Mary Grace McCormick, Credit Writer
Yes, closing credit cards can hurt your credit score in the short term, depending on how old the accounts are and how much other credit you have. But canceling a credit card account might also benefit your credit score in the long run if you manage the rest of your finances better as a result of having one fewer account to worry about.
You can estimate the effect of canceling a credit card on your credit score by using our credit score simulator. You can also check your latest credit score for free on WalletHub. You’ll get daily updates as well as personalized advice.
Here’s what happens to your credit score when you cancel a credit card:
- Credit score drops: Your credit score often goes down because the average age of your open accounts decreases and your overall utilization increases (since you have less available credit).
- Scores bounce back: Your credit score should rebound within 3-6 months of canceling your credit card account. Make sure to have at least one open credit card remaining and pay all your bills on time.
- What happens if you don’t cancel: A credit card that is in good standing will continue to help your credit score. Even if you don’t make purchases with it, it will still report positive information to the credit bureaus each month. This is definitely worth considering if your card does not charge an annual fee.
- Age matters: Closing newer accounts won’t have as much of an impact as closing older ones.
- Limit matters: Closing low-limit accounts won’t do as much damage as closing high-limit ones.
- When score drops matter: If you don’t need the best score possible for the 3-6 months it usually takes credit scores to bounce back after credit card cancelation, the temporary drop shouldn’t cost you anything.
Bottom Line: Avoid canceling your oldest card and your card with the highest credit limit. That will mitigate the amount of credit score damage. And if you have to close your oldest or highest-limit card, make sure you do it at a time when you don’t need your credit score to be at its best.
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Dmitriy Fomichenko, President, Sense Financial
It might have a short term negative impact on your credit. However, now that you've established some payment history you should be able to apply and obtain regular credit card with no annual fees and perhaps with some rewards (cash back or some bonus points).
Michael Solari, Financial Advisor
Yes this will affect your credit score. However, I've found it doesn't affect your score that much if you already have good credit. You may leave the card open but I would definitely check your credit report each year since so many people have had their information stolen over the last few years. The credit report will show you what credit cards, loans or mortgages you've ever taken out. Check to make sure there's nothing open without your knowledge.
People also ask
Matt Hylland, Investment Adviser, Financial Planner
Closing old credit accounts, even if they have 0 balance will likely negatively effect your credit score in two ways:
First, if closing the accounts shortens the length of your average credit history, your score will be negatively impacted. If you are worried about your credit score, keep older accounts open to keep credit history.
Second, if closing these accounts will significantly reduce your outstanding credit and cause you to use a larger percentage of your outstanding credit, your score will be negatively impacted.
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