How closed credit cards affect your credit score

Part of managing credit cards involves making decisions about closing them. Before picking up your phone to call a credit card company, take some time to find out what will happen to your credit score if you close the card.

Closing credit cards never raises your credit score

Closing credit cards never raises your credit score

Closing a credit card will not delete the card history from your credit report, nor will it keep the history from being included in the calculation of your credit score.

So, if you are closing your credit card to maximize your credit score, think again because this tactic will not work.

Because there are so many different statements about how closing a credit card affects your credit score, I spoke with Craig Watts, Director of Public Affairs at FICO to clarify some misconceptions about what happens to your FICO when close your credit card.

Will credit utilization increase because you closed a credit card that still has balance?

Will credit utilization increase because you closed a credit card that still has balance?

Craig Watts: As a person’s credit report will continue to show the active unplanned amount for that account – even though the account is closed – the FICO formula will continue to include that account in its calculation of utilization rates. Since the consumer pays the disputed balance of that account, reducing the balance should have a positive effect on the person’s utilization rate and FICO score, all else being equal.

When the outstanding balance is reported in the credit report as zero, FICO points will no longer include that closed revolving account in their accrual account. Just to be clear, the formula always tries to include any open revolving accounts in its estimates of usage rates, whether those accounts have outstanding balances or show a zero balance.

A: What about the credit age? It is widely reported, even among some reputable websites (myself included) that closing your oldest credit card lowers your credit life by reducing your FICO score. Is that true?

Craig: We helped to remind that myth a little

credit score

In the old days, we were too cautious [about the impact of closing an old credit card]. The calculation of FICO points considers both open and closed accounts. As long as the account history is still on the credit report, it is included in the FICO score. The catch is that credit bureaus remove accounts from the report at one point. Each credit bureau has its own internal structure for removing accounts, but it’s something like ten years. So it’s not something you have to worry about for at least a decade.

A: When a credit card company issues a credit card, there is often a comment about the credit report, “Closed by the credit provider”. Is there anything about that comment that harms his FICO score?

Craig: No. It doesn’t matter who closed the ticket.

In short, the credit score can be affected by closing the credit card if it is

  • The card still has balance.
  • It still has credit available when other cards do not.
  • It was the first card you ever opened (though it won’t matter for about 10 years)
  • You have no other credit cards

Because of your credit score, it’s important to evaluate your decision to close your credit card before you take action. Read the five credit cards you should never ask for to make a sensible decision.

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