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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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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the only reason i check my score is to make sure the CCs I have did not screw up and report incorrect info.

I will keep paying off loans as fast as I can and ignore changes in scores due to short credit history. I could care less if I have a 750 (with an F in credit history) or an 800 (with a C).

The credit reporting agencies are doing what suits them best not whats best for the consumer.

I also dont deal with banks. I found credit unions to be a lo better to deal with. Stay away from the largest banks. The fees and the risks are much higher.

Credit Karma Team
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Thanks for posting! Credit unions are a great alternative to banks.

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Disclaimer:  The overall credit scoring-model sector is changing rapidly with all proprietary scoring agrengies, e.g. Equifax, TransUnion, FICO, etc. vying for new ways to SELL their new scoring algorityms.  I am just as likely to read the same information as any of you with newfound transparency.  This response is from educated speculation.  

That said, if your credit history/file is limited to a couple of "loan types" or open accounts in good standing, a loan payoff might hurt your score due to the limited loan types populated.  

I have paid several car loans and noticed a slight drop initially.  However, because I have an active credit file with mortgages, credit cards, and student loans, my score does not decrease anymore.  Also, I have opened and successfully paid several auto loans in my name.  That also might help my situation.  BRIGHT SIDE...you have no car note...for now!  :-)

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Thanks for posting! 

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I have 6 credit cards and i am willing to close the 2 out due to anuual fees and extremely HIGH APR....! But I am so afraid to do so because of it hurting my score. But i am positively sure that i do want to get rid of them! Having 6 in your wallet is sometimes a hassle on the due dates so I want to lessen that responsibility... Cause if it wasn't for the annual fees, i would sure just put them to sleep... Any advise on this...? Please feel free to help me out... 

Credit Karma Team
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Hi Magnum670, 

The impact on your score really depends on your credit profile. If you have many other postive, longstanding accounts the drop may not be substantial. It's important to weigh the annual fee vs. the benefits of having the card. 

1 Contribution
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Our mortgage was sold twice in one year. My history now shows 2 closed $100k accounts and a newly opened one for $93k. My credit score dropped 90 points, with no other changes...  This is ridiculous! I had no say in my mortgage being sold. I've never been late or missed a payment. Yet, I am being penalized. I was planning to sell this house and move to another state this summer but now I don't know if I can qualify for a decent mortgage anymore. 

Credit Karma Team
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Hi Chris42125,

You might want to contact your current mortgage holder or work with the credit bureau to see if the most recent account can be backdated to reflect the original opening date. 

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I have 3-4 old (6-7 years)closed loans on my report. None show pastdue. Will removing these from my bureau help or hurt my score

We answered this question on the Credit Karma Blog

Review by
CK Moderator

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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.

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Why would a credit simulator show an increase in my credit score if I'd closed my oldest c/c?

This is a loaded question without knowing your specific credit report. Here is one possible explanation: If you have a long credit history with multiple accounts about the same age and a high amount of available credit, the closed credit card account may have no impact while the reduction in your available credit could actually increase your score since too much available credit is also a risk for lenders. Does the hypothetical apply to you?

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CK Moderator

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I have been building my credit up, but is there no recourse for when Credit card companies lower your limits for bogus reasons? This is affecting my credit scores, and I have never paid late, and always maintain and pay big balances. Someone told me they had the same issues with different Banks as well, that Credit card companies are just finding anyway to lower anyones limits to lower their own liabilities right now. Is this the case?

Answer posted on Credit Card Q&A

Review by
CK Moderator

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I am an authorized user on my brother's account. I have it there to boost my credit score. it ws started in 1990, and there is a large credit limit(over $50,000.00) Recently, however, he has been paying small amounts, and now has a debt to limit ratio of over 50%. That is, the outstanding balance is over $25,000.00. His payments are always on time, and always more than the minimum. I am trying to determine whether I should be removed from the account because of the poor ratio. Bottom line, will this increase or decrease my three scores?

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I closed 4 credit card accounts I had opened to buy online things with to recieve a discount. Paid them in full and closed all 4 about 6 months later. My credit score DROPPED 45 points because of the activity!

Reply by
sublimeexemplar

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Yep, because you just drastically shortened the average age of your accounts by massively dilution.

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