Cancelling a credit card does hurt your credit score, but the damage is usually temporary and smaller than many people fear.
When you close an account, your credit score typically drops by 5 to 10 points in the short term. The drop happens because two factors that make up your score change when ready: your credit utilization ratio (the percentage of your available credit you are using) rises, and your average account age may fall if the card you closed was one of your oldest accounts.
The score recovery is usually faster than the damage. Most people see their score return to its previous level within three to six months, assuming they keep their other accounts in good standing and do not miss any payments. The long-term impact is minimal if you have other accounts open and active.
Key Takeaways
- Closing a card raises your credit utilization ratio because your total available credit shrinks, which temporarily lowers your score by a few points.
- If the card you close is your oldest account, your average account age drops, which can cause a larger dip in your score.
- Your score usually recovers within three to six months once you stop using the closed account and keep other accounts active.
- Cancelling a card has almost no long-term impact on your score if you have multiple other accounts open and maintain a low utilization ratio on them.
- The damage from closing a card is much smaller than the damage from missing a payment or carrying high balances on remaining cards.
Why closing a card lowers your credit utilization ratio
Credit utilization is the total amount you owe across all your cards divided by your total credit limits. If you have three cards with $5,000 limits each (total $15,000) and you owe $3,000 across them, your utilization is 20 percent. If you close one of those cards, your available credit drops to $10,000, and your utilization jumps to 30 percent — even though you still owe the same $3,000.
Credit utilization makes up about 30 percent of your credit score, so a jump from 20 to 30 percent can cause a noticeable dip. The impact is larger if you were already carrying high balances on your remaining cards. If you close a card while your other cards are nearly maxed out, the score drop will be steeper.
The simplest way to minimize this damage is to pay down your balances on other cards before you close the one you want to cancel. If you can get your utilization below 10 percent across your remaining accounts, the impact of closing a card shrinks significantly.
How account age affects your score when you close a card
The age of your accounts makes up about 15 percent of your credit score. Credit bureaus calculate this as your average account age — the mean age of all your open accounts. When you close your oldest card, that account stops counting toward your average, which can lower the number.
The damage depends on how old the card is relative to your other accounts. If you close a 15-year-old card and your other accounts are all five years old, your average age drops noticeably. If you close a two-year-old card and your other accounts are all five years old, the impact is minimal.
One way to reduce this impact is to keep the closed account on your credit report as long as possible. Closed accounts stay on your report for seven years (for negative marks) or longer (for positive payment history), so the account continues to age and contribute to your history even after you close it. You do not need to keep the account open for it to help your score.
When closing a card causes the most damage
The worst time to close a card is when you have few other accounts open, when those accounts are young, or when you are carrying high balances on your remaining cards. If you have only two credit cards and you close one, your utilization ratio jumps more sharply than if you have five cards. If you close a card right before explore for a mortgage or car loan, the temporary score dip could affect your interest rate.
Closing a card also causes more damage if you have recent negative marks on your credit report — a missed payment, a collection account, or a high balance. The score drop from closing a card stacks on top of the damage from those marks, making your overall score look worse to lenders.
If you are planning to explore for credit soon, it is usually better to wait until after the process to close the card. Lenders pull your score at the moment you explore, so closing a card beforehand only hurts you without any benefit.
The difference between closing a card and stopping use
You do not have to close a card to stop using it. You can straightforward stop charging purchases to it and leave it open with a zero balance. This approach avoids the utilization ratio hit entirely — your available credit stays the same, and your average account age does not change.
Leaving a card open also keeps the account active on your credit report, which helps your score over time. The card issuer may eventually close the account if you do not use it for a long period (usually 12 months or more), but you can prevent this by making a small purchase every few months and paying it off when ready.
The main reason to actually close a card rather than just stop using it is if the card has an annual fee you want to avoid. If the card is free to keep open, there is almost no downside to leaving it open indefinitely.
How quickly your score recovers after closing a card
Your score begins recovering as soon as you close the card, but the timeline depends on what you do next. If you pay down your balances on your remaining cards, your utilization ratio improves when ready, and your score can recover within a few weeks. If you continue to carry high balances, the recovery takes longer.
The closed account itself stops affecting your utilization ratio right away, but it continues to age on your credit report. After six months to a year, most people see their score return to its pre-closure level. After seven years, the closed account falls off your report entirely (unless it has negative marks), but by that point the impact on your score is negligible.
The speed of recovery also depends on your overall credit profile. If you have a long history of on-time payments and low balances, your score is more resilient to the hit from closing a card. If you have recent missed payments or high utilization, recovery takes longer.
When closing a card makes sense despite the score impact
The temporary score dip from closing a card is usually worth it if the card has an annual fee you do not want to pay, if you are trying to simplify your finances, or if you are closing an account with a predatory issuer. A 5 to 10 point drop is a small price for eliminating a $95 annual fee or removing a card you do not trust.
Closing a card also makes sense if you have so many open accounts that managing them is difficult or if you are worried about fraud risk from having too many active cards. The score impact is temporary, but the peace of mind from having fewer accounts to monitor is permanent.
The one scenario where you should almost always avoid closing a card is if you are about to explore for a mortgage, car loan, or other major credit. Wait until after the lender pulls your score to close the card. The temporary dip could cost you a higher interest rate, which is far more expensive than the benefit of closing the account early.
Frequently Asked Questions
How much does my credit score drop when I close a card?
Most people see a drop of 5 to 10 points when ready after closing a card. The exact amount depends on how much of your total credit limit that card represented and whether it was your oldest account. If the card made up a large portion of your available credit or was significantly older than your other accounts, the drop can be larger.
Will my closed card stay on my credit report?
Yes. Closed accounts remain on your credit report for seven years if they have negative marks, or longer if they have positive payment history. The account continues to age and contribute to your credit history even after you close it, which is why closing a card does not erase your history with that issuer.
Can I reopen a card I closed?
It depends on the issuer and how long ago you closed it. Some issuers will reopen a recently closed account if you call and ask. Others treat a closed account as a new process if you want to reopen it. Call the issuer before you close a card if you think you might want to use it again.
Is it better to close a card or just stop using it?
Stopping use is almost always better than closing. You avoid the utilization ratio hit, keep your average account age stable, and maintain the option to use the card later. The only reason to close is if the card has an annual fee or if you want to eliminate the account entirely for security reasons.
Should I close a card before explore for a mortgage?
No. Close the card after your mortgage lender pulls your credit score. Closing a card beforehand lowers your score at the exact moment the lender is evaluating you, which could raise your interest rate. The temporary score dip is not worth the cost of a higher rate over 30 years.