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Credit Score Changes: How Does Closing an Account Affect My Credit Score?

Written by Robin Holland on October 25, 2010 in Credit  |   10 comments

Credit Score Changes: How Does Closing an Account Affect My Credit Score? We get tons of questions from consumers about how their credit score has changed. People also want to know how to improve their credit score, and how their financial activity will affect it….

Cutting credit card and closing account affects credit scoreCredit Score Changes: How Does Closing an Account Affect My Credit Score?

We get tons of questions from consumers about how their credit score has changed. People also want to know how to improve their credit score, and how their financial activity will affect it. We’ve talked here before about what’s in a credit report, but I want to take a close look at how credit scores are calculated. One of the most common questions I see from people on Facebook and on this blog is “How will closing an account affect my credit score?”

Unfortunately, I can’t say that closing a certain account will decrease your score by X points, or that paying off your balance on another account will raise your score by Y points. The reason I can’t tell you exactly what will happen to your credit score is that everyone’s credit is different, and everyone’s financial situation is different. (And no one else can tell you this, either, so watch out for scammers!)

For example, take someone who has no debt, an excellent credit history, and a good mix of types of accounts. Closing one account is probably not going to affect that person too much.

When you’re thinking about closing an account, you want to evaluate your credit situation and the types of accounts you have open to make the least, or most positive, impact on your credit score.

  • What kind of accounts do you have? You want to maintain a healthy mix of accounts. How many open, revolving, or installment accounts do you have? If you have five revolving loans (most often credit cards), these are considered to be part of the same family. You can probably close one or two accounts within the same family without too much impact.
  • How long have your accounts been open? Credit accounts that have been open for a long period of time are scored more favorably than recently opened accounts. Showing a history of paying your debts on time reflects more positively than having lots of credit accounts. If you want to streamline your accounts and close one or two of your credit cards, make sure you hold on to the cards you’ve held the longest.

People open credit accounts for many reasons and decide to close them for lots of different reasons. There isn’t a magic formula to opening or closing accounts and improving your credit score, because each situation is different. But if you evaluate your credit needs thoughtfully, you can make better decisions about your credit accounts.

For example, when I moved from California to Atlanta, it was the perfect time for me to examine my credit and personal finances. I decided to close the retail cards, because I wouldn’t be shopping at those stores anymore, but I kept my mortgages open. I have a long history of paying my mortgages on time, and it would be foolish to remove that positively contributing account from my credit report.

Curious about how your credit score might change if you open or close an account? Check out the FICO Score Simulator.

10 comments

  1. Susan B. Volk from says:

    Thanks for this article! I was looking for the FICO Score Simulator the other day and became frustrated when I couldn’t find it until seeing that you linked to it!

    • EFX Finance Blog Editor, JF says:

      @Susan – Glad to have been of help. Thanks for reading, and we hope to see you back again soon.

  2. Pam H says:

    How is my credit score affected if a revolving/credit card account is closed due to inactivity but the reason is that the company closed? It is on the credit report as closed at grantor’s request but I had not used it for over two years before the company went out of business. Then evidently the company was under the Sears umbrella since that is now how it appears on my credit report.

  3. Josh S says:

    If you have a hign balance on a credit card and you are closing that account, your credit score will go up (e.g. $4,900 debt on a credit card with a limit of $5,000) – just make sure that account is not the olders you have on file.

    • EFX Moderator, EM says:

      Josh, thanks for posting. It’s hard to know precisely how a credit score will be affected by closing an account. Length of credit history is an important part of a credit report and closing an account will change that history. It’s most important to make sure that a debt is paid on time and in full. We have more information on how credit scores are calculated here: http://blog.equifax.com/credit/how-your-credit-score-is-calculated/. I hope that helps.

  4. terrance davis says:

    why is my credit score going down,while I am current on all of my bills?

  5. william s. says:

    A few years ago I consolidated all my revolving credit cards with a bank loan and paid it off in 4 years time. HOWEVER, the bank never advised me regarding closing those accounts and how it would impact my credit score. I unknowingly closed all the credit cards, believing it would be of value financially. My credit score went from over 800 to less than 600 in a very short time. Any comments on the bank who gave me the consolidation loan being so unhelpful and therefore ruining my credit score for years to come?
    I’m still upset about it as you can see. thanks.

  6. Gabriela E. says:

    I have a couple of cars that are older than 6 months but less that 1 year. I have not used them in a long while and I am considering closing them. How could that affect my credit score? (I do have older cards and those are the ones I use)

    • EFX Moderator, KB says:

      Gabriela E, that’s a great question. Closing one of your credit accounts could reflect negatively on your credit score because it will change your credit utilization. If you close an account, you may lower the combined credit limit on all of your accounts, making your debt-to-credit ratio appear higher.

      And while positive credit behavior—such as paying your bills on time—will reflect positively on your credit score, you don’t need to carry a balance on all of your accounts. Here is a link with more information: http://blog.equifax.com/credit/five-ways-you-could-damage-your-credit-score/

  7. Ken says:

    Dear commenters. It appears that the moderator is not much help as the link provided here takes you back to an FAQ response that pointed me here in the first place. If this comment does not get removed by the moderator, may I suggest that folks enter their experiences to help others as definitive answers seem to be as plentiful as snow in Florida.
    My experience has been to hold on to one card for as long as you can. This will establish your credit history, which is part of the score calculation. Then, if you have other cards, they only factor in as a much smaller percent in the overall calculation. Also the more cards you have with higher limits, this is a positive for your scores. This is from an observation where Transunion had fewer cards reporting to it than the other providers, (which I had to get corrected) and the score was lower by 10 points. So, if you want to get that 25k mile card and cancel it after less than a year consider this experience. Key is to have at least one long term card that was kept with 0 owing or min payment ALWAYS. Hope this gets posted.


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