Closing Old Credit Card Accounts Won’t Boost Your Score—But This Will

Though closing a credit card might seem like a savvy move, it can actually hurt your credit score in several ways, like increasing your credit utilization. 

If you’re looking for a quick and easy credit score boost, consider a credit limit increase instead of closing a credit card. Credit limit increases are simple to request, they give you more spending power, and depending on your spending habits, you can typically see a nice increase in your credit score.

Key Takeaways

• Closing a credit card can damage your credit score by causing your credit utilization rate to surge.
• It could also hurt your credit mix and eventually reduce your average age of accounts, which both negatively affect your credit scores.
• A credit limit increase can improve your credit score by reducing your credit utilization.
• If you close a credit card, consider asking for a limit increase on another card to offset changes in your available credit.

If you no longer need a credit card that has an annual fee or other features that are costly or burdensome, we recommend closing it. Otherwise, it’s generally a good idea to keep it open.

How Closing a Credit Card Affects Your Credit Score

Closing a credit card account can slash your overall available credit, lower your average age of accounts, and thin out your credit mix. All three of these things can harm your credit scores.

Credit Utilization Ratio

Credit utilization refers to how much of your total available credit you’re using on revolving accounts (like credit cards and lines of credit), and it’s a big factor in most credit scoring formulas. If you use $500 of a total credit limit of $1,000, for example, your utilization rate is 50%.

The lower your credit utilization, the better it is for your credit score. As a result, closing a card (and therefore losing some of your available credit) can cause your scores to drop. And that drop may be significant, depending on that card’s credit limit and how much you spend.

Average Age of Accounts

Credit scores also take the average age of your credit accounts into consideration (along with other age details). It’s a somewhat minor scoring factor, but older is better.

Removing a credit card account from this equation, particularly one you’ve had open for a while, can hurt this average. Fortunately, you shouldn’t feel the sting for a while. Accounts in good standing remain on your credit reports for 10 years after being closed.

Credit Mix

Credit mix refers to the diversity of credit accounts open in your name. Most scoring formulas like to see you successfully manage both revolving accounts and installment accounts (like auto loans and student loans).

If you close a credit card and don’t have any other revolving accounts open, it might ding your credit score. The impact shouldn’t hurt too badly, though. This is another relatively minor scoring factor.

A Credit Limit Increase Can Boost Your Credit Score

Looking for a quick way to boost your credit scores? Closing a credit card is unlikely to help. Instead, requesting a credit limit increase could do the trick. All things being equal, more available credit should reduce your credit utilization rate and may improve your credit score.

If you’d like to close a card, maybe because of an annual fee, it might be worth requesting an increase on another card you’re keeping open. That way, your available credit won’t take as large a hit.

You can often request a credit limit increase via the card issuer’s mobile app or online portal. Or, call the number on the back of your credit card to speak to a rep directly. There’s no guarantee you’ll get an increase, but if you’ve been a reliable cardholder and your finances are in good shape, it’s a possibility.

Be aware that credit limit increase requests often result in hard inquiries because you’re asking for more credit—these can have a minor negative impact on your score. This shouldn’t be a problem compared to the boost you can get from a limit increase, but if you don’t get the increase, you’re just left with the inquiry. If you have quite a few credit cards to request increases for, spacing them out a bit could be helpful for your odds of success and your credit.

Use Credit Cards Responsibly to Maintain Great Credit

If you’re going to use credit cards, using them responsibly is key to good credit health. Avoid carrying month-to-month balances, always pay on time, and evaluate the situation thoroughly before closing an account

New to credit or still polishing your cardholder knowledge? Brush up on credit card fundamentals before you swipe.