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

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.

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
0 People Helped

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 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
0 People Helped

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??

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

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

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,

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

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

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