Closing a Credit Card Can Hurt Your Credit Score

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Dear Experian,

Why does closing a credit card you are no longer using negatively affect your credit?


Dear VNO,

Closing a credit card account causes your overall credit utilization rate to increase, which is a sign of risk. As a result, your credit scores may decrease.

Your credit utilization rate is also called your balance-to-limit ratio. To calculate it, add up all of your credit card balances and then add up all of your credit limits. Divide the total balances by the total limits.

Generally, the lower your utilization rate, the better for your credit scores.

Things to Consider Before Closing an Account

If you are planning to make a major credit purchase in the next three to six months, it's probably best to leave the account open. However, while closing the account may impact your credit scores for a time, it still might make sense for you if you are not planning to apply for credit soon.

Your credit scores should not be the only factor in your decision. If you are having difficulty managing debt you already owe and are tempted to use the card, consider closing it so that you won't take on more debt. Another consideration for closing a card could be if you're paying a high annual fee without getting an equal amount of benefits from it. A good way to offset the impact of closing the account is to pay down the balances on your remaining cards.

Order a Copy of Your Credit Score

Ordering a credit score can help you gain a better understanding of what is contributing to your credit rating. When you request your free credit score through Experian, you will receive with it a list of the risk factors that are currently affecting your FICO® Score the most.

The factors are the key to unlocking what you need to do to improve your creditworthiness over time, which will be reflected in better credit scores.

Thanks for asking.
Jennifer White, Consumer Education Specialist