When you close a credit account, you decrease the amount of credit available to you, which increases your credit utilization rate across all of your remaining cards.įor example, if the total credit available to you across all your cards is $10,000, and your current balances amount to $2,000 a month, your utilization rate is 20%. That same calculation is also done using the sum of all of your credit card balances and credit limits. How Will Closing This Account Affect My Credit Utilization Rate?Ī big factor in determining your credit score is your credit utilization rate, which is calculated by dividing your credit card's balance by its credit limit. There's no guarantee you'll get an offer, but it doesn't hurt to find out. Or you may score a lower interest rate or have your annual fee waived. They may say you're qualified for bonus rewards if you keep the account open and spend a certain amount within a set time period. If you're considering closing your account, you can always call your card issuer and let them know-they may make an offer to try to get you to stay. If you can't get the card's annual fee waived, have it converted it to one with no annual fee or get your deposit back, canceling the card may be your best option. If you have a secured credit card and you've improved your credit score enough that you qualify for an unsecured card, consider asking the card issuer if you can get your deposit back but keep the account open. This may allow you to keep the account open at no additional cost. If you're paying an annual fee on a credit card you don't use much, and don't feel you're getting enough value from the card's rewards or perks, it may make sense to cancel it.īut if the annual fee is the only reason you want to cancel the card, call your issuer and ask them if they can either waive the fee or convert the card to another one that doesn't carry an annual fee. Is There an Annual Fee or Security Deposit? The timeline can vary by issuer, but if you're not planning to cut up the card, consider using it to make a small purchase every six to 12 months and to keep it active. That said, some credit card issuers may choose to cancel your card due to inactivity if you haven't used it in a while. If you're worried about potential fraud, some credit card companies allow you to freeze your card account via their mobile app, making it impossible for anyone to use it for new purchases. If you don't use it and don't want to be tempted by it, store the card in a secure place or even cut it up. Also, once it's closed, the account won't continue to age and increase your length of credit history any more than it already has.īefore closing a credit card that you have had for a long time, consider whether you really need to. You might see credit score effects when it comes to length of credit history, however, since closed accounts aren't weighted as heavily as accounts you still use, and not every credit scoring model treats closed accounts the same way. An account in good standing will stay on your credit report for 10 years, and your payment history on that account will be factored into credit scores the entire time it remains. There are two elements that determine the length of your credit history: how long you've been using credit and the average age of your credit accounts.Ĭanceling a credit card will affect the average age of your accounts, but not always immediately. The age of your credit accounts is one of the factors that help determine your credit score. Also, make sure there aren't any recurring charges that will hit the account after you've paid down the balance, which can delay the process. To do this, stop using the card for new purchases and either transfer your current balance to a different credit card or pay it off altogether. That way, you can wash your hands of the account completely. It's best to pay off a credit card account in full-or transfer the balance elsewhere-before closing it.

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