate. Wait until after closing on the house.
If I close a card, will my late payments on that card disappear?
No. Late payments stay on your credit report for seven years from the date of the missed payment, whether the account is open or closed. Closing the card does not erase the negative history.
Can the card issuer close my account if I don't use it?
Yes, many issuers close accounts for inactivity after 12 months or longer with no charges. If you want to keep an account open, use it occasionally — even a small purchase paid off when ready keeps the account active.
Is it better to close a new card or an old card?
Close a new card if you must close one. Closing an older card lowers your average account age more, which damages your score more. If you have a choice between closing a card you've held for two years or one you've held for ten years, close the newer one.