Closing a credit card usually damages your credit score, even if you pay off the balance first
Closing a credit card affects your credit in two when ready ways: it reduces the total credit available to you, and it removes a payment history from your record. Both of these changes lower your score. The damage is often temporary — your score typically recovers within a few months to a year — but the timing matters. If you are planning to explore for a mortgage, car loan, or another form of credit soon, closing a card now can cost you a lower interest rate.
The score drop is usually smaller if the card you are closing has a high balance relative to its limit, because closing it actually improves your credit utilization ratio. But if the card carries little or no balance, closing it will almost always hurt more than it helps.
Key Takeaways
- Closing a credit card reduces your available credit and removes payment history, both of which lower your credit score by 10 to 50 points on average.
- The damage is temporary if you have other cards with good payment history, but it can last several months to a year.
- Closing a card with a high balance relative to its limit may actually improve your score slightly, because it lowers your overall credit utilization.
- If you need to close a card, doing it at least six months before you plan to borrow money gives your score time to recover.
- Keeping the card open and unused is almost always better for your score than closing it, as long as there is no annual fee.
How closing a card affects your credit utilization ratio
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 (total $15,000 available) and you carry $3,000 in balances, your utilization is 20 percent. Credit scoring models treat utilization as a sign of financial stress — the higher your utilization, the lower your score.
When you close a card, you lose the credit limit on that card. If you close a card with a $5,000 limit and no balance, your available credit drops from $15,000 to $10,000. If you still carry $3,000 in balances, your utilization jumps from 20 percent to 30 percent. That change alone can drop your score by 10 to 20 points.
The exception is closing a card that carries a high balance. If you close the card with $3,000 on it and keep the other two cards open, your utilization drops to zero percent on the remaining cards. This can actually improve your score, though the benefit is usually offset by the loss of payment history.
Why payment history matters when you close a card
Payment history is the largest factor in your credit score — it accounts for about 35 percent of the total. When you close a card, that account stops appearing on your credit report as an active account. If the card had a long history of on-time payments, you lose the benefit of that positive history.
The account does not disappear entirely. Closed accounts remain on your report for seven to ten years, and they continue to show their payment history during that time. But credit scoring models weight recent activity more heavily than old activity. A closed account with no new payments counts for less than an open account with the same history.
The damage is smallest if you have other cards with long payment histories. If you have five cards and close one, the remaining four still demonstrate your ability to pay on time. If you have only one or two cards, closing one removes a significant portion of your payment history.
The timing question: when closing a card costs you the most
The cost of closing a card depends on when you need to borrow money. If you are planning to explore for a mortgage, car loan, or credit card in the next six months, closing a card now will likely result in a higher interest rate or a smaller loan amount. Lenders pull your credit score at the time of process, and a lower score directly affects the terms they offer you.
If you have no plans to borrow money for at least a year, the timing is less critical. Your score will recover, and the damage becomes irrelevant. But if you are uncertain about your plans, it is safer to wait. Keeping a card open costs nothing if there is no annual fee.
The exception is a card with an annual fee that you do not use. In that case, the fee is a real cost, and closing the card makes sense even if it temporarily lowers your score. But before you close it, call the issuer and ask whether they will waive the fee or downgrade you to a no-fee version of the same card. Many issuers will do this to keep your account open.
What happens to your score if you keep the card open instead
Keeping a card open and unused is almost always better for your credit score than closing it. The card continues to report its payment history, and it continues to count toward your available credit. Your utilization ratio stays lower, and your score stays higher.
The only cost is if the card charges an annual fee. If there is no annual fee, there is no downside to leaving it open. You do not have to use the card or make payments on it — as long as you do not carry a balance, it costs you nothing and helps your score.
Some people worry that having too many open cards looks risky to lenders. This is not how credit scoring works. Lenders care about how much credit you are using, not how many accounts you have. Ten open cards with zero balances is better for your score than two open cards with high balances.
How to close a card the right way, if you decide to do it
If you have decided that closing a card is the right move, follow these steps to minimize the damage and avoid complications.
First, pay off the entire balance. Do not close a card with a balance on it. The issuer may close the account for you if you stop paying, but that will damage your score far more than a voluntary closure.
Second, wait at least one or two billing cycles after paying off the balance. This ensures that the zero balance is reported to the credit bureaus. Then call the card issuer's customer service number on the back of the card and ask to close the account. Ask the representative to confirm that the account is closed and that no balance remains.
Third, request written confirmation of the closure. The issuer should send you a letter stating that the account is closed at your request and that the balance is zero. Keep this letter in case there are disputes later.
Fourth, check your credit report two to three months after closure to confirm that the account is showing as closed. You can order a free report from each of the three bureaus — Equifax, Experian, and TransUnion — once per year at annualcreditreport.com. If the account is not showing as closed, contact the issuer again.
Alternatives to closing a card
Before you close a card, consider whether one of these alternatives might work better for your situation.
If the card has an annual fee, call and ask for a fee waiver or a downgrade to a no-fee card. Many issuers will do this without closing the account. You keep the credit history and available credit, and you eliminate the fee.
If you are closing the card because you do not use it, straightforward stop using it. Leave it open and unused. It will not hurt your score, and it will help your available credit ratio.
If you are closing the card because you are worried about fraud or identity theft, you do not need to close it. You can request a new card number and expiration date without closing the account. Call the issuer and ask them to reissue the card.
If you are closing the card because you want to simplify your finances, consider keeping just one or two cards open instead of closing all of them. Closing multiple cards at once causes a larger score drop than closing one card over time.
Frequently Asked Questions
How much will my credit score drop if I close a card?
The drop depends on your current score and the card's balance. If you close a card with no balance, expect a drop of 10 to 50 points. If you close a card with a high balance, the drop may be smaller or even nonexistent, because your utilization ratio improves. The damage is temporary and usually recovers within three to twelve months.
Should I close a card before or after explore for a mortgage?
Close it after, if you must close it at all. Lenders pull your credit score when you explore, and closing a card before that pull will lower your score and may result in a higher interest rate. If you have already closed a card, wait at least six months before explore for a mortgage to give your score time to recover.
Will closing a card hurt my credit if I have other cards open?
Yes, but less than if you had only one or two cards. The damage is smaller because your remaining cards still demonstrate payment history and available credit. If you have five or more cards, closing one will have a minimal impact. If you have only one or two, the impact will be larger.
Can I reopen a card after I close it?
It depends on the issuer. Some will reopen a recently closed account if you call within a few days or weeks. Others will not. If you think you might want to use the card again, call the issuer before closing it and ask whether they can reopen it if you change your mind. Do not count on this — it is safer to keep the card open.
What if the card issuer closes my account without asking?
Issuers can close accounts for inactivity, missed payments, or suspected fraud. If this happens, the account will show as closed on your credit report, and your score will drop. You cannot prevent an issuer from closing an inactive account, but you can minimize the damage by using the card occasionally — even a small purchase every few months is enough to keep the account active.