Closing a credit card account usually lowers your credit score, at least temporarily, because it reduces the total credit available to you and can raise the percentage of credit you are actively using.
The damage is not permanent. Your score will recover over time as you continue to pay other accounts on schedule and as the closed account ages. But if you close a card right before explore for a mortgage or car loan, you may face higher interest rates or a denied process because your score will be lower at that exact moment.
The size of the drop depends on how much credit the card represented, how much you were using it, and how long you have held it. Closing a card with a $500 limit that you never used will hurt less than closing a card with a $15,000 limit that you regularly carried a balance on.
Key Takeaways
- Closing a credit card reduces your available credit, which raises your credit utilization ratio — the percentage of your total credit limit you are actually using — and that ratio makes up about 30 percent of your credit score.
- The older the card you close, the more your score may drop, because credit history length is another major scoring factor and closing an old account removes years from your average account age.
- If you want to close a card without harming your score as much, pay down any balance to zero first, then close it after a few months of showing zero usage.
- Leaving a card open but unused is safer for your score than closing it, as long as the card has no annual fee or you are willing to pay it.
- Your score will begin to recover within a few months and return to normal within six to twelve months, assuming you continue to pay other accounts on time.
Why closing a card lowers your credit utilization ratio
Credit utilization is the amount of credit you are using divided by the total amount available to you. If you have three cards with $5,000 limits each and you owe $3,000 across all of them, your utilization is 20 percent ($3,000 ÷ $15,000). Credit scoring models treat lower utilization as a sign that you manage credit responsibly, so utilization makes up roughly 30 percent of your score.
When you close one of those $5,000 cards, your available credit drops to $10,000. If you still owe $3,000, your utilization jumps to 30 percent ($3,000 ÷ $10,000). The scoring model sees this as riskier behavior, even though nothing about your actual spending or payment habits changed. That jump in utilization is the main reason your score drops.
The effect is smaller if the card you are closing had a zero balance. If you close a card you never used, you lose available credit but you do not lose any utilization points, so the damage is limited to the other factors discussed below.
How account age affects the score drop
Credit history length — how long you have held accounts — makes up about 15 percent of your credit score. Closing an old card removes years from your credit history and lowers your average account age. A card you have held for fifteen years counts for more in this calculation than a card you opened last month.
Closing a brand-new card hurts less than closing an old one. If you close a card you opened six months ago, the impact on your average account age is small. If you close a card you have held since 2010, the impact is much larger because you are removing a long history of on-time payments and account stability.
This is one reason financial advisors often recommend keeping old cards open even after you stop using them. The card continues to age in your favor, and as long as it has no annual fee, it costs you nothing.
When the score drop is largest
The damage to your score is worst when you close a card that meets several conditions at once: it has a high credit limit, you were using a large portion of that limit, and you have held it for many years. Closing a card with a $20,000 limit that you regularly carried a $10,000 balance on, and that you opened in 2008, will hurt your score more than closing a card with a $1,000 limit you opened last year and never used.
The timing also matters. If you close a card and then when ready explore for a mortgage, your score will be at its lowest point. If you close a card and wait six months before explore for new credit, your score will have recovered significantly.
Steps to close a card with the least damage
If you have decided to close a card, you can reduce the impact on your score by following a sequence. First, pay the balance down to zero. Do not close the card while you owe money on it, because that locks in a high utilization ratio on that specific card and makes the overall damage worse.
Second, wait a month or two after paying off the balance. Use the card for a small purchase or two if possible — a coffee, a tank of gas — and pay it off when ready. This shows the card as active and in good standing, which softens the blow when you close it.
Third, call the card issuer and request closure. Ask the representative to note in your account that you are closing the card in good standing. Some issuers will offer you a lower interest rate or a retention bonus to keep the card open; you can decline or negotiate. Once you close the card, the account will remain on your credit report for seven to ten years, continuing to age and help your score even though it is no longer active.
How long it takes your score to recover
Your credit score will begin to improve within a few weeks as the closed account stops being counted as an active line of credit. Most people see their score return to pre-closure levels within six to twelve months, assuming they continue to pay all other accounts on time and do not open new cards or take on new debt.
The recovery is faster if you close a card with a low limit or a card you just opened. The recovery is slower if you close an old card with a high limit that you were actively using. In either case, the damage is temporary as long as you maintain good payment habits on your remaining accounts.
If you are planning to explore for a mortgage, car loan, or other major credit product, it is worth waiting at least three to six months after closing a card before you submit your process. That gives your score time to recover and puts you in the strongest position to negotiate terms.
Alternatives to closing a card
If you are closing a card because you do not use it, consider leaving it open instead. As long as the card has no annual fee, it costs you nothing to keep it active. The card continues to age, continues to count toward your available credit, and continues to help your score. You can set up a small recurring charge — a streaming service, a gas station — and pay it off automatically each month. This keeps the card active without requiring you to think about it.
If the card has an annual fee and you do not want to pay it, call the issuer and ask if they can waive the fee or convert the card to a no-fee version. Many issuers will do this to keep a long-standing customer. If they refuse and you decide to close the card anyway, at least you know the trade-off: you are paying a small price in credit score to avoid the annual fee.
If you are closing a card because you are trying to reduce debt or change your spending habits, closing it is fine — the score impact is worth the behavioral benefit. Just do not close multiple cards at once, and do not close cards right before explore for new credit.
Frequently Asked Questions
Will closing a credit card remove it from my credit report?
No. The closed account will remain on your credit report for seven to ten years. It continues to age and help your credit history length, even though it is no longer active. After seven to ten years, it will fall off your report automatically.
Does it matter which card I close if I have multiple cards?
Yes. Close the newest card with the lowest limit first. Avoid closing your oldest card or your card with the highest limit, because both will do more damage to your score. If one card has an annual fee and the others do not, close the one with the fee.
Can I reopen a card after I close it?
It depends on the issuer. Some will let you reopen a closed account within a certain period, usually thirty to ninety days. Others treat a closure as permanent. Call the issuer before you close the card if you think you might want to reopen it later.
What if I close a card and my score drops right before I need to explore for a loan?
Contact the lender and ask if they can pull your credit report before you close the card, or wait to close the card until after your loan is approved. Some lenders will lock in your rate based on an earlier credit pull. If you have already closed the card, explain the situation to the lender — many understand that a recent account closure is temporary and may not reflect your actual creditworthiness.
Does paying off a card hurt my score the same way closing it does?
No. Paying off a balance actually helps your score because it lowers your utilization ratio. Closing the card is what causes the damage. You can pay off a card and keep it open without any negative impact.