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.
  •  

    Canceling credit accounts that still have a balance can come back and haunt you later. [Tweet this]

     
  • 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

If I closed my college credit card thinking it was better to tie up loose ends, is it possible to open it back up? I wouldn't want the card, (the terms are terrible) but should I want the history? I have 2 cards with much better terms now.

You could always call up the issuer and ask. Make sure they understand you want to re-open an existing card and not apply for a new one.

Review by
CK Moderator

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if you pay off a collection account does your credit score increase? if so, by how much?

Top Contributor

Reply by
ktjojo74

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Helpful to 1 out of 1 people

when you pay off a collection accont, and you know your check has cleared the bank , write a letter to the collection company and ask for 2 things. 1. to have the account information removed completely from all 3 of your credit bureaus immediately.  and 2. to have them send you a letter of satisfaction.  This second part is a safeguard for you.  Collection companies are pretty good about removing paid accounts. If they neglect to do so, you can collect your proof of payment, and write a letter to the 3 bureaus asking them to remove it. 

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i have one card that just raised my apr to 23% from 10% when i paid 1 time late. what should i do to get that cc lowing the apr down or should i close that card?

Top Contributor

Reply by
ktjojo74

66 Contributions
133 People Helped

This is called a penalty APR. Call the company and ask them if they can lower it immediately. Also ask to have the late fee waived. 

If they cannot/will not lower rate now, ask them when it will go back down. If the answer is reasonable, then make it happen.  If it seems unreasonable like more than 1 year, then consider paying off the card and moving on. 

1 Contribution
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Over the years I have obtained a large number of credit cards - always after a better deal. I can't use them all because my wife refuses to write all the checks for the payments. We have always paid all balances on time - no late penalties, no interest payments,etc. I would like to close some of the dormant accounts (one company did close one on me - a card we never applied for), but know that my credit score will decrease if I do so. I am caught in a Catch-22. Can someone explain why a credit score would decrease with cancelling an account when there is a perfect payment history??

1 Contribution
0 People Helped

I'm near to paying off a line of credit from Beneficial Finance. I'm considering closing it at that time but I'm not sure how it will impact my score due to UCC. I hear that Finance Company accounts lower one's score. Also, you mention too much 'available credit' will lower the score. Are there any standards for how much available credit a person should have?

1 Contribution
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My score dropped 80 points within a month because I closed 2 card accounts that I no longer used and was paying a monthly fee on. It was so frustrating! Now we are looking to buy a new car and having a tough time getting a decent interest rate even though my score is 675. I thought that was high enough for a relatively good interest rate, but apparently its not. All because I closed old card accounts. If only I could do it all over...

Reply by
turbosb2

6 Contributions
1 Person Helped

Thats the same thing im going through!

1 Contribution
0 People Helped

I have a good credit score and strong payment history, however my bank credit card changed the cards rate to a variable from fixed and raised the interest from 7.99% to 13.4% I have never been late, over limit, etc. There is a balance on it and wonder what is my best course of action in closing this account.

Top Contributor

Reply by
ktjojo74

66 Contributions
133 People Helped
Helpful to 1 out of 1 people

Call them and ask themy some questions

1. why was it increased

2. can they fix it now

3. why not

4. when will it go back down

5. what can i do to expedite this

remind them what a good customer you are and see if there is anything you can do to lower rate.

1 Contribution
0 People Helped

One of my credit card was closed by the lender because of non-use. How did this action affect my credit score?

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my credit score is 603. if i open a new credit account, would it hurt my credit score?

Opening any new credit line will impact your score short term since there is a credit inquiry. Try our credit simulator if you want to better gauge the impact.

Review by
CK Moderator

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My credit card company recently nearly doubled the interest rate on the only credit card I have. Throughout the years they have consistently raised my credit limit to where it is now, more than my annual income. I pay off my balance almost every month to avoid interest charges, but would like to get another card with a lower interest rate and keep the old one for emergencies. Before I do, I would like to lower the credit limit on the old card. How would this effect my credit score and chances of getting an additional card. My score is presently 763.

With that score, getting a new card shouldn't be a problem.

If the interest rate is the primary concern, call your existing issuer and request that they lower it. You would be surprised at how successful this can be for people with good credit. If that doesn't work, apply for another card first then you can call the existing company and request a lower credit limit keeping in mind total available credit does impact your credit score.

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CK Moderator

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