Quick answer
Closing a credit account can lower your score in the short term by raising your credit utilization ratio, shortening the average age of your accounts, and reducing credit mix. For many people the effect is temporary and manageable—but for those with thin credit files or high balances, it can be material and affect loan approvals, interest rates, or credit card offers.
Why closing an account matters
Credit scores are algorithms that weigh several categories of behavior. The two most commonly affected by closing accounts are:
- Credit utilization (amount owed ÷ total available revolving credit)
- Length of credit history (average age of accounts and age of oldest account)
Credit mix and active account count are also considered but usually matter less. These scoring principles are documented by major scoring vendors and consumer regulators (FICO; VantageScore; Consumer Financial Protection Bureau).
Source references: Consumer Financial Protection Bureau (CFPB); FICO and credit bureau guidance from Experian and TransUnion.
How the three main factors change when you close an account
1) Credit utilization
- What changes: Closing a credit card reduces your total available revolving credit. If balances remain the same, utilization goes up.
- Why it matters: Utilization is commonly a large driver of FICO and VantageScore calculations for revolving debt. Many experts recommend keeping utilization under 30% overall and ideally under 10% for best scores (FICO; CFPB).
- Example: You have two cards with $5,000 limits each and a $2,500 combined balance. Utilization = 25% ($2,500 ÷ $10,000). Close one $5,000 card and utilization doubles to 50% ($2,500 ÷ $5,000), which may drop a score anywhere from several to 40+ points depending on the rest of your profile.
2) Average account age and age of oldest account
- What changes: Closing an older account can lower the average age of your accounts. Closed accounts in good standing typically remain on credit reports for up to 10 years, but the scoring impact of a closed account (especially when it falls off the report) can still affect calculations.
- Why it matters: Scoring models reward longer, stable credit histories. Removing a long-standing account from the active roster shortens the history used by models.
- Note: A closed account in good standing generally stays on your credit report for up to 10 years, so the drop in average age may be delayed. However, if you close your oldest account, future new accounts will be judged against a younger overall age sooner.
3) Credit mix and number of accounts
- What changes: Closing a type of credit (for example, your only revolving account) may reduce your credit mix.
- Why it matters: Mix is a smaller factor but can tip the scales if you have a thin or marginal credit profile.
Other ways closing an account can affect you
- Lender perception: Fewer active accounts or higher utilization can make you appear riskier to manual underwriters or automated scoring used by lenders.
- Issuer reporting differences: If a card is closed by the issuer for nonpayment, that may be reported differently and carry more harm than a consumer-initiated closure.
- Authorized users: If you remove an authorized user or are removed, their activity can stop affecting your score; likewise, adding an authorized user can change usage and age metrics.
Consumer examples (realistic scenarios)
Example A — The unused old card
- Situation: A consumer with three cards, one 8 years old with a $3,000 limit but $0 balance. They close the old card to reduce accounts.
- Likely outcome: Slight drop in average account age and an increase in utilization if balances exist on other cards; score could fall 10–30 points depending on other factors.
Example B — Closing a high-limit card when balances remain
- Situation: Two cards with $8,000 and $2,000 limits, $4,000 balance on the higher-rate card. They close the $8,000 card.
- Likely outcome: Total available credit shrinks, utilization spikes, and score impact could be large enough to influence mortgage or auto loan rates.
In my practice as a financial advisor, I’ve seen clients who lost 15–40 points immediately after closing their oldest card—usually because their utilization shot up and their account age shortened at the same time.
How long does the impact last?
- Short term (weeks to months): Score changes from utilization shifts appear at the next reporting cycle and may persist while balances remain high relative to available credit.
- Medium term (months to 1–2 years): Responsible payment behavior, reduced balances, or getting new accounts (carefully) can repair the score.
- Long term (years): Closed accounts in good standing remain on reports up to 10 years; once they fall off, the long-term historical effect ends. New positive activity compounds over time.
Practical checklist before closing an account
- Calculate the new utilization ratio: Add your current revolving balances and divide by the new total credit limit after the closure. If it pushes you above 30% (or higher within your personal risk tolerance), postpone or take action.
- Pay down balances first: Paying off or lowering balances before closing reduces the utilization shock.
- Consider a downgrade: Ask the issuer to convert to a no-fee/low-fee product instead of closing; this often preserves the account age and limit.
- Request a credit limit increase on other cards: That can offset the lost limit if the issuer will approve it without a hard inquiry.
- Keep the oldest account open if possible: Age matters more than a marginal reduction in account count.
- Confirm which party will report the closure and the reporting date: If the issuer closes the account for cause (late payments), that may be more damaging.
When closing might be the right move
- Ongoing or high annual fees you can’t justify and no downgrade option.
- Fraud or suspected identity theft tied to the account.
- A card that tempts you to overspend despite other controls.
- You’re consolidating to simplify and have planned steps to protect utilization and history.
Actions to take after closing an account
- Watch your credit reports: Use AnnualCreditReport.com for free reports from Equifax, Experian, and TransUnion at least once a year.
- Monitor scores and statements: Look for unexpected drops or errors and dispute them with the bureau that shows the incorrect data.
- Rebuild quickly if needed: Pay down other revolvers, make on-time payments, and avoid new hard inquiries unless necessary.
Tools and resources
- CFPB guidance on credit reports and scores (Consumer Financial Protection Bureau)
- FICO® score educational materials on utilization and account age (FICO)
- Credit bureaus’ consumer pages at Experian and TransUnion for reporting timelines and disputes
Internal, related articles on FinHelp
- Read more about credit utilization in our article: Credit Utilization Rate: How It Impacts Your Credit Score.
- For a broader view of scoring, see: How Credit Scores Are Calculated and Why They Change.
- If you’re looking for practical fixes, our guide Improving Your Credit Score: Practical Steps That Work outlines step-by-step recovery strategies.
Frequently asked quick questions
- Will closing a credit card always lower my score? No—whether you see a drop depends on your balances, the limits involved, and the age of the card.
- Does closing an account remove it from my credit report immediately? No—closed accounts in good standing usually remain on reports for up to 10 years.
- Is it better to downgrade than close? Often yes—downgrading preserves account age and limits while removing fees.
Final takeaways and professional advice
Closing an account is a legitimate financial choice, but it isn’t neutral for your credit profile. Before you close, run simple math on utilization and account age, consider downgrades or paying down balances, and be mindful of timing if you plan to apply for major credit (mortgage, auto loan) in the next 6–12 months. In my practice, a cautious, informed approach reduces unintended score drops and keeps loan options open.
This article is educational and not individualized financial advice. For guidance tailored to your situation, consult a certified credit counselor or financial advisor.
Sources: Consumer Financial Protection Bureau (CFPB), FICO, Experian, TransUnion.
