Does Closing a Credit Card Hurt Your Credit Score?
Closing a credit card can hurt your credit score by reducing your total available credit and increasing your credit utilization ratio. The Consumer Financial Protection Bureau (CFPB) states that closing an existing card could decrease your credit score. The change may be temporary or minor, and the full impact varies based on other factors about your credit profile.
Closing an unused card with a large credit line creates a noticeable jump in utilization. Closing a card with a small credit line produces a much smaller change. Whether closing an account makes financial sense depends on whether you pay an annual fee, your debt habits, and when you plan to apply for new credit.
What Closing a Card Does to Your Credit Utilization
Part of your credit score is based on your credit utilization ratio, which is the total amount of revolving credit you are using divided by the total credit available across all of your accounts. The CFPB notes that closing an existing card can increase your utilization ratio and lower your credit score. When you close an account, that card's credit limit disappears from your total available credit, but any balances you carry across other cards remain the same.
In our internal modeling, we closed an unused card of three different sizes from a $20,000 set of limits with $4,000 owed to see how much utilization moves. In this baseline scenario, an individual holds four cards with credit limits totaling $20,000 and owes a combined balance of $4,000 across their active cards. That starting position represents a credit utilization ratio of 20.0% ($4,000 divided by $20,000). The model assumes the card being closed carries a $0 balance.
| Closed Card Limit | Remaining Total Limit | Total Balance Owed | New Utilization Ratio |
|---|---|---|---|
| Starting Baseline | $20,000 | $4,000 | 20.0% |
| $2,500 Limit Closed | $17,500 | $4,000 | 22.9% |
| $5,000 Limit Closed | $15,000 | $4,000 | 26.7% |
| $10,000 Limit Closed | $10,000 | $4,000 | 40.0% |
A cardholder can check their own numbers easily. Divide total balances across all cards by total remaining credit limits after a planned closure. In our calculations, closing a card with a $2,500 limit reduces total available credit to $17,500, which edges the utilization ratio up from 20.0% to 22.9%. Closing a card with a $5,000 limit reduces total limits to $15,000, lifting utilization to 26.7%. Closing an unused card with a $10,000 credit limit cuts total available borrowing capacity in half. That pushes the credit utilization ratio to 40.0%.
Neither the CFPB nor our model publishes a formula showing a specific score drop in points. The CFPB points out that the impact on your score varies based on the broader details of your credit profile. Your remaining credit limits may be low relative to your debts. In that case, the jump in your utilization ratio can be substantial. To understand general score health benchmarks, read our guide on what is a good credit score.
When Closing a Card Is the Right Call
Closing a card account is a reasonable financial move under specific personal conditions, even if it lowers your score. The CFPB advises that you should not assume closing an account will improve your credit score. Still, the CFPB identifies three scenarios where canceling an account can be a sound financial decision.
- The card charges annual fees or poor terms that outweigh the benefits. If an unused card charges an annual maintenance fee, keeping it open costs money year after year. Reviewing good annual percentage rate (APR) for credit cards terms can help you evaluate whether an existing card has become too expensive to retain.
- It helps you avoid accumulating debt you cannot pay off. The CFPB lists this as a reason to close.
- You are not planning to apply for credit in the near future. If you do not anticipate applying for a mortgage, an auto loan, or another credit line in the coming months, a temporary or minor decline in your credit score poses fewer immediate consequences. When you have no immediate borrowing needs, eliminating an unnecessary account or shedding an annual fee carries minimal practical downside.
Conversely, the CFPB explains that some people keep a card account open, especially an old account with a positive payment history. Doing so may help maintain a higher credit score.
Steps to Reduce Score Impact When Closing an Account
Paying down your revolving debt before canceling an account reduces the mathematical impact on your credit utilization ratio. If an individual with $20,000 in total limits pays their balance down from $4,000 to $1,000 before closing a $10,000 card, their post-closure utilization ratio drops to 10.0% ($1,000 owed divided by $10,000 in remaining limits). Paying down balances ahead of time keeps the post-closure ratio lower.
Evaluating which card to close also allows you to control the change in your available credit. Closing a card with the lowest limit produces the smallest shift in your total utilization ratio. You might hold multiple cards you no longer need. Closing the card with the lowest credit limit or highest recurring annual fee minimizes the reduction in your total credit lines.
Closing multiple cards at once compounds the loss of available credit. Each account you close removes its limit from your total available borrowing capacity.
The CFPB shares the specific tip that if you keep an unused account open, you should watch your statements to protect against identity theft and check for unexpected fees or charges. If you prefer to conduct daily spending without revolving lines of credit, explore our breakdown of credit card vs debit card features.
Situations Where the Standard Rules Differ
The standard utilization arithmetic and recommendations do not fit every cardholder profile. If you close your sole credit card, you eliminate 100% of your revolving credit limit. The table above does not apply to you. Ask the card issuer or a nonprofit credit counselor how closing it would affect you.
A cardholder carrying an unpaid balance on the exact card they intend to close still owes it. Closing a credit card does not erase what you owe. The balance remains owed to the issuer. The CFPB does not publish specific reporting timelines or point calculations for closed cards with remaining balances.
Our analysis also does not fit someone preparing to apply for a major loan, such as a home mortgage or vehicle financing, in the near future. The CFPB lists not planning to apply for credit soon as a reason to close. A loan application is the opposite.
Our core verdict would change if you currently pay expensive annual fees on an unused card while holding zero balances across all other accounts. In that scenario, closing the card removes the ongoing cash expense while leaving your overall credit utilization at 0.0%.
Our Takeaway
Closing a credit card can lower your credit score through higher utilization. The larger the credit limit you remove relative to your outstanding balances, the greater the resulting jump in your ratio. In our internal modeling, closing an unused $10,000 card out of $20,000 in total limits while carrying a $4,000 balance raises your utilization ratio from 20.0% to 40.0%.
Closing an account fits a cardholder facing an annual fee or poor account terms that outweigh card perks. It also fits someone who wants to avoid accumulating debt they cannot pay off. It does not fit an individual who plans to apply for new financing in the near future, or someone who holds large balances across their remaining accounts. The full impact on your credit score varies based on the broader details of your credit profile.
If you are considering closing a card, calculate your combined balances and your remaining total credit limits to see how your utilization ratio will adjust. If the closure causes your utilization to spike, consider paying down existing card balances first, or contact an accredited nonprofit credit counselor to review your full debt management strategy.
Frequently asked questions
Is it better to close a credit card or leave it open with a zero balance?
Keeping an unused card open may help maintain a higher credit score, especially an old card with a positive payment history. This preserves your total available credit limit and keeps your utilization ratio lower. Closing the card might be a good decision if the account carries annual fees or poor terms that outweigh the benefits, or if it helps you avoid accumulating debt you cannot pay off. Suppose you keep an account open with a zero balance. The CFPB advises monitoring statements to protect against identity theft and catch unexpected fees.
How long does closing a credit card hurt your score?
The CFPB notes that any change to your credit score resulting from a card closure may be temporary or minor, but the CFPB does not specify a set number of months or years. The full impact varies based on other factors across your credit profile. Check the CFPB guidance page directly for the full explanation.
Does closing multiple credit cards hurt your score?
Each closure removes that card's limit from your total, so utilization rises with each one. Divide your total balances by the limits that remain after each planned closure.
What happens if I close a credit card with a zero balance?
Closing a card with a zero balance removes that card's available credit limit from your overall borrowing capacity without changing the dollar amount of debt you carry on other cards. If you carry balances on any other credit cards, your total credit utilization ratio will increase, which can cause a temporary or minor decrease in your credit score.
What happens if I close a credit card with a balance?
Closing a credit card does not eliminate the debt you have incurred, and you still owe the remaining balance to the card issuer. The CFPB publication does not outline specific reporting timelines or point changes for closed cards carrying balances. Ask the card issuer how the closed account will be reported.
Does closing a credit card improve my score?
The CFPB explicitly warns consumers not to assume that closing a credit card will improve their credit score. Because closing an account reduces your total available credit lines without decreasing what you owe on other cards, the resulting increase in credit utilization can cause your score to drop.
Sources
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