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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2 Contributions
0 People Helped

 An interesting thing that I found out recently while checking my credit reports was that not all credit card limits are counted towards my total. I wanted to cancel my Chase card as it was coming to the end of a fee free offer and I don't want to pay a fee next year. In my credit reports I noticed that the credit limit for that card was not included as well as a BoA card that I have. I don't know why this is the case but it is something to watch out for.

It seems that my credit score (according to Credit Karma) has not been reduced since I canceled this card. I would suggest that it is well worth checking the free credit reports every year. The whole credit score thing is just a big game and you need to play it very smart to come out on top. Incidentally my Credit Karma score was very close to my median score when I applied for mortgage financing a few months ago.

1 Contribution
0 People Helped

 I do not understand the logic of the accounts:  No. of total accounts for me was 26 but 18 were paid off through the years and 8 are open. Cr. score dropped 100 points since I last checked. My DTI ratio is 12% and I am an excellent credit risk but it says only "fair".  I have 100%  payments made on time also.  You get out of debt and you are penalized!   Absurd!  We get cc offers in the mail constantly???

1 Contribution
0 People Helped

ithank you for your insight. i have always worked hard to take pride in my credit. but, the banks have gotten very hard to get loans from. ifound it much easier to get money from a credit card. i always had great intrest. rateslast loan  i had taken out was at an 8 percent rate,which i am not happy with. they donot consider rental property for any kind of colatteral. also when i have dental work i finance it through a credit agency that has high rates& that comes up negative. 

1 Contribution
0 People Helped

 what if you filed chapter 13 and divorced

 ,the accounts were to be closed and they are still there. they were joint accounts,this has been 8 yrs now, will it 10 yrs or more before they close they was on his ss# i was added when we was married

1 Contribution
0 People Helped

I see tons of comments about your score potentially going DOWN if you close "old" accounts but none on closing "new" accounts. I'm 9 points away from having "excellent" credit and the reason is that I scored a "D" in the average length of time I've had my accounts open. I have old accounts in excellent standing. But I recently was talked into opening new ones because they gave me a percentage off my purchase by opening a new card. Should I close these new accounts (I don't need them). Will this help my credit score go up?

1 Contribution
0 People Helped

ITS JUST RIDICULOUS THAT WE LIVE IN A SYSTEM THAT WANTS YOU TO CONTINUE DEBT TO BETTER YOUR OPPROTUNITY TO GAIN MORE DEBT.

1 Contribution
0 People Helped

I think there is somebody using a card that has my name on it, but I don't know how to check. A long time ago my ex gave me a credit card, even had my name on it. I never used it, but I think my ex step son is using it...there are accounts on my credit repoer that I beleive are not mine. What can I do to get to the bottom of this?

1 Contribution
0 People Helped

I want to close my bank account and start using a credit union. will it hurt my credit score?

1 Contribution
0 People Helped

I really do not see why people are all bend out of shape about credit.  Though I use credit, I have more than enough in my portfolio not to even use them, not even for purchasing a car.  Also, If I choose to, I have enough to purchase a house with out credit.  No, I did not inherit any funds, rather I live well below my means and save between 72 - 88% of my annual salary.  Right now, all I need is a place to live and food in my stomach.   If a credit card lowers my credit (like Atira did when they brought the accounts from my bank and had enough nerve to increase my APR from 13% to 21% and reduce my limit from 7,500 to 2,200), I just cancel them after I apply for another credit card with the same previous limit at my bokerage firm.  I only use one credit card at any given time.

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