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The Do’s and Don’ts of Closing Old Accounts
September 25, 2008
260 comments | Comment on this Article
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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My one credit is closed by there company because of too much over limit.If I pay down the debt of that closed account,my credit score is up or same score?
bsk53 1 year ago
I had a credit card through HSBC (Unionplus). I have very good credit and out of no where they closed my account due to "inactivity". How will this affect my FICO score. Anyone know?
Reenie 1 year ago
My score dropped 29 points when I applied for a new credit card with Citibank in order to obtain 25000 airline miles. The only other reason for the score to drop was a cancellation of a Visa card by Chase Bank because of non-use.
vitatow 1 year ago
I'm near to paying off a line of credit from Beneficial Finance. I'm considering closing it at that time but I'm not sure how it will impact my score due to UCC. I hear that Finance Company accounts lower one's score. Also, you mention too much 'available credit' will lower the score. Are there any standards for how much available credit a person should have?
allim4u 1 year ago
Over the years I have obtained a large number of credit cards - always after a better deal. I can't use them all because my wife refuses to write all the checks for the payments. We have always paid all balances on time - no late penalties, no interest payments,etc. I would like to close some of the dormant accounts (one company did close one on me - a card we never applied for), but know that my credit score will decrease if I do so. I am caught in a Catch-22. Can someone explain why a credit score would decrease with cancelling an account when there is a perfect payment history??
drfjones 1 year ago
i have one card that just raised my apr to 23% from 10% when i paid 1 time late. what should i do to get that cc lowing the apr down or should i close that card?
tamhiept 1 year ago
My score dropped 80 points within a month because I closed 2 card accounts that I no longer used and was paying a monthly fee on. It was so frustrating! Now we are looking to buy a new car and having a tough time getting a decent interest rate even though my score is 675. I thought that was high enough for a relatively good interest rate, but apparently its not. All because I closed old card accounts. If only I could do it all over...
stepho13 1 year ago
Thats the same thing im going through!
turbosb2 11 months ago
I have a good credit score and strong payment history, however my bank credit card changed the cards rate to a variable from fixed and raised the interest from 7.99% to 13.4% I have never been late, over limit, etc. There is a balance on it and wonder what is my best course of action in closing this account.
icepk5 1 year ago
My credit card company recently nearly doubled the interest rate on the only credit card I have. Throughout the years they have consistently raised my credit limit to where it is now, more than my annual income. I pay off my balance almost every month to avoid interest charges, but would like to get another card with a lower interest rate and keep the old one for emergencies. Before I do, I would like to lower the credit limit on the old card. How would this effect my credit score and chances of getting an additional card. My score is presently 763.
jsandala 1 year ago
With that score, getting a new card shouldn't be a problem.
If the interest rate is the primary concern, call your existing issuer and request that they lower it. You would be surprised at how successful this can be for people with good credit. If that doesn't work, apply for another card first then you can call the existing company and request a lower credit limit keeping in mind total available credit does impact your credit score.
CK Moderator
my credit score is 603. if i open a new credit account, would it hurt my credit score?
jagne 1 year ago
Opening any new credit line will impact your score short term since there is a credit inquiry. Try our credit simulator if you want to better gauge the impact.
CK Moderator