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

I have a question that hasn't really been addressed that I could find. In the past couple years, I've opened a few same as cash accounts. They were all paid on time with no interest paid (yay!). However, since they're opened and paid off within a short amount of time would it be helpful to just close them immediately after the final payment? I just want to raise my average age of accounts since credit limits are not a problem.

1 Contribution
0 People Helped

How long does it take for a credit inquiry to get removed from your account?

Credit inquires are usually tracked for 2 years.

Review by
CK Moderator

1 Contribution
0 People Helped

Looking over my credit report, I have a few open accounts from way back in the day that I no longer have anything to do with. I have an HSBC account opened back in 2000. This was for a ring I bought for a gfriend. I don't think it was a credit card, but a loan specific for the ring. It says its still open, but with 0 owed, all in good standing. I also have a BofA account opened in 1998. This was my first car. It's all paid off, account in good standing.

Both of these accounts are some of my earliest loans, so they definitely extend my credit history. Should I leave these as "opened" since they don't seem to be hurting, and actually seem to be helping my credit history?

If you don't have a fee associated with the account, you should leave old accounts open.

Review by
CK Moderator

2 Contributions
0 People Helped

I have an excellent credit score. I have too many cards and one from b of a I dislike their company. I have a 30,000 limit. I'd like to dump B of A and move the credit to another card. Difficult I find. Or maybe just let this credit go. I understand credit karma has a way of doing senerios that show how it would effect my credit score. How do I find this on credit karma. Thank you for being smart and not a rip off. I appreciate it.

Ron

1 Contribution
0 People Helped

There 30 total credit card accounts included in your report but do not know who they are or the benefit of eliminating them. About half are active.

1 Contribution
0 People Helped

How long does it take for your credit score to rebound if you close a credit card that is less than one year old and now charges a fee? Right now I have a score of 805. I will be buying a house in the next year and don't know whether to keep the card (even with a zero balance) and just close it. I'm afraid it will affect my changes of getting a good mortgage rate? If I close it now, will my score have time to rebound if I apply for a mortgage in 6-9 months?? Thanks for the article!

1 Contribution
0 People Helped

Hi . . . my credit report card reflects "A" across the board except in the number of accouts ("D" here). . . I have 6 open and 11 closed accounts. Please explain the steps for me to get some of these accounts off my history because some of the accounts are old - which I understand I may want to keep - and are with creditors that I don't do business with any longer. . . . thx,

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

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

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.

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