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."

Sponsored by:

Comment on Article Receive Comment Email Alerts Send to a Friend Print Article

USER COMMENTS(91)

vladthedog
Jun 21
6:42 am

Looking over my credit report, I have a few open accounts from way back in the day that I no longer have anything to do with. I have an HSBC account opened back in 2000. This was for a ring I bought for a gfriend. I don't think it was a credit card, but a loan specific for the ring. It says its still open, but with 0 owed, all in good standing. I also have a BofA account opened in 1998. This was my first car. It's all paid off, account in good standing.

Both of these accounts are some of my earliest loans, so they definitely extend my credit history. Should I leave these as "opened" since they don't seem to be hurting, and actually seem to be helping my credit history?

CK Moderator

If you don't have a fee associated with the account, you should leave old accounts open.

KWH
Jun 19
10:23 am

I just checked my report card and discovered that my credit limited used by CreditKarma to determine my score is off by about $40K. How do I make sure the correct amount is used for the evaluation?

CK Moderator

Our data is direct from the credit report. Use annualcreditreport.com to make sure the data is correct on your TransUnion credit report.

adam6
Jun 19
2:58 am

I'M going to but a house in 5 months i'm PAYING AND SEATTLING ACCT THAT ARE REPORTING ME FROM MAY 2009 HOW CAN I BRING UP MY CREDIT SCORE TO A 620 BY NOV PLEASE VERY IMPORTANT TO ME AND MY WIFE THIS HOUSE IS VERY IMPORTANT WE NEED A HOUSE SHE IS A DIEBETIC I HAVE TO GET ONE I NEED THE FASTED WAY IN 5 TO 6 MONTHS

wonbanana
Jun 15
5:09 pm

I have a question that hasn't really been addressed that I could find. In the past couple years, I've opened a few same as cash accounts. They were all paid on time with no interest paid (yay!). However, since they're opened and paid off within a short amount of time would it be helpful to just close them immediately after the final payment? I just want to raise my average age of accounts since credit limits are not a problem.

ksaffari
Jun 14
10:28 pm

How long does it take for a credit inquiry to get removed from your account?

CK Moderator

Credit inquires are usually tracked for 2 years.

annoneil01
Jun 14
12:36 pm

Hi, Darrin692001. I, too, have had the exact same scores through for a very long time. I keep a log. My Credit Karma FAKO has not changed since APRIL 23, 2009. On the 'good' side, that's exactly the same as my True Credit Transunion FAKO, which also has reported the exact same score since April 23, 2009. Off-topic, April 23rd is also the day that six hard inquiries were added back onto my true Transunion report, lowering my FAKO by 3 points. Could have been worse. :) A true credit report direct from Transunion later revealed that the only change was Transunion had chopped nearly all of Credit Karma's soft inquiries. I'm going to order another true report in a couple months. If I'm still at my current FAKO in November, I'll just accept that I've plateau'd and this is the best it's going to be until my accounts age more (barring a catastrophic life experience). :) What's your exact situation, Darrin?

downing
Jun 2
9:26 am

I'm a little confused on what qualifies as a credit account. I have one car loan, one debit card, 2 credit cards. I assume this is only 2 credit accounts (the cards). I pay both in full, rarely more than 20% of my available credit is used. So would my score be lower because of fewer accounts?

darrin692001
Jun 2
5:04 am

how often does this site update ? my score has been the same for a while can i ask why ?

CK Moderator

It updates every time you request an update. Did you use the update button? Seems like a trivial question but I have to ask.

zzbeasley
Jun 1
1:25 am

What happened in the subprime mortgage market seems to be repeating itself in parts of the cc industry: the card company makes a profit from overspending by folks who are then charged very high interest rates. This debt is then packaged for sale mixed in with 'good' debt with the idea that the taxpayer will eventually cover for the security holders. Hey what worked so well once should work again, right?