Does canceling a credit card hurt your credit

Does Canceling A Credit Card Hurt Your Credit?

by Amrita Das
Published: Last Updated on

Last Updated on April 11, 2025 by Amrita Das

Canceling a credit card can seem like a straightforward choice, but the reality is more complex. Whether it’s due to high annual fees, overspending concerns, or simply because you want to simplify your finances, closing a credit card can impact your credit health in ways you might not expect.

This blog explores how canceling a credit card can hurt your credit score, the key factors to consider before closing an account, and smart strategies to minimize potential negative impacts. By the end, you’ll have the insights needed to make an informed decision about your finances.

Closing a Credit Card Hurts Your Credit

Table of Contents

Understanding the factors that decide your FICO credit score: Does Canceling A Credit Card Hurt Your Credit?

1. Payment History (35%)

Your payment history carries the most weight in your FICO score, accounting for 35% of the total. Lenders place significant importance on whether you’ve consistently paid your bills on time. This category covers your record of payments on various types of accounts, including:

  • Credit cards
  • Mortgages
  • Auto loans
  • Personal loans

This section also takes missed payments, collections, and public records like bankruptcies into account. A single late payment won’t necessarily tank your credit, but multiple missed payments or defaults can quickly lower your score.

How to Improve Your Payment History

  • Set up automatic payments for your credit accounts to avoid missing due dates.
  • If you’ve missed a payment, resolve it as soon as possible. Payment issues that are more recent have a greater negative impact than older incidents.
  • Keep lines of communication open with your lenders. If you anticipate trouble making payments, reach out to discuss possible solutions before your account becomes delinquent.

2. Amounts Owed (30%)

The “amounts owed” category focuses on your debt utilization ratio—that is, how much of your available credit you’re using. This component evaluates whether you’re over-reliant on credit and are at risk of financial trouble. It includes:

  • The total amount owed across all credit accounts.
  • How much debt you owe on individual accounts.
  • The proportion of credit used compared to limits on revolving accounts, like credit cards (known as credit utilization).
  • Using a high percentage of your available credit can signal financial strain, which negatively affects your score.

How to Manage Amounts Owed

  • Aim to keep your credit utilization below 30% for each account and overall.
  • Pay down revolving credit balances, starting with the accounts carrying the highest utilization.
  • Limit new purchases on your credit accounts to free up available credit.

3. Length of Credit History (15%)

The next factor is how long your credit accounts have been active. This includes:

  • The average age of all your accounts.
  • The age of your oldest and newest accounts.
  • How long specific accounts have been active and in good standing.

Lenders see a longer credit history as indicative of stability and experience managing credit. Essentially, someone with a decade-long history of timely payments is considered less risky than someone who opened an account last year.

How to Build a Strong Credit History

  • Avoid closing your oldest credit accounts, even if you no longer actively use them.
  • Maintain long-standing accounts in good standing to improve the average age of your credit.
  • Start building credit early, but ensure you can manage it responsibly.

4. New Credit (10%)

Opening new credit accounts and inquiries into your credit report make up 10% of your FICO score. While applying for credit is often necessary, doing so frequently can be a red flag to lenders, suggesting financial strain.

This category includes:

  • Hard inquiries from lenders when you apply for credit (these remain on your report for up to two years).
  • The number of newly opened credit accounts.
  • Frequent credit applications can lead to score dips, so be intentional about when and why you apply for new credit.

How to Handle New Credit

  • Limit the number of credit applications, especially within short time periods.
  • Utilize pre-qualification or pre-approval options that result in a “soft inquiry” rather than a “hard inquiry.”
  • Open new accounts only when strategically necessary.

5. Credit Mix (10%)

The remaining 10% of your score is attributed to your credit mix, which refers to the variety of credit types you manage. Lenders like to see that you can responsibly handle multiple forms of credit, including:

  • Revolving credit, such as credit cards or retail accounts.
  • Installment credit, such as student loans, auto loans, and mortgages.
  • Having a balanced and diverse credit mix demonstrates that you’re capable of managing different financial obligations.

How to Diversify Your Credit Mix

  • If you only have one type of credit, consider adding another when the timing is right (e.g., taking out an auto loan or opening a credit card).
  • Avoid taking on credit you don’t need solely to improve your mix. Responsible management is more important.

How Closing a Credit Card Hurts Your Credit?

When you close a credit card, three of these critical factors may be negatively affected. Here’s how.

An Increased Credit Utilization Ratio

When you close a credit card account, the available credit on that card is subtracted from your total credit limit. This can immediately increase your credit utilization ratio, one of the most significant factors in determining your credit score.

What is Credit Utilization?

Your credit utilization ratio is the percentage of your total available credit that you’re currently using. For example, if your total credit limit is $10,000 and you carry a $3,000 balance across all your cards, your utilization rate is 30%.

Why It Matters

Lower utilization rates are better for your credit score because they indicate responsible credit use and lower reliance on borrowing. A utilization rate above 30% can signal financial risk, which can lead to a drop in your credit score.

Example of the Impact

Here’s a practical example to illustrate how closing a card could change this ratio:

Card A: $10,000 balance, $15,000 credit limit

Card B: $2,000 balance, $25,000 credit limit

Without closing any cards, your total credit limit is $40,000, and you’re using $12,000 (30% utilization). But if you close Card B, your total credit limit drops to $15,000. With the same $10,000 balance, your utilization skyrockets to 67%! That increase could seriously hurt your credit score.

Pro Tip

Before closing a credit card, calculate how the change will affect your utilization rate. Aim to keep the number below 30% for the best results.

A Shorter Average Age of Accounts

The length of your credit history has a 15% influence on your credit score. Closing a credit card, especially an older one, can reduce the average age of your accounts over time.

Why The Length of Credit Matters

A long credit history demonstrates consistent and responsible borrowing behavior over the years. Lenders are more likely to trust individuals with a well-documented financial record.

The Good News

When you close an account in good standing, it usually remains on your credit report for 10 years. This means it will still contribute to the length of your credit history during that time. However, after it drops off, the total age of your accounts could significantly decrease, especially if the card you closed was your oldest account.

Pro Tip

Think twice before closing one of your oldest credit cards. If it doesn’t have an annual fee, it may be worth keeping it open to preserve the age of your credit history.

A Less Diverse Credit Mix

Your credit mix plays a smaller role in determining your credit score (10%), but it’s still an essential factor that reflects your ability to manage different types of debt.

What is Credit Mix?

Credit mix refers to the variety of credit accounts in your name, such as credit cards, car loans, student loans, or mortgages. A healthy mix shows lenders you can successfully juggle various types of credit.

Example of the Impact

Imagine you have three active accounts:

  • One credit card
  • One student loan
  • One car loan

If you close your credit card account, your mix will now include only installment loans, which could negatively affect your credit score slightly. This might make future lenders think twice about extending revolving credit to you.

Pro Tip

If you’re building or maintaining your credit score, keeping at least one credit card open could help diversify your credit portfolio.

Read Also: Is Kohls Credit Card Changing To A Visa Card?

Closed Credit Cards Still Affect Your Score

Another common misconception is that once you close a credit card, it disappears from your credit report. This is far from the truth. Here’s what actually happens:

Positive Payment History Remains

If you’ve consistently made on-time payments on your credit card, those positive records will remain on your credit report for up to 10 years after you close the account. This means that even if you cancel a credit card with a stellar record, your good payment history will continue benefitting your credit score for a significant amount of time.

Negative Payment History Remains

On the flip side, canceling a card won’t erase any missed or late payments. These negative marks will stay on your credit report for up to seven years. Simply closing the account doesn’t “reset” your credit history or remove these blemishes.

How much does the impact of closing a credit card have?

While closing a card can potentially cause a decrease in your scores, the impact may not be as significant as you think. This is because there are other factors that also contribute to your credit scores, such as the span of your credit history and your payment history.

The real shift in your credit scores after closing a credit card will depend on various factors specific to your situation. Therefore, it’s impossible to predict exactly how much your scores will be affected by closing a credit card.

However, if you have been using credit responsibly with the accounts you currently have open, then the impact should not be significant.

How to Safely Cancel a Credit Card in 6 Steps: Does Canceling A Credit Card Hurt Your Credit?

If you’ve decided canceling a credit card is necessary, here’s how to do it while minimizing any negative impact on your credit and financial health:

1. Redeem Your Rewards First

Before you close your account, check for any remaining rewards like cashback, points, or airline miles. Many credit cards require active accounts to claim rewards, meaning unused points may be forfeited after cancellation.

  • Consider using points for travel, gift cards, or cash back.
  • Some programs allow you to transfer points to other cards within the same issuer.
  • By redeeming your rewards first, you maximize the value of your card one last time.

2. Pay Off Your Balance in Full

Even if you cancel the card, you’re still liable for paying off any balance you owe. Leaving an unpaid balance means you’ll continue to incur interest charges until it’s fully paid.

Here’s why paying off your balance makes sense:

  • It ensures your credit score isn’t hurt by missed payments.
  • You avoid accumulating unnecessary interest fees.
  • Once your balance is zero, it’s easier to proceed with canceling the account.

3. Contact Your Card Issuer

Reach out to your credit card issuer’s customer service team to formally initiate the cancellation process. You can easily do this work over a phone call.  Have the following information and questions ready:

  • Your account details for verification.
  • Confirmation of your statement balance (ensure it reads zero).
  • Ask if any additional steps are needed, based on your cardholder agreement. This step ensures you’re complying with any specific requirements the card issuer might have for account closures.

4. Send a Certified Letter

For added verification, it’s a good idea to follow up your request with a certified letter to the card issuer. This provides tangible proof that you made the request.

What to include in the letter:

  • Your full name and account details.
  • A direct request to cancel the card.
  • A request for written confirmation once the account is closed.

Using a certified mail service ensures that your request is received and processed.

5. Monitor Your Credit Reports

After your card is canceled, monitor your credit reports to make sure the closure is accurately reflected. Check with major credit reporting agencies (Equifax, Experian, and TransUnion) to confirm that:

  • The account is marked as “closed by customer.”
  • There are no lingering issues like unpaid balances or inaccuracies.
  • If you notice an error, you can dispute it with the reporting agency.

6. Keep Old Statements for Reference

Finally, hold onto your last few billing statements for future reference. Even after your account is closed, having copies of your statements may provide helpful clarity in the event of disputes or if you need access to any records.

Read Also: Does Avant Check Income For Credit Cards?

When to Keep a Credit Card Open

While there’s no one-size-fits-all answer, here are situations where it’s generally advisable to keep your credit card open:

If It’s Your Oldest Account

Your credit history length directly affects your credit score, and older accounts demonstrate a long, successful borrowing history. Closing the account could drastically reduce your average credit age, thereby affecting your overall score.

For example:

Imagine you have three credit cards with ages of 10, 5, and 2 years, respectively. If you close the 10-year-old account, your average account age would shift from 5.7 years to just 3.5 years. That drop could make your credit profile less attractive to lenders.

If You Have a Thin Credit File

A “thin credit file” refers to having few or no accounts reported to credit bureaus. If you fall into this category, closing a credit card, especially one in good standing, could remove a key piece of your profile. This could make it harder to apply for loans, mortgages, or new credit in the future.

Keeping the account open helps to:

  • Strengthen the depth of your credit file.
  • Provide evidence of responsible credit use over time.

If You’re Managing Credit Utilization

Your credit utilization ratio refers to the percentage of your available credit that you’re using. For example, if you have a $10,000 credit limit across all cards and carry a $2,000 balance, your utilization ratio is 20%.

Now imagine you close a credit card with a $4,000 limit. Suddenly, your availability drops to $6,000, increasing your utilization ratio to 33%. Higher ratios indicate higher credit risk and can negatively affect your score.

By keeping the credit card open, you:

  • Avoid artificially increasing your credit utilization.
  • Keep your available credit higher, which looks better to lenders.

If You Have an Excellent Payment History

When you’ve made on-time payments consistently on an account, it becomes a positive contributor to your credit score. Closing this account would eventually cause its payment history to fade from your credit report after about seven to 10 years.

Benefits of keeping this account open:

  • You continue to benefit from years of on-time payment records.
  • It reinforces your reputation as a responsible borrower.

If It Offers Unique Perks

Sometimes, a credit card offers exclusive benefits that you can’t replicate elsewhere. Whether it’s cashback rewards, travel points, or zero foreign transaction fees, these perks can add value to your financial strategy.

Ask yourself:

  • Does this card offer rewards or perks I use often?
  • Do the benefits outweigh the annual fee (if applicable)?
  • Would I regret losing these perks once the account is closed?

When is it Appropriate to Delete a Credit Card?

While canceling a card often has its downsides, there are situations where it might be the right decision:

  • High Annual Fees: If yearly fees on a particular card outweigh the benefits or rewards you’re receiving, it might be better to cancel it. However, consider asking the issuer for a downgrade to a no-fee version before closing the account.
  • Temptation to Overspend: If having the card leads to temptation and you’ve struggled with debt before, removing that temptation may outweigh potential credit score impacts.
  • Low Credit Limit: If the card has a low credit limit and doesn’t contribute significantly to your overall credit utilization, the impact of canceling it might be minimal.
  • You No Longer Use It: Store-specific credit cards or outdated secured cards are candidates for closure when you’ve outgrown their benefits.

Alternatives to Closing Your Credit Card

Closing your credit card doesn’t have to be the only way to address your concerns. Before making a decision, consider these alternatives:

Upgrade to a New Card

If your current card isn’t meeting your needs, see if you can upgrade to a better one with your current issuer. Many lenders allow upgrades while preserving your account history, which avoids the negative impact of closing one card and opening another.

Transfer Your Balance

If high-interest debt is the issue, transferring your balance to a card with a low or 0% introductory APR could help you save on interest and pay down your balance faster. Just be mindful of transfer fees and the APR after the introductory period.

Use Your Card for Small Purchases

Instead of letting your card gather dust, use it for small recurring purchases (e.g., streaming services or a utility bill). This keeps the account active and helps maintain your credit utilization ratio. To avoid building up more debt, pay off the balance as soon as charges post to your account.

Lock Your Card

If you’re trying to limit spending, use a card lock feature if your lender offers one. This temporarily freezes purchases while keeping the account open and active. For example, Capital One lets you manage locks easily through their mobile app.

Cancel Additional Benefits without Closing the Card

If high fees are the problem, contact your card issuer to see if there’s a no-fee version of your card. Switching could keep your credit history intact while eliminating extra costs.

Read More: Does Dollar Car Rental Accept Chime Credit Card?

FAQs: Does Canceling A Credit Card Hurt Your Credit?

Q. Should you cancel unused credit cards or keep them open?

A: Closing an unused credit card can have a negative impact on your credit score. This is because it decreases the amount of available credit and raises your overall credit utilization rate, which is a key factor in calculating your FICO Score. According to Experian, credit utilization accounts for 30% of your FICO Score.

Q. What is the best way to cancel a credit card without damaging my credit score?

A: To avoid any negative impact on your credit, follow these steps when closing a credit card account:

  • Pay off any remaining balance in full.
  • Redeem or transfer any rewards you have earned.
  • Update recurring payments to be charged to a different card.
  • Contact your credit card issuer and request for the account to be closed.
  • Safely dispose of the physical card.
  • Monitor your credit report afterwards to ensure that the closure has been properly reflected.

Q: What is the best course of action for a credit card that you no longer use?

A: The most beneficial option would be to keep the card open, as long as there are no annual fees associated with it. By maintaining an open account, it will continue to reflect positively on your credit score by showing responsible payment history and keeping your overall credit utilization low.

Q: What are the consequences of canceling a credit card on one’s credit score?

A: Canceling a credit card can have adverse effects on your credit score, such as decreasing the average age of your accounts and raising your credit utilization ratio. This can significantly impact those with shorter credit histories and smaller lines of credit, resulting in a significant drop in their credit score.

Read More: Alliant Credit Union Credit Card: A Review Guide

Does Canceling A Credit Card Hurt Your Credit? Conclusion

Canceling a credit card doesn’t have to spell disaster for your credit score, but it’s a decision best made strategically. Consider the potential impacts on your credit utilization and account age, and explore alternatives when feasible.

Remember, a credit score is just one part of your financial health. Maintaining responsible habits like paying bills on time and keeping balances low can help offset any temporary score dips.

If you’re unsure whether canceling a credit card is the best move, speak with a financial advisor or explore tools that simulate how changes to your accounts may impact your score. Thoughtful decisions can help you strike the right balance between financial wellbeing and convenience.

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