How Closing A Credit Card Account May Impact Credit ScoresĀ Jyoti Thakur, March 2, 2023May 30, 2024 Closing a credit card account can have an impact on your credit scores because it affects your credit utilization and the length of your credit history. Credit utilization is the amount of credit you have used compared to the amount of credit available to you. When you close a credit card account, the credit limit on that account is no longer available to you, which can increase your credit utilization if you have balances on other credit cards. A high credit utilization ratio can lower your credit scores because it may indicate to lenders that you are using a large amount of your available credit, which could be a sign of financial strain. Closing A Credit Card Account May Impact Credit Scores: How does closing a credit card work? To close a credit card, you can contact the credit card issuer either by phone, online, or in writing. You will need to provide your account information and request that the account be closed. Some credit card issuers may also require you to provide a reason for closing the account. Once you have requested that the account be closed, the credit card issuer will generally cancel the account and stop issuing new charges on the card. However, it’s important to note that you may still be responsible for paying off any outstanding balances or fees on the account. It’s a good idea to check your account statement or contact the credit card issuer to make sure there are no outstanding balances or fees that need to be paid before you close the account. There are several reasons why you might not want to close a credit card: Closing a credit card can shorten your credit history: When you close a credit card, you are also losing the history of that account. This can shorten your overall credit history, which is a factor in your credit scores. A longer credit history can be beneficial for your credit scores because it shows lenders that you have a track record of managing credit responsibly over a longer period of time. Closing a credit card may result in a loss of rewards or benefits: Some credit cards offer rewards or benefits such as cash back, points, or travel perks. If you close a credit card that offers these benefits, you may lose out on these rewards. Closing a credit card may not be the best financial decision: Depending on your financial situation and credit score, closing a credit card may not be the best decision. For example, if you have a low credit score and are trying to improve it, closing a credit card may not be helpful because it could shorten your credit history and increase your credit utilization ratio. It’s important to carefully consider these factors before deciding whether to close a credit card. If you do decide to close a credit card, it’s a good idea to pay off any balances and make sure all of your accounts are in good standing before doing so. Bottom line: The length of your credit history is also a factor in your credit scores. When you close a credit card account, you are also losing the history of that account, which can shorten your overall credit history. A longer credit history can be beneficial for your credit scores because it shows lenders that you have a track record of managing credit responsibly over a longer period of time. It’s important to carefully consider the potential impact on your credit scores before closing a credit card account. If you do decide to close a credit card, it’s a good idea to pay off any balances and make sure all of your accounts are in good standing before doing so. You may also want to consider the other credit cards you have and the credit limits on those accounts before closing a credit card to ensure that you will still have enough available credit to maintain a low credit utilization ratio. Featured Finance closing credit card accountcredit scoreImpact