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

September 25, 2008

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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

(123 Total Comments)

I see that "average age of credit lines" is an important factor in calculating my score.

I have two cards that I have had for over 7 years. Then 2 years ago, I opened a Macy's credit card. They were offering a large discount on purchases at the time, and I do shop for clothes there some so I thought it might be a good idea.

Since then, I've rarely shopped there and haven't used the card in 1 1/2 years.

Should I close this card? I'll never use it, and closing it would greatly increase the average age of my open credit lines.

chocobo at 6:43 pm Feb 5

You should close the card. Gradually your score should increase.

CK Moderator

Will my credit score drop if visa closed one account and opened another because I lost my card?

babybo01 at 4:09 pm Feb 5

Usually a lost card is replaced instead of closed. This should not affect your credit score. If you requested to close the account, it will hurt your score and opening a new card will likely take a hit because of a hard inquiry.

CK Moderator

My oldest credit card (one I have had since 2001) charges an annual fee of $50, plus a service fee of $6 per month ($72 annual) and my current APR is 11.90%. They are going to raise the rate to 16.90% plus Prime (approx 20 - 22%). I have not been late or overlimit!

Should I close this account? I have until Feb 21 to decide.

I have another card that does not charge an annual fee and is not changing my APR (currently 22.9%)I have been a valued customer since 2002.

Even8r at 11:42 am Feb 5

I had a similar situation. I chose to close 2 of my oldest accounts b/c the annual fees were not worth it. On one, I only had a credit limit of $650 and was paying $6 month service fee, PLUS an $89 annual fee! 1t was Capital One and the other was First Premier. I had them since college but the rates were ridiculous! So I closed them both. My score may have dropped (like 30 points), but it was nothing too massive! My score has been increasing back up every month that I maintain a healthy credit history and pay other accounts down.

I feel, in the long run, I saved paying over $100 a year for credit cards not even worth it, with no benefits for using them.

Caprisha at 5:02 pm Feb 6

does anyone know what's going on with these credit card interest rates? The same thing happened to me, I have a couple of cards that have low interest and now the rates are going up like 5-6%. I've never been late and keep my balanced below 35%. It seems whatever Obama did is backfiring and costing consumers higher interest. To answer your question, you should definitely close that account, that is a lot of money in annual fees.

debad1257 at 9:02 pm Feb 6

I have an "airline" points card at $60/year. It is just about my oldest and has my greatest credit/cash limit. Is it worth the $60/year or should I close it down? I do use the card some to keep it active.

cyrcl at 3:11 am Feb 5

It is valuable to keep this credit line open. Closing it will surely hit your score. I think the $5/month is a small amount if it causes you to have a great credit file. It all comes down to if you think it is worth that personal investment.

CK Moderator

Can I close my old checking accounts or recently that I have opened?will closing checking account reduce credit score?

Thanks

Sarath

sarathb at 10:25 pm Feb 4

Opening and closing checking accounts do not hurt your credit score. Be sure to pay off your balances if you owe any or else they become collections.

CK Moderator

I have requested several companies to consolidate lines of credit, so my available credit has not changed, and I have fewer cards.

I expect I will loose some lines of credit, just because I do not use the cards.

I have been aggressively paying off cards to prepare for retirement, and few cards have a balance. I decided to retire before I wanted, because of circumstances. I think my available credit is too high for my income.

Is there any benefit to reduce available credit? Is it mostly a matter of preventing loss of available credit?

ssrferrs at 2:56 pm Feb 4

When all this banking mess hit, my credit card companies doubled my interest rates. In a panic, I agreed to close the accounts, but continue to pay off the balance over time at my old rate.

I am still paying off 2 of these cards at the old rate, but the accounts are listed as "closed". Is there anything I can do to help this situation. I realize now that I should not have closed these accounts. Can I open them again, due to the fact that I am still paying them off as if they were open?

Any advice?

nielsemp at 1:59 pm Feb 2

I've gotten myself a handful of sub prime cards with high fees even if i have zero balance.What should I do being one of them is my oldest account but has fees in the amount of $316 a year even on a zero balance.

wayne6372 at 6:13 pm Jan 31

This can be due to many factors. Although he had collections and such, he might have also had longer credit line history than you. There are so many areas to take into account so its hard to really tell.

dina12 at 2:27 pm Feb 3

when doing the following, remember to limit the number of applications and credit bureau inquiries to no more than 3 per 12 months. Fewer is better.

Use your improved credit to acquire a prime no fee card. I recommend either Visa or MasterCard. After you have used it a couple of months and paid each month in full, you should cancel the fee cards at least a month prior to the next scheduled fee if it is an annual fee. Assuming you have them paid in full as you say, close the highest fee cards first.

Visit with your banker where you have a good relationship and have not bounced checks for at least a year. Ask for their help. Explain you are upgrading your credit cards and not seeking to increase your total credit. Tell them your plan to close some accounts as soon as you receive the better grade cards. Seek their help and advice.

Your credit score may take a hit due to older cards being canceled, but it will be worth it to your pocket book.

Jeff68005 at 1:43 am Feb 4

I have to laugh! When I met my husband I had higher credit than he did. He had a bunch of collections, I paid off. We have maintained all of our credit the same since we got married, and now his credit score is higher than mine. How can that be?

KlAnderson at 4:32 pm Jan 28

The score from CK is the Transrisk score, I'm not sure what score your previous loan inquiry was from. Credit scores vary depending on what the inquiry is for. Even within the same company like TransUnion, you can have more than one score. You may want to inquire scores from other bureaus as well for comparison. My scores are about 20-30 points different for each bureau.

dina12 at 2:24 pm Feb 3

I have a score of 798. I remember applying ofr an auto loan 3 years ago (which is now paid off) and my score was 850. What happened and should I close down some store cards I never use (bon ton, old navy, gap)?

skmerrow at 8:57 am Jan 21

It could be any number of reason. Closing old accounts generally does not improve credit scores.

CK Moderator

If you now have a couple of Visa or MasterCards, then consider closing the store cards unless they provide a benefit you use. i.e. Kohls has a monthly in store bonus for Kohls cardholders.

Keep the oldest of your cards for aging reasons.

Jeff68005 at 1:48 am Feb 4