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

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

Closing old and unused credit accounts can help you avoid unnecessary fees and guard against identity theft. However, it can also cause your credit score to drop if you aren't careful. Here are a few do's and don'ts for closing those dormant accounts:

Do...

  • Consider closing unused cards that are costing you money. If your card has an extraordinarily high interest rate or an abundance of fees, and your provider isn't willing to lower your rate or waive some fees, you may want to consider closing the card - especially if you don't use it.
  • Be aware that you can usually cancel accounts that have an active balance by asking your creditor to close the account to new charges while you continue 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 some 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.
  • Remember to check your credit reports for updates and errors after you close accounts. You should generally wait 30 to 60 days for the creditor and credit bureaus 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. 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. A good rule of thumb is to keep your credit balances under 30 percent of your available limits if possible.

If you have any more questions, head over to our Community, where you can ask other Credit Karma members about various financial topics.

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All Comments

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1 Contribution
0 People Helped

I'm a little confused on what qualifies as a credit account. I have one car loan, one debit card, 2 credit cards. I assume this is only 2 credit accounts (the cards). I pay both in full, rarely more than 20% of my available credit is used. So would my score be lower because of fewer accounts?

2 Contributions
0 People Helped

I recently closed 2 cc's after they raised rates had both cards for years was never late and paid more than minimum payments. I'm now paying a fee for closing those cards. How do I negotiate with them when they are just down right rude over the phone.

What do you mean you are paying a fee to close the accounts?

Review by
CK Moderator

3 Contributions
1 Person Helped

Good article, it did clarify some things for me. Now I have silly question. Are you reporting anywhere that I asked you what my credit score is? Is this going to hurt my credit score?

Using Credit Karma or checking your own score for your own use does not lower your score.

Review by
CK Moderator

1 Contribution
0 People Helped

My bank recently raised the interest rate on my CC. I think this is unfair, as I have always maintained a low balance on the card, always made more then the minimum payment on the card and I recently paid the entire balance off. What gives them the right to increase my interest rate? Suffice it to say I no longer plan to use this card in future. Sadly, I cannot close this account as it is my oldest card. And I do have a relatively short credit history just 5 years.

1 Contribution
0 People Helped

Clark Howard from the Clark Howard show always says not to close your unused credit card for 2 years. If before it will affect your score. If you are paying a fee close it as soon as you can or just before they charge you a fee if you can afford the hit on your score.

1 Contribution
0 People Helped

EASY TO USE

2 Contributions
0 People Helped

how often does this site update ? my score has been the same for a while can i ask why ?

It updates every time you request an update. Did you use the update button? Seems like a trivial question but I have to ask.

Review by
CK Moderator

1 Contribution
0 People Helped

What happened in the subprime mortgage market seems to be repeating itself in parts of the cc industry: the card company makes a profit from overspending by folks who are then charged very high interest rates. This debt is then packaged for sale mixed in with 'good' debt with the idea that the taxpayer will eventually cover for the security holders. Hey what worked so well once should work again, right?

1 Contribution
0 People Helped

Why would a credit simulator show an increase in my credit score if I'd closed my oldest c/c?

This is a loaded question without knowing your specific credit report. Here is one possible explanation: If you have a long credit history with multiple accounts about the same age and a high amount of available credit, the closed credit card account may have no impact while the reduction in your available credit could actually increase your score since too much available credit is also a risk for lenders. Does the hypothetical apply to you?

Review by
CK Moderator

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0 People Helped

I have been building my credit up, but is there no recourse for when Credit card companies lower your limits for bogus reasons? This is affecting my credit scores, and I have never paid late, and always maintain and pay big balances. Someone told me they had the same issues with different Banks as well, that Credit card companies are just finding anyway to lower anyones limits to lower their own liabilities right now. Is this the case?

Answer posted on Credit Card Q&A

Review by
CK Moderator

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