Closing a credit card does hurt your credit score, but the damage is usually temporary and smaller than people fear
Closing a credit card will lower your credit score in the short term. The drop happens because two things that matter to your score change when ready: your total available credit shrinks, and the ratio of your balances to your limits gets worse. A card you never use still counts as open credit. Once you close it, that available credit disappears from the calculation.
The damage is not permanent. Your score will recover over time as you keep making on-time payments and your overall credit profile strengthens. The closed account itself stays on your credit report for up to 10 years, but its impact on your score fades after a few months to a year.
Whether closing a card makes sense depends on what you are trying to accomplish and what the card costs you. A card with an annual fee that you do not use is often worth closing. A card with no fee that you opened years ago is usually worth keeping open, even if you never touch it.
Key Takeaways
- Closing a credit card lowers your credit score because your available credit decreases and your credit utilization ratio gets worse.
- The score drop is temporary — typically 10 to 50 points — and recovers within a few months to a year of responsible credit use.
- Cards with no annual fee are worth keeping open even if unused, because the benefit of available credit outweighs the cost of doing nothing.
- Cards with annual fees should usually be closed if you do not use them, because the fee costs more than the score damage.
- Closing a card does not erase negative history on that card — late payments and high balances remain on your report for seven years.
How closing a card affects your credit utilization ratio
Your credit utilization ratio is the percentage of your total available credit that you are currently using. If you have three cards with $5,000 limits each and $3,000 in balances across them, your utilization is 20 percent ($3,000 divided by $15,000). Credit scoring models treat lower utilization as a sign of responsible credit management.
When you close a card, the available credit on that card vanishes from the calculation. If you close one of the $5,000 cards in the example above, your total available credit drops to $10,000. Your utilization jumps to 30 percent ($3,000 divided by $10,000), even though you did not charge anything new. That jump is what damages your score.
The impact is smaller if the card you are closing has a low balance or no balance. Closing an unused card with a zero balance hurts less than closing a card you regularly use. The worst time to close a card is when you have high balances on your other cards, because the utilization ratio gets worse at the exact moment you are losing available credit.
Why the score damage is usually temporary
Credit scoring models weight recent behavior heavily. A single closed account does not override months or years of on-time payments. As you continue to use your remaining cards responsibly, your score will climb back up. Most people see their score recover within three to six months, though it can take longer if you have other negative marks on your report.
The closed account itself stays visible on your credit report for up to 10 years, but its weight in your score calculation diminishes over time. After a year or two, the fact that you closed it matters far less than what you do with your remaining open accounts.
If you are planning to explore for a mortgage or other major loan, closing a card right before you explore is a mistake — the timing makes the damage worse. If you have already closed a card and are now worried about a loan process, the score impact is usually not enough to disqualify you on its own, but it is worth waiting a few months if you can.
When closing a card makes financial sense
A card with an annual fee that you do not use should usually be closed. The fee costs real money every year, and keeping the card open for the sake of available credit is not worth it. Call the issuer and ask if they will waive the fee before you close it — many will, especially if you have been a customer for years. If they refuse, close the card.
A card with no annual fee is almost always worth keeping open, even if you never use it. The cost to you is zero. The benefit — available credit that improves your utilization ratio — is real. You can keep the card in a drawer and charge a small purchase to it once or twice a year to keep the account active, or straightforward leave it alone. Most issuers will not close an account for inactivity if you are in good standing, though some will after two or three years of no activity.
A card you use regularly but want to close for other reasons — you dislike the issuer, you want to simplify your wallet, you are trying to reduce temptation to overspend — is worth thinking through. The score damage is real but temporary. If the reason you want to close it is strong enough, the temporary hit is worth accepting.
What happens to rewards and cash back when you close a card
Any rewards or cash back you have already earned usually stay in your account after you close the card. You can typically redeem them for a set period after closure, though the window varies by issuer. Some issuers let you redeem for 30 days after closure; others give you longer. Check your cardholder agreement or call the issuer before you close the card to confirm the redemption important date.
Rewards you have not yet earned are gone. If you close a card that offers bonus points for spending, you will not earn those points after the account closes. If you were working toward a sign-up bonus, closing the card before you meet the spending requirement means you lose the bonus.
Some issuers will let you transfer your rewards to another card you hold with them, or to a partner program. Ask before you close whether this option exists. If you have a large balance of rewards, it may be worth keeping the card open a bit longer to redeem them first.
Closing a card does not erase past problems
If you are closing a card because it has a history of late payments or high balances, understand that closing it does not remove that history from your credit report. Late payments stay on your report for seven years from the date they occurred, whether the card is open or closed. High balances that were reported to the credit bureaus also remain on your report for seven years.
Closing the card may actually make the damage worse in the short term, because the negative history becomes more visible — it is no longer balanced by current responsible use of that account. If you have a card with a bad payment history, it is usually better to keep it open and use it responsibly going forward, to show that you have fixed the problem.
The only exception is if the card is costing you money in fees or interest and you have no intention of using it again. In that case, closing it stops the financial bleeding, even though the past damage remains on your report.
Alternatives to closing a card
Before you close a card, consider whether you could straightforward stop using it instead. If the card has no annual fee, this is almost always the better choice. You keep the available credit, your utilization ratio stays the same, and your score does not drop. The card sits unused in your wallet or a drawer, costing you nothing.
If the card has an annual fee and the issuer will not waive it, closing is the right move. But if you are on the fence about whether you will use the card again, ask the issuer to downgrade it to a no-fee version instead. Many issuers offer a basic card with no annual fee in the same product family. You keep the account history and the available credit, but you eliminate the fee.
If you are closing a card because you want to reduce the number of accounts you manage, remember that you do not have to actively use a card to keep it open. You can set up one small automatic charge — a streaming service, a gas station, a coffee shop — and pay it off automatically each month. This keeps the account active without requiring you to think about it.
Frequently Asked Questions
How much will my credit score drop if I close a card?
The drop typically ranges from 10 to 50 points, depending on how much available credit you are losing and how high your current utilization ratio is. The impact is smaller if you are closing a card with a low limit or zero balance. If you have other negative marks on your report, the drop may be larger.
Should I close old cards or new cards first?
If you must close a card, close a newer one rather than an old one. The length of your credit history matters to your score. An old account, even if closed, helps your average account age. A newer account has less impact on your history, so closing it does less damage.
Will closing a card hurt my chances of getting approved for a mortgage?
A single closed card usually will not disqualify you, but the timing matters. If you close a card within three to six months of explore for a mortgage, the score drop may be visible to the lender. If you have already closed a card, waiting a few months before explore gives your score time to recover.
Can I reopen a card after I close it?
Some issuers will reopen a recently closed account if you ask within a short window, usually 30 to 60 days. If you close a card and change your mind, call the issuer quickly. Reopening is easier than explore for a new card, because the issuer already has your history and information.
What if I close a card and then need the available credit?
Once a card is closed, you cannot use it. If you think you might need the available credit in the near future, do not close the card. If you have already closed it and need credit, you will have to explore for a new card or increase the limit on an existing one, both of which trigger a hard inquiry and may lower your score.