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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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I'm 24 and in order to help build credit have a few cards that are joint accounts with my mom. All but one of the accounts has a balance of $0 and haven't been used in a while. I keep them on there because they help my credit score. However, I just looked at one of my reports and found that one of the cards that I have is nearly maxed out by my mom. I very rarely use the card, mainly for Christmas flights home and car service, so the balance is not primarily mine but is severely affecting my score. Is there any way that I can take the card completely off of my account? And if I do, will there be serious repercussions on my score? The card was only added in my name in 2006, so it's not very old.I told my mom, but she didn't seem very concerned so I don't think she's going to try to pay it down too quickly at this point.

Lzard6190 1 year ago

If it is on your credit report, it will affect your credit score. Aside from closing the account, there is no easy way to remove the trade line from your credit report. Even if you close the account, the balance will remain on your report until it is paid off. This is one of the hazards of allow others to use your credit.

CK Moderator

In paying off debt, what would be the best way in order to increase my credit score. I know that I would like to pay the highest interest cards first. Is it best to pay them down one by one to 50% and then all to 35% or pay them down one by one to 35%.

kyrabeatty 1 year ago

Where on earth are all the rules they use to determine what ones credit score is.

edgeavalanch 1 year ago

Check our News&Advice section we have numerous articles on how credit scores work.

CK Moderator

I am an authorized user on my brother's account. I have it there to boost my credit score. it ws started in 1990, and there is a large credit limit(over $50,000.00) Recently, however, he has been paying small amounts, and now has a debt to limit ratio of over 50%. That is, the outstanding balance is over $25,000.00. His payments are always on time, and always more than the minimum. I am trying to determine whether I should be removed from the account because of the poor ratio. Bottom line, will this increase or decrease my three scores?

JerryB 1 year ago

I have been building my credit up, but is there no recourse for when Credit card companies lower your limits for bogus reasons? This is affecting my credit scores, and I have never paid late, and always maintain and pay big balances. Someone told me they had the same issues with different Banks as well, that Credit card companies are just finding anyway to lower anyones limits to lower their own liabilities right now. Is this the case?

ratwurkz 1 year ago

Answer posted on Credit Card Q&A

CK Moderator

Why would a credit simulator show an increase in my credit score if I'd closed my oldest c/c?

revizor 1 year ago

This is a loaded question without knowing your specific credit report. Here is one possible explanation: If you have a long credit history with multiple accounts about the same age and a high amount of available credit, the closed credit card account may have no impact while the reduction in your available credit could actually increase your score since too much available credit is also a risk for lenders. Does the hypothetical apply to you?

CK Moderator

I closed 4 credit card accounts I had opened to buy online things with to recieve a discount. Paid them in full and closed all 4 about 6 months later. My credit score DROPPED 45 points because of the activity!

66restomod 1 year ago

What about closing out an auto loan by paying it all off ahead of time? I've heard keeping it active and paying it off bit by bit can improve one's score, but I would prefer just to be done with it. Does it matter?

spcomplex 1 year ago

One reason given for my credit score was that my revolving bank account had not been open for very long.I was forced to close my bank account due to fraudulent activity on my account but opened the new account at the same time.How can I receive recognition for my long standing relationship with my bank and will it have much effect on my actual score.

mortman3 1 year ago

Normally accounts that are closed for fraudulent activities are reopened with the same history and credit attributes. Usually, the only thing that changes is the account number. As such, your score should not be affected.

CK Moderator

I have a Bank account with $500 overdraft protection. Does this affect my credit? Online it reads like a credit line. Also, I have a debit card with the same bank, and an ATM card. do either of those count against my credit score??

Phedgeman 1 year ago