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:

Do...

  • 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.


Don't...

  • 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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All Comments

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1 Contribution
61 People Helped

Helpful to 61 out of 69 people

I AM NOT MY CREDIT SCORE!

1 Contribution
73 People Helped

Helpful to 73 out of 79 people

I paid off my motorcycle loan a couple of months ago. Once it was reported, my score went down 4 points.! *******s! I worked hard to pay off that loan early, just to be punished?
On a good note, I did save myself tons on interest. But it does suck..!!

Reply by
URTHEBEST

2 Contributions
312 People Helped
Helpful to 70 out of 74 people

I have paid off 1 credit card and 1 loan and my credit score keeps going down.  I did so my credit score would go up and I could get pre approved to buy a house.  Now I am screwed with a fair credit score.  What the heck!!!  So wrong to do this to a person!!  I think the system sucks!!!

Reply by
bigoreo31

5 Contributions
33 People Helped
Helpful to 33 out of 35 people

Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

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