The Do’s and Don’ts of Closing Old Accounts

The Do’s and Don’ts of Closing Old Accounts

Advertiser Disclosure

We generally make money when you get a product (like a credit card or loan) through our platform, but we don’t let that cloud our editorial opinions. Learn more about how we keep this compensation from affecting our editorial views.

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.

Editorial Note: We're here to provide tools and educational materials to help you take control of your credit. Even though compensation may affect which companies we write about and products we review, our marketing partners do not review, approve or endorse our editorial content. In other words, the opinions you read here are our own.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

 

Did we get something wrong? Our editorial team loves research, so the information on our platform is fact-checked and accurate (to the best of our knowledge) when we initially post it. We do our best to keep the content up to date. We may not catch everything, though, so we don't make any guarantees about the accuracy or completeness of the information provided. If we did miss something, let us know by emailing us at corrections@creditkarma.com. To get complete details about a product, we suggest visiting the company's website.

All Comments

Results 251-260 of 665Results per page: 5 | 10 | 25Page 26 of 67   Previous | Next
1 Contribution
0 People Helped

I agree with gwenaellp. I've had 6 unused credit cards with no balances for many years. I have always been told not to cancel them because it would reduce my credit score. It doesn't seem safe for me to leave open accounts that I may never use just to keep my score up. I feel like I need to constantly keep track of the activity for those accounts.

Reply by
buzz53

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

Why not close one and see what happens. If your score goes up I would wait 6 months or more & then close one more & see what happens. They say to close the one with the highest interest rate... I agree. Plus if you call to tell them you are closing the acct due to the high interest rate, they might even reduce it for you.

1 Contribution
0 People Helped

I have excellent credit but I just had an unused Discover card closed by the company because of non-use(19 months). I also had a credit card app. refused because I have enough credit allready avaiable. Does this hurt scores? Thanks.

1 Contribution
0 People Helped

Why is it that any simulated action I take cannot raise my score over 769 maximum? I pay all of my cards off entirely every month. My Mortgage accounts are amortizing and paid with auto withdrawals. why can't my score be raised?

Answered at :http://blog.creditkarma.com/credit-karma/credit-advice-qa/

We posted the answer on our blog.
Blog Q&A

Review by
CK Moderator

1 Contribution
0 People Helped

Very good info, took care of a lot of rumors and bad information I have received by others. Thank you!

Stringbean

1 Contribution
0 People Helped

HOW CAN I SEE ALL 3 REPORTS?

1 Contribution
0 People Helped

Is a 514 credit score a bad one? Will I have trouble buying a car or home?

2 Contributions
0 People Helped

My sons applied for a loan on his own house which had no balance on it, He had a score over 700 almost 800 and he had to pay a higher interest rate because they said his score was not high enough and he had 3 credit cards that were very clean in other word, no late, no past due,no bad credit of any kind.  I don't know if that will tell you anything or not.  Anyway, the best thing you can do is get approved on a house before you even start looking and that will tell you how much you can borrow and what kind of interest raate you can expect.   Good luck. What do you do with perfect credit and the bureaus just wipe you out?

1 Contribution
0 People Helped

I LIKE IT ITS VERY FAST AND I GOING TO RECOMMEND TO MY CHILDRENS AND ALL MY FRIENDS. I THANK YOU CREDIT KARMA FOR THIS OPPORTUNITY.

2 Contributions
0 People Helped

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

Reply by
omareduardo

3 Contributions
2 People Helped

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

1 Contribution
0 People Helped

I do this every year religiously. Great recommendation!

1 Contribution
0 People Helped

To everyone who's complaining that it's unfair that your credit score can drop if you pay off accounts early: it's not unfair and it doesn't have anything to with whether you "should" be penalized.  Your credit score measures how profitable it is to loan you money.  Yes, how responsible you are and how likely you are to pay the money back is one component of that -- but it's not the only component.  The lender makes less of a profit if you pay off the loan early.  Your credit score is just indicating how good of an investment it is to loan to you, and will reflect that you're a good investment because you'll probably pay back the loan, but not a great investment because you'll pay it back early and the lender will make less of a profit.  If you don't like this, then save up before you buy things.  If you want to buy things before you can afford them, then someone will expect to make a profit from loaning you money.  If you decrease that profit, you are not as good of an investment.

5 Contributions
1 Person Helped

I am regullary pushinished for living without a credit card and paying off loans.  My interest rates are rediclously high.  I was denied a mortgage because I have no credit card.  Big business sticks it to the little guy who trys to live within their means.

Results 251-260 of 665Results per page: 5 | 10 | 25Page 26 of 67   Previous | Next

Comment on this Article

Write your comment:
Enter Your Comments