How Closing a Credit Card Account May Impact Credit Scores

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Highlights:

  • Closing a credit card could change your debt to credit utilization ratio, which may impact credit scores

  • Closing a credit card account you’ve had for a long time may impact the length of your credit history

  • Paid-off credit cards that aren’t used for a certain period of time may be closed by the lender

You’ve paid off your credit card, and you’re wondering if you should close the account - and whether that might impact your credit scores, for better or worse. The answer depends on your unique credit situation.  

Before you close a credit card account, consider the following:

  • Closing a credit card could lower the amount of overall credit you have versus the amount of credit you're using (your debt to credit utilization ratio), which could impact your credit scores. You can calculate your debt to credit utilization ratio by adding all your available credit and all the debt you owe on those accounts. Divide the total debt by the total available credit. Creditors and lenders like to see a lower ratio of how much debt you have compared with how much available credit you have. 
  • Closing a credit card account you’ve had for a long time may impact the length of your credit history, which is another factor generally used to calculate credit scores. In general, creditors like to see you’ve been able to properly handle credit accounts over a period of time.  
  • If you have a paid-off credit card you haven't used in a certain period of time, it may be declared inactive and closed by the lender

If you do close a credit card account, it’s a good idea to review your credit reports to make sure the information is reported correctly. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com.

You can also create a myEquifax account to get two free Equifax credit reports each year. In addition, you can click “Get my free credit score” on your myEquifax dashboard to enroll in Equifax Core Credit™ for a free monthly Equifax credit report and a free monthly VantageScore® 3.0 credit score, based on Equifax data. A VantageScore is one of many types of credit scores.