Credit News

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

by Staff Writer, Credit Karma

September 25, 2008 | 91 comments

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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USER COMMENTS(91)

pcpark
Aug 21
10:17 am

I found the comments very informative..I am 55, divorced twice, score 780, which thru it all, I have protected my credit like a 'crazy person', but why 16 cards over the years? Did my former spouses open cards up, jointly? It also showed 4 open, I can only account for 3? Where can I view information on the open ones? Thanks for all you are doing here!

CK Moderator

Thank you for the kind words.

You can view your detailed credit report at AnnualCreditReport.com. That is the free government site. You can also view it at anytime at TrueCredit (charges may apply).

cridland
Aug 16
8:48 am

Clear, concise answers to questions.

palnick
Aug 12
11:13 am

very good advice as many are not aware that closing credit cards(even if the bank closes them) does hurt your sore.

quiltkat
Aug 11
4:32 pm

Good info' to have

lcf2152
Aug 6
10:30 am

My credit score is 768 down from 785. I opened up a new card due to a $30 incentive and then planned to close it in a month or so. It caused an inquiry and dropped my score down. The only non 'A' that I have in the summary is due to the number of accounts - 7 are open (I use 2 regularly) and 12 show as closed. Why do the 12 closed matter? For years I've done the open/close thing - thinking as long as I kept the two open that I have had for a decade or more I was fine. How do I improve that accounts open thing to kick up my score? I have 100% on payments and an "A" on all other aspects of the summary. Thanks.

CK Moderator

Your score should pop up after a few months provided you don't have any new inquires. Total accounts matter because it shows your overall credit experience. More accounts usually mean more experience.

Looks like you have a great score. Don't worry about getting it much higher than 780. It will be difficult and you won't save you anything on interest or fees.

cygent
Aug 5
3:12 pm

My score was 828!! I recently closed my old AMEX card because of horrendous Customer Service, leaving me with only < 1 yr. old BofA credit card. So applied for Citi points card, got dinged and my score dropped to 757!! Yep, 70 points because a guy with excellent credit history got dinged for a credit card!! This is absolutely ridiculous. I am extremely ****ed of, now have to work to get my score back up to > 800 which will take > 2yrs. Stupid reasoning by them, both to ding me for the card & to lower my score. They can still view my history for last 7 yrs!! I am clean, just because I closed all of my accounts (coz I was scared of ID theft), I am being punished severely!! Dumb dumb dumb credit bureaus & CC companies.. YEAH CONTINUE LENDING & GIVING CREDIT TO THOSE WHO WILL DEFAULT & BRING DOWN THE ECONOMY... NOT RESPONSIBLE PEOPLE MY MYSELF. GREAT JOB!! STUPID!!

CK Moderator

Just know that 757 is still considered excellent and you would get the best rates on most loans.

rollingscd
Jul 30
12:05 pm

I am listed as having 22 accounts with only 2 open. The vast majority are simply student loans being rolled into one loan. Why am I being penalized?

CK Moderator

Having multiple installment loans is not decremental to your score. Also when accounts are consolidated or sold, they often have a different reason codes associated with the closing.

reginalee
Jul 27
11:50 am

I am considering closing out the only credit card that i have, because according to the credit calculator, my score would jump from a 583 to a 618. I am constantly over my credit limit and I have to pay large annual fees. But it's the only credit card that i have and I was told that it's not great to close out credit lines when you have limited positive credit. Help?

CK Moderator

Closing your credit card would hurt your credit card utilization. So there are multiple effects. Generally, your best bet is to control the CCU by paying down your debt and keeping your credit card open.

KamiLi
Jul 23
6:12 pm

is there any way that I am able to see a list of each of my creditor? I only see a total number 8 active, 3 inactive.

CK Moderator

You can view your detailed credit report at AnnualCreditReport.com. That is the free government site. You can also view it at anytime at TrueCredit (charges may apply).

hanthony
Jul 23
4:55 pm

I currently have a 701 credit score and want to find out how to improve it. I think the thing hurting me most at the moment is the fact that I have 11 active accounts. Never have had a late payment, but all of my cards have relatively low credit limits ($500 on most). Any advice?