Closing a credit card will usually lower your credit score, but the damage is temporary and smaller than most people fear
When you close a credit card, your score typically drops by a few points to as much as 10 or 20 points, depending on which card you close and what your credit looks like right now. The drop happens because closing a card changes two things that credit scoring models watch: your credit utilization ratio (how much of your available credit you are using) and your average age of accounts (how old your credit history is on average). Neither change is permanent, and neither will tank your score on its own — but if you are already carrying high balances on other cards, the timing matters.
The real question is not whether closing a card will hurt you, but whether keeping it open would help you more. That depends on why you want to close it, what the card costs, and what your other cards look like.
Key Takeaways
- Closing a card raises your credit utilization ratio because your total available credit shrinks, which can lower your score by 5 to 20 points depending on your current balances.
- If you carry balances on other cards, closing a card with a high limit will hurt more than closing one with a low limit.
- The score drop from closing a card is usually temporary — it recovers within a few months as long as you keep paying other accounts on time.
- An annual fee card is usually worth closing; a card with no fee is usually worth keeping open even if you do not use it.
- Paying off the card before you close it does not prevent the score drop, because the drop comes from losing the available credit, not from the balance.
Why closing a card affects your credit utilization ratio
Credit utilization is the percentage of your total available credit that you are actually using right now. If you have three cards with limits of $1,000, $2,000, and $3,000, your total available credit is $6,000. If you are carrying balances of $500, $800, and $0, your utilization is $1,300 divided by $6,000, or about 22 percent.
When you close the $3,000 card, your total available credit drops to $3,000. Your balances stay the same: $500 plus $800 equals $1,300. Now your utilization is $1,300 divided by $3,000, or about 43 percent. That jump in utilization is what lowers your score. Credit scoring models treat high utilization as a sign that you are financially stretched, even though nothing about your actual situation changed.
The impact is biggest if you are closing a card with a high limit, or if you are already carrying balances on your other cards. If you have no balances on any card, closing one does almost nothing to your utilization, because you are using 0 percent of your available credit either way.
How the age of your accounts plays into the decision
Credit scoring models also look at how long you have had credit accounts open. When you close a card, that account stops counting toward your average age of accounts — and if it was one of your oldest cards, the average age of all your accounts drops. A younger credit history is seen as riskier, so your score may drop a few more points.
This effect is usually smaller than the utilization effect, and it matters less if you have other old accounts open. If the card you want to close is your oldest account by far, closing it will hurt more than closing a newer card. If you have several accounts that are just as old or older, closing one card will barely move the needle.
The age penalty is also temporary. As time passes, your remaining accounts age, and the average age of your accounts climbs back up — even without the closed card.
When the score drop is worth it: annual fees and cards you do not use
If the card charges an annual fee and you are not using it, closing it almost always makes sense. A $95 or $150 annual fee is real money, and the credit score hit is temporary. You will recover those points within a few months of on-time payments on your other cards.
Even a card with no annual fee might be worth closing if it is a store card with a very low limit, or if you opened it recently and it is dragging down your average account age. But if the card has no annual fee, the math usually favors keeping it open. An open account with a zero balance costs you nothing and helps your utilization ratio.
Many people close cards because they worry about temptation — the fear that having available credit will make them overspend. That is a real concern, and if you know yourself well enough to say "I will use this card if it is open," then closing it is the right move for your finances, even if your credit score takes a small hit. A lower score is better than higher debt.
How to minimize the damage if you do close a card
If you have decided to close a card, a few steps can soften the impact. First, pay off the balance completely before you close it. This does not prevent the utilization hit — you will still lose the available credit — but it means you are not carrying a balance on a card you are about to close, which looks worse to lenders.
Second, do not close multiple cards at once. If you need to close more than one, space them out by a few months. Each closing will cause a small dip, but spreading them out gives your score time to recover between hits.
Third, keep your balances low on your remaining cards in the months after you close the card. If you were using 30 percent of your available credit before, try to get it down to 20 percent or lower. This directly counteracts the utilization hit from closing the card.
Finally, make sure you keep paying all your other accounts on time. Payment history is the single biggest factor in your credit score, and on-time payments will push your score back up faster than anything else.
What happens to the closed account on your credit report
When you close a card, the account does not disappear from your credit report when ready. It stays on your report for seven years, marked as "closed by consumer" or "closed by issuer." During those seven years, it still counts toward your credit history — it just does not count toward your available credit anymore.
This is actually good news. The account is still there proving you had credit and managed it responsibly, so it continues to help your credit profile in some ways even after it is closed. After seven years, the account falls off your report entirely.
The difference between closing a card and paying it off
Many people think that paying off a credit card balance will hurt their score the same way closing the card does. That is not true. Paying off a balance actually helps your score because it lowers your utilization ratio. You can pay off a card completely and keep it open, which gives you all the benefits of a low balance with none of the drawbacks of closing the account.
The score hit only happens when you close the account itself — when you tell the card issuer you no longer want the account open. Paying off the balance is always a good move. Closing the account is a separate decision that should depend on whether the card has an annual fee and whether you trust yourself not to use it.
Frequently Asked Questions
How long does it take for my credit score to recover after closing a card?
Most of the recovery happens within three to six months, as long as you keep making on-time payments on your other accounts and keep your balances low. The full recovery — back to where your score would have been if you had not closed the card — can take longer, but the worst of the damage is temporary.
Should I close old cards or new cards?
If you have to close a card, close a newer one if possible. Older cards help your average account age, and closing them does more damage to your credit history. If the old card has an annual fee, the fee might be worth paying to keep the account open — but run the math on what that fee costs you over time.
What if I close a card but the issuer reports it as closed by them instead of closed by me?
Sometimes an issuer will close an account on their end if you have not used it in a long time. This looks slightly worse on your report than closing it yourself, but the credit score impact is the same. If you want to close a card, close it yourself so the report shows "closed by consumer."
Does closing a card hurt my score more if I have bad credit?
The percentage drop can actually be bigger if your score is already lower, because you have less room to fall and fewer accounts to absorb the change. But the good news is that lower scores also recover faster — you will see improvement sooner if you focus on paying down balances and making on-time payments.
Can I reopen a card after I close it?
You can sometimes reopen a card within a short window after closing it, but policies vary by issuer. If you close a card and then change your mind within 30 to 60 days, call the issuer and ask. After that window, you would need to explore for the card again as a new account, which counts as a new inquiry on your credit report.