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)

chocchoc
Jul 22
10:06 am

if majority of my accounts have already been sent for collections will it hurt me or help me to pay these accounts off?

anniebaby
Jul 21
5:29 am

I just received a notice from Chase that they're reducing my $8,000 limit down to $2,000. The reasons they give are simply not true, and I've had this account for about five years...never late and always paid much more than minimum payment. Paid it off completely two months ago. Should I close it now?

CK Moderator

If you don't have any annual fees, our general advice is not to close any accounts until you open a new one. Credit and credit card issuers are contracting lines and available credit. You don't want to be in a situation where you have no credit available.

karind111
Jul 20
6:32 am

Is there anything I can do if I was stupid enough to cancel 2 credit cards I've had for 20+ years (over 6 months ago) before finding out that it would drop my credit score dramatically? Now my "oldest" account is 2.5 yrs, and my score dropped from 806 to 740! Would reinstating my AMEX "give me back" the 20+ years I was with them or would it start again from scratch?

CK Moderator

Age of trade lines is very important for your credit score. If you could get one of the old accounts re-instated, it should help provided they report the original open date.

noneemac
Jul 16
11:31 pm

+1 !! Thank you for all the great comments, advice, and insight. I like that you are terse.

dani18fsc
Jul 8
6:33 am

I recently purchased a car and when they ran my credit, the car I was trading in came up as a repo?! I have the letter sent from Honda saying my lien free title was in the mail and that there was a zero balance. I called Honda and they re-sent the same letter ... how can I get this off my credit???

drewsworld
Jul 5
1:08 pm

Good site, but i have a question? Why is there such a disparity in my score's numbers from here in comparison to MYFico.com which reports all three individual scores. Your site lists me at 766 while MYFico lists my scores between 774,801,and 802 respectively???

CK Moderator

FICO uses a different algorithm. But if you are excellent on one score you should be excellent on others.

Dcdaigneault
Jun 24
12:53 pm

There 30 total credit card accounts included in your report but do not know who they are or the benefit of eliminating them. About half are active.

neelie
Jun 23
8:26 am

How long does it take for your credit score to rebound if you close a credit card that is less than one year old and now charges a fee? Right now I have a score of 805. I will be buying a house in the next year and don't know whether to keep the card (even with a zero balance) and just close it. I'm afraid it will affect my changes of getting a good mortgage rate? If I close it now, will my score have time to rebound if I apply for a mortgage in 6-9 months?? Thanks for the article!

mrjad20
Jun 22
12:58 pm

Hi . . . my credit report card reflects "A" across the board except in the number of accouts ("D" here). . . I have 6 open and 11 closed accounts. Please explain the steps for me to get some of these accounts off my history because some of the accounts are old - which I understand I may want to keep - and are with creditors that I don't do business with any longer. . . . thx,

Ronn9
Jun 21
11:53 pm

I have an excellent credit score. I have too many cards and one from b of a I dislike their company. I have a 30,000 limit. I'd like to dump B of A and move the credit to another card. Difficult I find. Or maybe just let this credit go. I understand credit karma has a way of doing senerios that show how it would effect my credit score. How do I find this on credit karma. Thank you for being smart and not a rip off. I appreciate it.

Ron