The Do’s and Don’ts of Closing Old Accounts

The Do’s and Don’ts of Closing Old Accounts

Closing old and unused credit accounts on your credit reports can help you avoid unnecessary fees and guard against identity theft. However, 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:


  • Consider closing unused and idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity thieves. If you decide to close one or more accounts, consider closing the accounts with annual fees or the highest interest rates first.
  • Check your credit reports online to see the status of your accounts. Look out for late payments, high balances and signs of identity theft. Additionally, checking your credit report could save you time by providing you with contact information for each of your creditors.
  • Be aware that you can usually cancel accounts that have an active balance by asking your creditor to close the account to new charges and continuing to pay 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. However, watch out for additional fees.
  • Aim to keep four to six credit accounts open. This is generally recommended to 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. Think about reserving the other cards for emergencies only so that you are not tempted to overspend.
  • Remember to check your credit reports for updates and errors after you close your credit accounts. You should generally wait 30 to 60 days for the creditor and the credit reporting agencies to update your records. While the accounts and their payment histories may stay on your report for seven or more years, the status should be updated to reflect that they are closed.


  • Close the oldest account on your credit reports. This could cause your credit history to appear shorter, which may 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 creditor. Typically, you should receive an account closing confirmation letter in 10 days.
  • 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 could reduce the chance of attracting negative suspicion from potential creditors.
  • Over-consolidate balances onto one card. As a rule of thumb, if your credit balances rise to above 30 percent of your available limits, you may see a drop in your credit score.

If you have any more questions, head over to our forums, where you can ask other Credit Karma members about various financial topics. When you're ready to apply, find the best credit card for you.

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1 Contribution
1687 People Helped

Helpful to 1687 out of 1786 people

I paid off my car loan that I had with Wells Fargo. After that was paid off, the account was reported as closed. My credit score went from a 765 to 743 because of this. I do not think it is right that if you pay off a car loan that you should be penalized if that account is closed. It should be that you get better credit when you pay off a loan. I even paid the loan off early. One should be rewarded for dealing with credit appropriately.

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752 People Helped
Helpful to 752 out of 803 people

Similar thing happened to me. I paid off a loan for some furniture in Nov and a student loan in Dec. The furniture was one of those 0% deals for 18ths the student loan came out of deferment in Feb. For both loans I paid extra each month, paid every payment on time or early, paced it so that it took about a year to pay off each, and the account just automatically closed once they were paid in full. However, I checked my score today, to my surprise, it dropped! I have had no inquiries, no new accounts, no late payments, just a reduction in total debt, I'm listed as having great activity, and it shows the accounts closed themselves. This is the stupidest thing I have ever seen. Scores should increase by paying extra and early, as long as you keep activity, but the opposite seems true.

3 Contributions
739 People Helped

Helpful to 628 out of 652 people

Lowering a score when an account is automatically closed when the debt is paid for (i.e. mortgage, auto loan) is a freaking scam.  It's just another excuse that financial institutions can use to increase your APR's so they continue to get gobs of money for absolutely no reason at all. 

I shouldn't have to pay more for my next house because I just paid off my $300,000 mortgage in 10 years.  Obviously I was extremely responsible in making my payments, so I should not be penalized for being so responsible. 

Oh, and for those of you who want to argue and say that credit scores aren't meant for determining payment responsibility, I have a quote that came directly from my Trans Union credit report that was received from 

The quote says "The reason consumers with good FICO scores get better interest rates is because they pose less risk of missing payments or defaulting on a loan.".

Hmmmmmmmmmmmmmmmmmmmmmmmmmmm, I wonder how I pose a higher risk this month (after paying off my mortgage 20 years early) than I did last month?  Nothing else changed on my report, except my mortgage has been marked as $0 balance and closed.

This credit scoring system we have, my friends, is the largest scam in the history of mankind. 

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273 People Helped
Helpful to 273 out of 285 people

I just dropped 25 points for paying off my mortgage, and my length of credit history has a "D" rating because I closed several unused cards out of fear of identity theft.  I have paid off several home and equity loans over the years, and no credit is given for that!  I don't want to keep anything open that I'm not using because I don't want to be forced to keep monitoring for activity.  This is a total scam and it's disgusting that they penalize you for trying to be responsible.  The object here seems to be reward you for entering into debt, making them money on finance charges, and make you keep paying for identity theft services and copies of your own credit report.  

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1104 People Helped

Helpful to 1103 out of 1161 people

you have to remember, these systems are created by hand full of powerful financial institutions.  the more business you give them, the better is your credit score.  If you close you credit accounts, loan accounts, etc.  then you are debt free.  And you no longer need them.  They dont like this loss of business, and your score decreases.  The longer you are in debt, the more you need them, and the better business they get from you. And better credit scores.  These institutions never want to see you debt free .... remember !!

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239 People Helped
Helpful to 239 out of 270 people

wow you are so correct and that is valuable information.

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311 People Helped
Helpful to 241 out of 281 people

what a screwed up system!

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337 People Helped

Helpful to 337 out of 344 people

My score went from an 805 to 766 after paying off mortgage. It is very sad to know that in order to get a good score you have to have debt. Now I could care less about my score, I would rather be debt free.

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154 People Helped
Helpful to 153 out of 159 people

Its just unbelieveable that you get penalized for being a responsible person.

2 Contributions
205 People Helped

Helpful to 205 out of 221 people

I know all of the credit score formula rules and guidelines used are unfair when appling traditional and responsible financial behavior values. There in lies the problem.  These scoring rules do not look to achieve a score that reflects how "debt free' or "finacially prudunt" you are.  These rules are designed to identify and reward people that are "active" ongoing debtors and how reliable they are in this lifestyle.  A person that is always is debt and is very reliable at constantly paying on debt is the goal or the best debtor.  If you have no debt and have no visible track record of constantly paying on debt, you are an unknown and therefore a risk. For instance....if you have 4 credit cards at a contant 10% utilization balance, a 5 year car loan at 40% original balance, a personal loan at 20% balance, a mortgage and have never had a late payments you are a golden debtor.  On the other hand, if you have paid of you car loan, mortgage, personal loand and all credit matter how accelerated or honorable and prudent you were in achieving this are now a risk.  I do not know how you can handle debt right have no debt loan active NOW that I can analyze.  Credit scores are creared to reflect ACTIVE debtors debt to analyze means more risk....current debt behavior has more value than older  paid off historical debt.

If this is how the credit scoring world must be so be it.  The trully deplorable side of this is where credit scores and used.  YOur credit score affects not only your ability to aquire new debt, it affects you car insurance costs, your ability to get a job even you ability to get rental property....the list is endless if someone is willing to pay for a credit report on you.  As a result, if you are late on paying a department store credit card for the pair of Dockers pant you theory...and in could pay more for your car insurance or be viewed and a hiring risk!!!  This not only is terribly unfair and devasting to a persons life, it has a very negative impact on the economy overall.  Too many lates on a credit card and you can lock yourself into a downward financaial spiral you can never fight your way out of.  Late on credit payment...tehn can't get a job....don't have money....borrow more to survive.....can pay that gets worse.....then bankrupt....then you are in a terrible position ofr 10 ruined.

Think of it this way....if you were a great baseball player that has played for 10 years, was a starting player every game,  and was considered the best hitter in the game you would get the best contract and salary in the game.  If you were a player that played only 25% of the season, played great or fairly well but also sat out 75% of the time, you will NOT get the best contract.  It is all about risk and CONSTANT performance.  If you want a great credit score stay actively in debt AND behave flawlessly as a debtor.

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