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The Do’s and Don’ts of Closing Old Accounts

September 25, 2008

149 comments | Comment on this Article

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Closing old and unused credit accounts on your credit reports can help you avoid unnecessary fees and guard against identity theft. It can also cause your credit score to drop if you are not careful. Here are a few do's and don'ts for closing those dormant accounts:

Do...

Consider closing unused and idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity thieves. Close the accounts with annual fees or the highest interest rates first.
Check your credit reports online to see the status of your accounts. Look for late payments, high balances and signs of identity theft. As a bonus, checking your credit report can save you some research time by providing you with contact information for each of your creditors.
Be aware that you can cancel accounts that have an active balance. You can ask your creditor to close the account to new charges and continue paying down the balance each month. This may be a good way for heavy credit users to prevent new spending while they are reducing their balances but watch out for hidden fees.
Keep four to six credit accounts open. This will keep your credit score and debt balances healthy. Signs of active and responsible credit use are viewed positively by creditors
Designate one card for regular use and try to pay the balance in-full each month. Reserve the other cards for emergencies only so that you are not tempted to overspend.

Don't...

Close the oldest account on your credit reports . This could cause your credit history to appear shorter and could harm your credit score.
Just throw away old cards and expect your accounts to close automatically. The safest way to close an account is to send a certified letter to the customer service department of the credit company. You should receive an account closing confirmation letter in 10 days.
You shouldn't be pressured to cancel several accounts all at once. Gradually paying down and closing accounts may be the best plan if you are unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel numerous credit accounts, spacing the closures over time will reduce the chance of attracting negative suspicion from potential creditors.
Avoid over-consolidating balances onto one card. If your credit balances rise to above 35% of your available limits, you may see a drop in your credit score.
Don't forget to check your credit reports for updates and errors after you close your credit accounts. Wait 30-60 days for the creditor to report the closed account and the credit reporting agencies to update your records. While the accounts and their payment histories will stay on your report for 7 or more years, they should be marked as "closed."

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Comments

(149 Total Comments)

My account on credit karma indicated I have 10 account of which two are closed. I do not have 10 credit cards. I only have two open credit cards and they are the only cards I have ever opened. "

Does this mean that my identity has been compromised? I would greatly appreciate all the help you may offer regarding this matter. Thank you for your time. "

jalalaref at 12:40 pm Mar 9

Please inquire with www.transunion.com. Our report comes directly from them, you can dispute errors with them

CK Moderator

Here is a question for the modirator. "

I just updated my credit score on CK and I got a warning that the number of accounts had dropped by one since the last time I updated serval months ago. After check a bit I determined that one of my old closed accounts had finally aged enough so that the credit bureau did not include it in the report. The number of open accounts stayed the same. The result was that my credit score did not change one point. On the other hand CK is making a big deal about the total number of accounts and not the number of OPEN accounts. What gives? "

MSJ7 at 6:46 pm Mar 5

Credit Karma is not making a big deal. We are just making a systems that notifies you of changes to your credit report.

CK Moderator

So what do you do if your oldest card which has been paid off for a number of years and has a high inerest rate to boot. Now wants to charge you an annual fee if you don't charge $2400 a year? "

Kynwal at 4:53 pm Mar 4

Our general advice is to close accounts that have annual fees. Your score may take a hit but the idea of good credit is to save you money not cost your money. You may want to apply for a new card before you close this old one.

CK Moderator

I wish i would of gone to this site a few days before i spoke to my parents! they told me to pay off my credit cards and close the accounts. I did and guess what! my score was low to begin with, but it went from 636 to 603! all within 2weeks. yes, i let them know what a BIG mistake i made by listening to them this time. "

vixonlynn at 4:25 pm Mar 3

In the long run, you're going to be better off. As your remaining cards age, they'll give you a better history - and your overall ability to get in "over your head" will be reduced - which is something lenders like. Besides which - if you don't need the card, why have the temptation laying around? "

pmandry at 1:09 pm Mar 9

I just received notice from Chase they were lowering my credit limit on a semi-active account (have not used it in 9 mos.) Sent them a nice note back through their e mail facility that, like most prudent people (including corporations) I keep available accounts close at hand, and since their unilateral action could cost me in the long term, suggested they reverse their action or I might seek compensation if my credit score changes. And by the way, I am sure the Media, the Better Business Bureau, the States' Attorney Generals, and my Congressmen would be advised if I thought their answer not the right thing. "

Go on the offensive, people, If enough people complain, then the banks will listen. "

Corpscopp at 3:51 am Feb 28

Chase doesn't care about valuable customers. Today I went to my credit union (at 7.89% interest) since Chase raised my APR TO 20.99% for being a EXCELLENT CUSTOMER, and I'm so glad to say, my credit union will be paying Chase in full within 48 hrs.. If they are going to lower your credit limit, just close your account. To my understanding (reading blogs on credit),you will still get a 'DING' against your credit if a they lower your credit limit. "

So I say,PAY IF OFF AND CLOSE IT!!!!!! Chase doesn't deserve a EXCELLENT CUSTOMER as yourself. "

I say, CLOSE YOUR ACCOUNT AND FORGET CHASE. Banks doesn't listen to LOYAL customers, it's all about PROFIT. I have talked with Chase until am blue/pink in the face, they could care less.. "

CHASE only cares about MONEY, not GOOD CUSTOMERS! :( "

PURPLEMAXIMA at 3:44 pm Mar 1

I have 15 credit cards, but currently only have 7 open, all with low balances except for the furniture that I have financed, and 3 of the credit cards and promotional no interest for so long-in which I am paying what I need to pay in order to pay the amount off before the interest rate sets in. Most of these newer cards have been opened within the last two years, but my question is should I close those accounts that I opened 4 or so years ago if I never had a balance on them, or do not plan too? "

mshugars at 8:18 am Feb 25

My first credit card account has just went from 0% to 19.98% APR because the promotional period has ended, if i were to switch this account to another card with the same company, would this count as me closing my oldest account. "

stupiddog at 12:42 pm Feb 20

Yes, but since you credit history is short, your score will go up in a few months and if you can find a better rate credit card, it will benefit you

CK Moderator

will credit card company reduce rates 5 or 10 precent if claim your going to drop them cause always on time an pay 3 times minum payment "

lexus350 at 6:20 am Feb 16

It's not a guarantee but you can try it. Have in mind the rate you would like them to give you and see how close they come to it. If all else fails...take your fantastic business somewhere else. "

theheat71 at 10:50 am Mar 1

It seems I have alot of credit inquiries and i checked a graph that shows there was 10 in Jan and 9 in Feb. What caused the change? I haven't applied for any credit. Also, how can i improve the number? "

galindom25 at 12:50 pm Feb 15

Looks like one of your credit inquireis dropped off your report between Janauary and Februaary. Credit inquiries generally remain on your report for over 2 years.

CK Moderator

How much available credit should you have? I have 2 cards that I never use. One with a 13,000 credit limit, and a store card with a 3,000 limit. I read somewhere that you should only have 37% of your income in available credit...and I have much more than that. Should I close some cards or leave them open and lower my available credit? Or should I do nothing? I have excellent credit now and don't want to hurt that. "

aecarlson85 at 8:15 am Feb 15

yea your definatly not gonna wanna lower your limit... that will hurt it and in the debt cures book it has a few pages saying not to do that. you only wanna use 35 percent or lower of that limit on your cards "

duster323 at 3:30 pm Feb 16

Your income doesn't affect your credit score (it's not even on the report). As such, the percentage of available credit relative to your income doesn't affect your credit score. Lenders use DTI but you have to give them your income for them to calculate that value. "

robert0380 at 10:21 am Mar 1

If you have EXCELLENT CREDIT, do nothing!!! You only have 2 cards that you never use that is so AWESOME. This is what am currently working on, getting my balances down to improve my credit score. I started in Jan paying down my balances and I have really stuck to my budget, no more eating out, malls, ebay, etc, etc. I have GOOD credit, but I'm shooting for EXCELLENT just like you :). "

Wish me luck. You are good to go :)! "

PURPLEMAXIMA at 3:54 pm Mar 1