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. Close the accounts with annual fees and 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 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. However, 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.
  • 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.
  • Over-consolidate 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.
  • 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."


All Comments
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Sorry to have to enlighten you, but some of us are living off of those credit cards. It's not that we no longer care about our scores, but we have to eat, have to have a roof, take care of our families, so consider that right now is not a good time to worry about credit scores. Why not just be thoughtful and help somebody out, that way, credit card usage may or may not be lesser. Just saying.

Comment by
bunstero

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6 People Helped

i don't know what happen i had a car loan. I just pay it off and now they closed the accound and the accound still have a balance on it. I don't knowehat should I do

Comment by
nehemjazz

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 should you pay off old collection accounts?

Comment by
andora56

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Helpful to 1 out of 1 people

Yes...unless they are about to "fall" off your credit report.  If they are a year or two, and you have the money, yes.  It will not make your credit that much better if you have more than one.  You are seen as risky to lenders and the collections are equivalent to mini-bankruptcies when sacking the score.  Curious.  What is your score, and how much did it drop?

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Reply by
bpround

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I find it interesting that having built my Vantage score to 990 using this site to pay off credit cards, that in recently refinancing my home 1st and 2nd loans, that over the last month my Vantage score dropped 75 points, as my 1st loan was paid off and they have not reported my replacement loan. So according to the scoring agencies, my Vantage score is better when I owe $460K than when I reportedly owe $60K. The great thing about this site is that you can see and track the approximate scores to improve your score and to know when the best time is to say apply for a car loan. You also see how credit is really about them and not so much about you. Most would think that my risk would be higher (reflected in a lower credit score) when I owe more, not when I owe less.

Comment by
Allerton69

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MOST PEOPLE DONT HAVE ENOUGHT CASH.NOT EVERYBODY IS BORN WITH A SILVER SPOON

Comment by
skippydog17

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I personally know that closing old accounts hurts you.  My score dropped dramtically  when i closed paid off accounts. I didn't realize at the time, that as i closed my accounts, i erased my credit history, card by card. I could not understand why i was not getting approved for a car loan.  i learned the hard way.   

Comment by
mdiaz09

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I have 20 personal lines of credit, the oldest from 1999 with 5 business lines.  While I diluted my account age a great deal with my rash openings last year and this year for rewards, business, etc.;  that one account from the 90's shows how early and long I have maintained myself and solvency.  

With anyone reading and analyzing your credit for loans or employment, it is best to allow for them to see that you have held that "credit job" for a long time.

Esentially, your credit report is a résumé for credit bureus to assign a score to digest the instrument and algorithms used to create the numeric score.

SO!  If you open an account, USE IT!  PAY IN FULL!

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Reply by
bpround

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Hmmm cash versus credit...my momma always taught me if you want something save up until you CAN buy it.  Also, if you have to ask how much it costs, then you can't afford it..loan/credit or not!

Next comment is on unused credit card accounts.  I have one now, from a dept. store, and when I first took it out, I made one purchase, never bought anything with it again (yes I was trying to establish credit in MY name rather than my husbands).  A few years ago I did try to use it but the dept. store had cancelled it as I had not used it in so many years..and they didn't tell me they'd cancelled.  I went ahead and took out another one, and I'm sure it is cancelled now also.  So, you might want to check into those unused accounts to see if they are still truly active?  Just a thought

Comment by
ouizee

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This is a good tip. When a credit card goes unused/inactive for a long period of time, some credit card issuers will cancel the card, or at least stop reporting the card's information to the credit bureaus (which means it won't be helping you build credit). Thanks for sharing your experience!

Review by
CK Moderator

I closed a loan,,,,geee It seems as if this is being reported to credit karma as a bad thing or they seem to read that from transunion. .... 

Comment by
007taz

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 if i  apply for new credict card  is that going lower my credict score?

Comment by
maestra123

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Just like any other credit line application, you'll get hit with a hard inquiry that will drop your score by a few points. To see how a new credit card might affect your credit, use our Credit Simulator.

Review by
CK Moderator

I have 2 credit cards that are almost maxed out. Is it a good idea to tranfer these balances to a new card with a higher limit and free up these cards? WIll it hurt or help my credit?

Comment by
dreamgirl21

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Maybe, but there are other factors to consider. You could go with a balance transfer card, if you qualify. Most give you 0% or very low interest for an introductory period. But you'll want to pay off the entire balance in the introductory period. The new account will possibly help your credit score, but if you start racking up debt on it, you'll be back where you started. I'd suggest getting advice from our community in the Credit Advice Center.

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CK Moderator

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