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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I'm going to be a little blunt here regarding the large number of comments regarding decrease in credit score when an account is closes.  People, why do you care so much about the sharp fluctuation before and after an account is closed?  First and foremost, neither of us should be spending on our CC more than we make; whether you live on minimum wage or over 100K.  I can care less if my FICO drops and my APR shoots up to 100%.  Why?  Because I pay in full and laugh at the banks.  Yeah, but what about the big purchases!?  Well, you save for those purchases (car, furniture, education, etc.) and walk in the store confident that you can pay in cash.  Once a deal is sealed, then consider financing those big purchase depending on the return you could get in the market without exposing you to too much risk.   That way when your FICO score drops and the greedy banks raise up your APR, you're not caught off guard and be stuck with a higher interest rate for the rest of the loan. 

I love my credit cards, I truly do! I charge everything to them.  I wish I could put my rent and in a couple years my 15yr mortgage payments in those cards too - well, you can but transaction fee is too high.  The only reason I use my CCs is because of the cash back and rewards.  Why pay in cash for the same item when I can charge it to the card and get a weighted average cash back of 3%?  I don't know about you, but I think that's a lot more than what most FDIC Insured saving accounts are paying!  The return is probably a lot higher when you consider the sign up bonuses too, but I'll leave to someone else to calculate it.  I never charge - and neither should you - a dollar in a card unless there is an actual dollar in you bank.  Stop being impulsive, breath, and rethink before making the purchase.  The fluctuations will become second nature, and the only thing you will care about is whether or not someone else is using your information.  

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Scam them back is the best solution.  I have a 0% car loan and get over $2000 back a year from utilizing credit cards the way most people use debit via reward systems.  Viola, credit score over 820 and not paying a dime of interest.

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2489 Contributions
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Thanks for posting!

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very good article, any info into how the companies think is helpful.

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this article was very helpful and informative. how can i remove those negative marks on my credit report myself?

You can only remove negative marks that are inaccurate. If you believe that is this the case, then you should contact the bureaus directly:

Equifax, P.O. Box 740256, Atlanta, GA 30374, (800)-685-1111, Web site: www.equifax.com

Experian, PO Box 2002, Allen, TX 75013, (888) 397-3742, Web site: www.experian.com

TransUnion LLC, P.O. Box 2000, Chester, PA 19022, (800) 888-4213, Web site: www.transunion.com

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Reply by
omareduardo

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If they are not inaccurate, then you can simply keep going without missing any payments and keeping up with the 'good habits'.  They will stay on your record for about 7 years, at which time the account will go back to good standing unless you make another mistake.  At least that's what I've been read.

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Reply by
Ferdling

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How about innaccurate and illegal collections that have unknowing been there a while.  Will this cause the account to show improvment?

Reply by
d499968324

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Sue in small claims. The debt collector, if there was one, and the company that illegal tried to collect the funds. Show the damages of how they hurt your credit score. It will either win you money or get it removed promptly.

Reply by
jmberrett

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If you have stuff on your credit that isn't yours it could be a simiple mistake. Example, my husband had a home mortgage (he's never owned a home) and a bunch of college loans on his account. his cousins name is spelled the EXACT same other than middle name. My brothers ssn is 1 number off from mine and i got a bad report from his credit. If it isn't yours dispute it through the credit bureau. If they don't take care of it (which if it isn't yours they should)  then you should sue or whatever you feel is more accurate!

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Reply by
ktjojo74

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by law, FCRA (the Fair Credit Reporting Act) says that the bureaus cannot knowingly place inaccurate information on your reports.  Conversely, once made aware must remove the inaccurate info immediately. 

You will need to review each report and make a list of the inaccuracies.  Then write a letter to each of the 3 bureaus listing the inaccuracies on that specific report.  Ask them to remove them immediately.

If you are talking about accounts that do not belong to you, you need to file a dispute for each account. 

As for collection accounts,  they can only remain on your report for 7 years. Check the laws in your state to determine how long companies can collect on a contract.  For example in Arizona it is 6 years.  Once that 6 years has expired, the original company can no longer legally collect on an account.  There are several other pieces of info like make sure you dont make payment arrangments with them unless you pay off the account as this will restart the clock. 

I am a paralegal so I know how to research the law and this is what I have found useful to me to clean up the inaccuracies on my credit. 

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Reply by
ktjojo74

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whoah there with the lawsuit.  A demand letter works very well in this situation.  I had an account with negative history that was on my credit for 9 years. Shame on me for not being more vigilant but shame on the company and the credit bureaus as it is their duty to know and comply with the law. 

I first wrote to the bank and kindly asked them to remove the remark.  They ran me around.  At the same time I wrote a letter to the one credit bureau that this account appeared on.  They sent me back a denial stating FCRA law that countered the denial.  I copied and pasted the laws that Experian quoted in my demand letter. 

I sent a letter to both the bank and Experian demanding $1,000 per month that this account remained on my credit longer than the law allowed. This allowed me to demand that each entity pay me $25k or i would be forced to seek other remedies. 

Well, as you can probably guess, I did not receive any money but my goodness, the next time i pulled my experian report, that one account was gone.  Tah dah. 

now because I am a paralegal, I signed the demand letter as a paralegal. I can do that. It may have carried weight it may have not, I will never know. 

But my attorney advised me I was probably successful because I quoted the exact section of the law that both of the companies broke.  They knew they messed up and they knew that I knew what had to happen next in order to avoid a costly lawsuit.

I have had other positive experiences when using a demand letter as well. 

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Lumberlifter. Very good info. How do I see who is checking on my credit account?

Reply by
omareduardo

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You have the right to get a credit report from all three major credit bureaus once a year at annualcreditreport.com, check it out!  I would just get a report from each one of them every 4 months to keep monitoring.  

Reply by
erthnyc

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I do this every year religiously. Great recommendation!

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If you close an old account, your total available credit will decrease. That may mean your utilization % will increase and score will go down. On the other hand, if your total available credit is very high, that may make you more of a "risk" and decrease your score. Old accounts are really somethig you should not be worrying about that much, as long as you make sure to monitor them for potential identity theft.

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I have been paying my Timeshare account on-time every month since I was approved 3 years ago. The balance is about 80% of the loan. Will this be looked at negatively when I apply for home loan?

Accounts in good standing are normally a plus when it comes to your credit score. So the answer is no.

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I'm 24 and in order to help build credit have a few cards that are joint accounts with my mom. All but one of the accounts has a balance of $0 and haven't been used in a while. I keep them on there because they help my credit score. However, I just looked at one of my reports and found that one of the cards that I have is nearly maxed out by my mom. I very rarely use the card, mainly for Christmas flights home and car service, so the balance is not primarily mine but is severely affecting my score. Is there any way that I can take the card completely off of my account? And if I do, will there be serious repercussions on my score? The card was only added in my name in 2006, so it's not very old.I told my mom, but she didn't seem very concerned so I don't think she's going to try to pay it down too quickly at this point.

If it is on your credit report, it will affect your credit score. Aside from closing the account, there is no easy way to remove the trade line from your credit report. Even if you close the account, the balance will remain on your report until it is paid off. This is one of the hazards of allow others to use your credit.

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My score dropped 29 points when I applied for a new credit card with Citibank in order to obtain 25000 airline miles. The only other reason for the score to drop was a cancellation of a Visa card by Chase Bank because of non-use.

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I had a credit card through HSBC (Unionplus). I have very good credit and out of no where they closed my account due to "inactivity". How will this affect my FICO score. Anyone know?

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Reply by
ktjojo74

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It will affect  your credit for a couple of reasons.

1. depending on the age of the account, if it was one of your oldest accounts, this could hurt you quite a bit. I would ask to have it re-opened and then to keep it open just charge like one tank of gas each month and pay it off.

2, another reason it may hurt you is that it cut back your available credit.  For instance, if you had $4500 available when it was open and now you only have $3500, it will hurt your score a little.  The age of the account has more impact.

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