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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)

lbuxbaumjr
Oct 30
9:29 pm

I agree with gwenaellp. I've had 6 unused credit cards with no balances for many years. I have always been told not to cancel them because it would reduce my credit score. It doesn't seem safe for me to leave open accounts that I may never use just to keep my score up. I feel like I need to constantly keep track of the activity for those accounts.

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ravens
Oct 17
8:22 pm

I LIKE IT ITS VERY FAST AND I GOING TO RECOMMEND TO MY CHILDRENS AND ALL MY FRIENDS. I THANK YOU CREDIT KARMA FOR THIS OPPORTUNITY.

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lumberlifter
Oct 16
4:21 pm

Lumberlifter. Very good info. How do I see who is checking on my credit account?

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coolraz
Oct 12
9:52 am

If you close an old account, your total available credit will decrease. That may mean your utilization % will increase and score will go down. On the other hand, if your total available credit is very high, that may make you more of a "risk" and decrease your score. Old accounts are really somethig you should not be worrying about that much, as long as you make sure to monitor them for potential identity theft.

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arqureshi
Oct 9
2:51 pm

quite helpful. thanks.

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scarfina43
Oct 9
2:21 am

this article was very helpful and informative. how can i remove those negative marks on my credit report myself?

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CK Moderator

You can only remove negative marks that are inaccurate. If you believe that is this the case, then you should contact the bureaus directly:

Equifax, P.O. Box 740256, Atlanta, GA 30374, (800)-685-1111, Web site: www.equifax.com

Experian, PO Box 2002, Allen, TX 75013, (888) 397-3742, Web site: www.experian.com

TransUnion LLC, P.O. Box 2000, Chester, PA 19022, (800) 888-4213, Web site: www.transunion.com

gwenaellp
Oct 8
5:17 pm

the problem is that closing an old account should not reduce a credit score, i don't see the logic to it.

credit history should show accounts even close ones that have been opened since people have their first credit card.

It unfortunatly another way credit card have found to keep their customers by scaring them.

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lawdog46
Oct 8
3:23 pm

very good article, any info into how the companies think is helpful.

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tlmilkman58
Oct 6
6:59 pm

Important information. I would be tempted to close out old credit cards that aren't needed.

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athalonius
Oct 6
1:46 pm

Good article, I am always curious how the agencies calculate credit worthiness, so anytime you can get some insight on how to build credit or keep it from going down, then I am glad to read it.

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