Does closing a credit card hurt your credit scores?

There are many reasons you might be considering closing a credit card account. You may be trying to limit your amount of revolving debt. Or you might not be using a particular card any longer.

Whatever your goal, know that closing your credit card is possible, but doing so may impact your finances in ways you might not expect. So, does closing a credit card hurt your credit score? It can. But the amount of change you’ll see will vary based on your personal circumstances and financial situation.

Here’s a deeper look at how closing a card can impact your credit scores and what you can do to mitigate any potential drop. 

Key takeaways 

• Before closing a credit card, you may want to be aware of any impacts it may have on your credit report.

• Closing an account can affect the age of your credit and your credit utilization ratio, which may hurt your credit scores.

• Exploring the pros and cons of closing a card can help you make an informed decision about what’s right for you and the impacts on your credit scores.

Closing your credit card can affect several factors that go into your credit scores:

For starters, how long you’ve had credit can impact your credit scores. For instance, both FICO® and VantageScore® consider the age of your oldest account as well as the average age of all your accounts. The older your credit history, the better. And closing an account can reduce the average age of your credit accounts, which could cause a drop in your credit scores.

Another primary factor that could be affected is your credit utilization ratio, which is the amount of available credit you’re using across all your accounts.

You can get your utilization ratio by dividing the total amount of your credit balances by your total credit limits. Then multiply that number by 100 to calculate your ratio as a percentage.

By closing a credit card, you’re decreasing the total amount of credit available to you. And that may increase your credit utilization ratio. Here’s one scenario to help explain. 

Say you have two credit cards:

• Card No. 1 has a $1,000 credit limit and a $0 balance.

• Card No. 2 has a $1,000 credit limit and a $1,000 balance.

In this scenario, your credit utilization ratio is 50%, because your total balance across both cards is half the available credit. But by closing card No. 1, your credit utilization ratio would spike to 100%. That’s because you would be left with a $1,000 total balance and a $1,000 credit limit. This could negatively impact your credit.

According to the Consumer Financial Protection Bureau (CFPB), experts recommend keeping your credit utilization below 30% of your available credit to avoid a negative impact on your scores.

While closing a credit card can affect your credit scores, it’s hard to say by how much. That’s because there are other factors—such as the length of your credit history and whether you have a record of making payments on time—that also play a role in your scores. The actual change to your scores after closing a card will be unique to your circumstances.

But closing a credit card shouldn’t have a major impact on your credit scores—especially if you demonstrate responsible credit use with the accounts you keep open.

There are some benefits to consider when deciding whether to keep accounts open:

• Managing your credit utilization. If the card you’re considering closing has available credit, keeping it open could help you maintain a lower credit utilization ratio. 

• Keeping a solid credit history. If your credit card is one of only a few sources of credit, closing the account could give you a thin credit file. This means you may not have enough credit history to be scored. In this case, you may want to keep your card open to continue building your credit while paying the balance in full.

• Maintaining a mix of credit types. Your credit scores can also benefit from having more than one credit type. This can include things such as revolving credit, personal loans or mortgages. If your credit card is your only form of revolving credit, you may want to keep it open to diversify your active credit.

• Preparing to make a big purchase. If you’re planning to take out a loan for a house or a car, it helps if your credit is at its best. In this situation, keeping your credit card open could help strengthen your loan application.

Although keeping your card open and paying it off could be the right move, it also depends on your situation. Before deciding to close an account, it’s important to look at the pros and cons to determine whether there may be any negative impact on your credit. 

If it seems like closing the account is best, there are ways to help minimize the impact on your credit scores.

Though keeping credit card accounts open could help you preserve your credit scores and maintain a positive credit history, there may be times when closing an account makes sense. Here are a couple of situations to keep in mind:

• You’re paying a high annual fee. Some credit cards require an annual fee that could be several hundred dollars, depending on the card. If you’re not taking advantage of the card’s benefits or aren’t using the card at all, canceling it will let you stop paying the annual fee and could save you money.

• You’re worried about overspending. If you’re trying to pay down your debt or you’re struggling to use your credit card responsibly, canceling may be a good idea. You could see a drop in your credit scores, but that drop will likely be smaller than what you’d see if you maxed your card out and couldn’t pay it off.

Review your situation and consider how canceling a card may impact your finances. If you think closing the account will help you control your finances or accomplish a goal, doing so may be worth the temporary hit to your credit scores.

Closing a credit card may seem simple enough. But before you break out the scissors to snip your card in two, here are some things to consider:

• Pay down your balance first. While you can close a credit card with an active balance, you may want to consider paying down your balance first. Even if you close your account, you’re still responsible for any remaining balance, interest and fees that might be charged. Plus, paying down your balance first will help keep your credit utilization under control.

• Double-check your payoff amount. In some cases, the payoff amount for your card may be more than just the statement balance because of fees and interest. Be sure you check with your credit card issuer to confirm what you owe.

• Get confirmation of your cancellation. With some credit card companies, you can simply sign in to your account to close it. Or you may be able to call your card issuer to make the request. Either way, consider getting confirmation in writing. That way, you have a permanent record in case anything gets called into question.

• Check your credit reports. After closing your card, you might also want to check your credit report. You can get free copies of your credit reports with credit scores from all three major credit bureaus from AnnualCreditReport.com. You can also monitor your VantageScore® 3.0 credit score for free with CreditWise from Capital One.

If you still have questions about closing your account, check your cardholder agreement for more details.

Before you decide to close your credit card account, you may want to consider a few other options:

If you feel like you aren’t using your current card very often or that it’s not meeting your needs, you may be able to upgrade to a different card with the same issuer. Depending on how your issuer treats upgrades, you may be able to keep your existing account history while potentially getting new benefits and rewards.

If you’re hoping to consolidate your debt or potentially lower your interest rate, you might consider a balance transfer. Balance transfers let you move some or all of the balance on one or more credit cards to a new credit card, ideally with a low or 0% introductory APR.

Just be sure to factor in any fees or terms involved. After the introductory period, the card will revert to its normal interest rate. So you may want to prioritize paying off what you transfer so you won’t owe interest on the remaining balance.

If your card hasn’t been getting much use, consider setting up a small recurring purchase. This will help keep the card active and reduce the likelihood of the credit card issuer closing the account. If you’re worried about building up a large balance, consider paying off that recurring purchase as soon as the charge shows up on your credit card. By paying the card off early, you’ll keep your credit utilization ratio on that card lower, which may help you boost your credit scores over time.

If you want to limit spending, see if your lender offers a card lock feature. Capital One lets you instantly lock your card to prevent it from being used for purchases. It takes just a few taps on the Capital One Mobile app. And if you decide you want to use the card in the future, you can unlock it just as easily. Just remember that your account may eventually be closed due to inactivity, so be sure to contact your lender for details.

Closing a credit card can impact your credit scores, which can make it harder to qualify for new loans or lines of credit until your scores recover. While it may be a good idea for some cardholders, canceling your card isn’t your only option.

If you’re carrying a balance on a card and want to pay it off or you have a card that no longer fits your needs, consider applying for a new credit card. Capital One offers many rewards cards that can help you better leverage your credit while letting you access benefits you may not have with your current card.

Compare Capital One’s credit cards to find the right fit for your goals and financial situation.