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Does Canceling A Credit Card Affect Your Credit Score?

Does Canceling A Credit Card Affect Your Credit Score?

When a person starts working towards being debt-free and paying off credit card balances, the question of closing accounts and how that impacts credit scores often comes up. The truth is there isn't a quick answer.

When you cancel a credit card, you may notice a small dip in your credit score, but it shouldn't harm your score long-term. Just remember that paying down your credit card balances first is key, not just for the card being canceled.

Discover the impact you may notice on your credit score when you close your credit card. The sections below also detail everything else you need to know about the process of canceling a card.

Scissors and Cards

How Canceling a Credit Card Affects Your Credit Score

When you cancel a credit card, it will show up on your credit history. However, it will not necessarily have a negative impact. Learn a bit more about how this action affects your credit score so you can make an informed decision as to whether to close your old account.

What is the Downside of Canceling a Credit Card?

When considering canceling your credit card, you need to remember the potential upsides and downsides associated with closing an account. Closing may be as simple as requesting your lender to shut it down, but there are variables to consider before doing so.

Does it Affect Your Credit Score?

Depending on how many credit cards you have open, it may affect your score. Knowing how your score works will help you understand how it can impact the overall score.

Closing Accounts Can Increase Your Credit Utilization Ration

Your credit utilization score makes up 30% of the FICO credit score. This score is calculated by taking your current balances and dividing them by the available credit. Therefore, closing a credit account with a large amount of available credit can affect your credit utilization ratio. That, in turn, affects your credit score.

Further Reading: Is 650 a Good or Bad Credit Score?

Reduction in Credit History

It is important to remember that your credit history does make up for about 15 percent of your overall credit score. However, it is worth noting that closed accounts won't drop off for a bit. It may take as long as ten years, in some cases. This may minimize the impact, but there may still be a noticeable effect.

How much can closing a credit card hurt your score? The truth is it can be difficult to say for certain. It depends on what you are doing with your other accounts. Are you using them responsibly? Continue to make on-time payments and keep your credit utilization ratio low, and the impact of your newly closed account should be minimal.

Five Reasons Not to Close a Credit Card

You may find yourself questioning whether you should close your card and risk damage in the first place. Here are some reasons you shouldn't close your card:

  1. If your credit score is on the edge of being good and you do not want to risk it dropping, do not close your credit card.
  2. If you plan on applying for a mortgage, do not close the card. This puts you at risk of losing any of your precious credit points.
  3. If the card you are considering closing is your oldest, you should hold off and not risk affecting your credit history negatively.
  4. When you have outstanding balances on credit cards, closing one reduces available credit. This can seriously negatively impact your utilization score.
  5. If you don't have a solid reason for closing it, consider holding off closing the card.

Five Reasons You Should Close the Card

Even with the potential downsides, there are some reasons to close your credit cards. Here are five reasons to close a credit card down:

  1. You are struggling with being responsible with your credit cards and missing payments. In this case, you may be worried about debt that you may not be able to pay off.
  2. You are getting a separation and need to close a shared account.
  3. You have a credit card for an airline and don't fly that airline anymore. You may also be unwilling to keep paying the annual fee.
  4. You have a retail card and do not shop at that store anymore.
  5. You have a card that charges high annual fees, and the card doesn't make sense for your current financial situation.

The Best Way to Close Your Card

Once you have made the decision to close an account, you need to know what is involved with getting it done. Here are some tips for closing your credit card.

Transfer or Pay Outstanding Balances

If you have a balance, always pay it off when possible before closing the account down. This will look better on your credit score and minimize the negative impact. Reach out to your creditor and make arrangements to get your balance paid off.

Redeem Any Rewards

If you have outstanding rewards or points, make sure to redeem these before closing your account down so that they don't go to waste.

Contact the Card Issuer

Make sure to reach out to your card issuer and close your account directly. Ask that they confirm this with a written notice. Additionally, ask that they note the account was closed according to the customer's request.

Make a Letter of Confirmation

Follow the process with a letter to your card issuer confirming your desire to cancel the card. This letter should have your phone number, name, address, and credit account number as well as details of the phone call. Again, make sure to note it was closed at your request.

Check for Automatic Payments

If the account had any automatic payments set up to it, such as streaming accounts or cell phone bills, make sure to contact these companies and make other arrangements. This way, no payments are missed. Remember that missed payments can negatively affect your credit score and cause delays in your services.

Notify Authorized Users

If your credit account has other authorized users, now is the time to notify them that you have closed the account. Also, ask that they destroy any of their cards.

Woman Cutting Card

Destroy Your Card

The final step is to destroy your credit card properly. If you have a shredder, that is the preferred method. If not, scissors will do the job.

What to Do Instead of Canceling the Card

What if you have come to the decision that keeping the card may be worth it to help your credit? The following tips can help you overcome the issues that made you consider canceling it.

Related post: How Do Closed Accounts Affect Your Credit Score?

Have Annual Fees Waived

If you have a card with an annual fee, consider contacting the company and asking them if they would think about waiving or lowing the fee for a year. Some are willing to do this to retain customers. Others have the fee in place until you have built your credit score.

Avoid Overspending

For those of you considering canceling the card because they are worried about overspending, there are options as well. You can stash the card somewhere you can't see it so you can avoid temptation more easily. You can give it to a trusted relative or friend for safekeeping.

For those in a serious struggle with temptation, you can pause the account. This means it can't be used by anyone, but it is not canceled. You need to ask customer service if this is an option.

Rarely Use the Card

For those looking to cancel the card because they do not use it that much, consider keeping it active by purchasing small items on it and paying the balance off. This can be a recurring monthly bill or any other small purchase. This will help to build your credit score as well.

How Many Points Does Your Credit Score Go Down If You Close a Credit Card?

Your credit score may dip and then rebound within a few months of closing a credit card, or you may see no real impact. The truth is it is hard to give a direct answer on how many points your credit score will be affected by because it depends on a large number of variables. For example, all your other open credit accounts will affect the degree of the impact.

Is It Better to Close a Credit Card or Leave It Open with a Zero Balance?

If you have a card that has the balance paid off, it is not a bad idea to keep it open. This is especially true where there is no annual fee or problem with being financially irresponsible. This card with an open balance can improve your credit utilization ratio, as previously mentioned. It can also improve your credit history. Both factors can positively impact your overall credit score.

Key Points to Remember

While it is sometimes necessary to close a credit card down, you should understand the best ways to do so. Credit cards may be canceled without damage to your credit score; just remember paying balances down is the most important factor. Closing a single card shouldn't affect the credit history age of your credit score.


There are many factors to consider when deciding whether or not to close a credit card account down completely. You must have a good understanding of how your credit score is tallied and what information is on your individual score. Consider your other open credit accounts, including their age, limits, and balances. Then, you need to factor in the particular card in question and what you feel is in your best interest. If you decide to shut it down, make sure to do so properly.

Also read: Will Overdraft Affect Your Credit Score?