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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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

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.

1 Contribution
0 People Helped

EASY TO USE

1 Contribution
0 People Helped

What happened in the subprime mortgage market seems to be repeating itself in parts of the cc industry: the card company makes a profit from overspending by folks who are then charged very high interest rates. This debt is then packaged for sale mixed in with 'good' debt with the idea that the taxpayer will eventually cover for the security holders. Hey what worked so well once should work again, right?

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

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

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0 People Helped

Would it be wise to take out a loan to consolidate an old loan and payoff 2 line of credit cards. How would this affect my score.

2 Contributions
0 People Helped

I applied for the Pulaski Bank card @ 6.5%. They are advertised in our newspaper every week as the lowest rate card available. I use only one card for everything and have been quite happy with my FIA card but they are going from 7.9% to almost 14%. I plan to cancel that card.

Thanks

1 Contribution
0 People Helped

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.

Review by
CK Moderator

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