Will Closing a Credit Card Increase Your FICO Score? | myFICO (2024)
The short answer is no. We never recommend closing a credit card for the sole purpose of raising your FICO Score. The decision to close down credit cards depends on your reasons for taking this action.
This may sound a bit counter-intuitive; after all, cleaning up your credit profile by getting rid of old or unused credit cards sounds like a good idea - and it may be from an overall credit management perspective. If you are tempted to charge more than you should just because you have more availability to credit, then getting rid of that temptation by closing some credit cards might be your best course of action.
However, your FICO Score takes into consideration something called a Credit Utilization Ratio. This ratio looks at your total used credit in relation to your total available credit; the higher this ratio is, the more it can negatively affect your score. So, by closing an old or unused card, you are essentially wiping away some of your available credit and there by increasing your credit utilization ratio.
Say you have 3 credit cards. Credit card A has a $500 balance and a $2000 credit limit. Credit card B is an unused card with a zero balance and a $3000 limit. Credit card C has a $1,500 balance and a $1,500 limit:
Card
Balance
Limit
A
500
2000
B
0
3000
C
1500
1500
In this scenario your Credit Utilization Ratio looks like this:
Card
Balance
Limit
A
500
2000
B
0
3000
C
1500
1500
Total
2000
6500
Credit Utilization Ratio: 30% = 2000/6500
Now, if you decide to close credit card B because it's an old card that you never use, this is how your credit utilization ratio would look like:
Card
Balance
Limit
A
500
2000
C
1500
1500
Total
2000
3500
Credit Utilization Ratio: 57% = 2000/3500
See that your Credit Utilization Ratio rose from 30% to 57% by closing the unused credit card?
Some reasons you might have for closing an account:
Are you applying for credit and is the loan officer instructing you to take this action in order to pass the lender's criteria? Then, it may make sense to take this action.
Are you taking this action as a means to "self-regulate" temptations you may have to use that card in the future? If so, it may make sense to take this action.
Are you trying to get negative items on that credit card from being counted? That won't work because FICO Scores still consider payment history and balances on accounts with a closed status.
Are you taking this action to try to increase your FICO Scores? If so, you may want to reconsider doing so because closing down $0 balance credit cards could potentially decrease your FICO Scores.
The decision to close down inactive or infrequently used credit cards should be carefully evaluated before taking that action. Be forewarned that an action to close down $0 balance or inactive cards will not increase your FICO Scores, and could potentially result in a score decrease.
myFICO is the official consumer division of FICO, the company that invented the FICO credit score. FICO ® Scores are the most widely used credit scores, and have been an industry standard for more than 25 years.
Closing a charge card won't affect your credit history (history is a factor in your overall credit score). Closing a credit card could hurt your credit score by increasing your credit utilization if you don't pay off all your balances.
In general, keep unused credit cards open so you benefit from longer average credit history and lower credit utilization. Consider putting one small regular purchase on the card and paying it off automatically to keep the card active. At Experian, one of our priorities is consumer credit and finance education.
Your score is based on the average age of all your accounts, so closing the one that's been open the longest could lower your score the most. Closing a new account will have less of an impact.
If the closed credit account was in good standing (there were no late payments), it will stay on your report for up to 10 years. That's good news because the positive credit history will help your score even after the account is closed.
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.
If you close your oldest credit card, the length of your credit history will decrease. However, it doesn't affect your credit score right away. Closed accounts can stay on your credit report for as long as 10 years.
A 650 credit score is generally considered “fair.” A score in this range may limit you from certain financial opportunities. Payment history, monitoring your credit and lowering your credit utilization ratio can be helpful ways to improve this score over time.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2023, the average FICO® Score☉ in the U.S. reached 715.
Using less of your credit limit is better for your score. There are some cases where your score could drop after paying off a card, particularly if you close the card. But the damage is usually minor and your score should recover quickly. It takes about a month or so for score changes to take effect.
Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. ...
Late or missed payments can cause your credit score to decline. The impact can vary depending on your credit score — the higher your score, the more likely you are to see a steep drop.
The fastest way to get a credit score boost is to lower the amount of revolving debt (which is generally credit cards) you're carrying. The percentage of credit you use against the amount of credit you have available is called your credit utilization rate.
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.
Closing a credit card account can negatively impact your credit, though how much it hurts your score depends on your credit history. Factors like how many other accounts you have open, how long you've had the accounts and the balances can all play a role.
If a card has an annual fee, you'll pay it at the beginning of your cardmember anniversary and have all of the relevant benefits for the remainder of that year. Canceling the card before the year is up means missing out on perks for which you've already paid. Some card issuers even explicitly advise against doing this.
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
Address: 743 Stoltenberg Center, Genovevaville, NJ 59925-3119
Phone: +2202978377583
Job: Administration Engineer
Hobby: Surfing, Sailing, Listening to music, Web surfing, Kitesurfing, Geocaching, Backpacking
Introduction: My name is Rubie Ullrich, I am a enthusiastic, perfect, tender, vivacious, talented, famous, delightful person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
