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Does closing a credit card hurt your credit?

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We love our credit cards — credit cards are the most commonly used payment method in the U.S., and, on average, Americans have nearly four cards per person.

However, juggling multiple credit cards can be confusing, and some cards have expensive fees and sky-high annual percentage rates (APRs). Closing an account can make sense, but you may be worried about the impact on your credit score.

Does closing a credit card hurt your credit? It's a common question, and, unfortunately, the answer is yes. However, how much of an impact depends on your credit history and what other accounts you have open. Here's what you should consider before cutting up that card.

How credit scores are calculated

When talking about how closing an account can affect your credit score, it's important to understand how credit scores are determined. There are many credit scoring models, but the two most commonly used are the FICO and VantageScore credit scores.

With both credit scoring models, your credit score is a three-digit number between 300 and 850, and the higher your score, the better.

FICO vs. VantageScore

Both FICO and VantageScore look at the following factors to determine your credit score:

  • Payment history: Your payment history is the biggest factor affecting your score under both scoring models. It reflects whether you made your past payments on time or whether you have a history of missed or late payments.

  • Amounts owed or total credit usage: Creditors like to see that you aren't using all of your available credit. Your amounts owed or credit utilization is another major factor affecting your credit.

  • Credit mix: The credit mix shows creditors that you can use multiple forms of credit responsibly.

  • New credit: Opening several new credit accounts can make creditors concerned that you're overextending yourself, so they like to see a limited number of new credit accounts.

  • Length of credit history or experience: A longer credit history allows creditors to more predictably assess your ability to repay any loans or credit card balances in the future, so the longer your credit history, the better.

Although both scoring models use the same factors, they weigh that information differently when calculating their scores. While FICO assigns each category a percentage, VantageScore's calculation uses a different scale.

The impact of closing a credit card

Now that you know the basics of how the major scoring models calculate your credit score, you can better understand how closing a card can affect your credit. Closing a credit card can hurt you in three ways:

1. Closing a card increases your credit utilization

Your credit utilization is what percent of your available credit that you use. For example, if you have a credit limit of $1,500 and a $750 balance, your credit utilization is 50% — you're using half of your available credit.

If you use a large percentage of your available credit, creditors worry you may take on too much debt, and your score may drop.

When you close a credit card, you can no longer access that credit limit, and your credit utilization increases. As a result, your credit score will likely decrease.

2. You may damage your credit mix

Creditors like to see that you can manage a variety of types of credit, such as revolving credit — like credit cards — installment loans and mortgage debt.

If you only have one credit card and close it to avoid the temptation of spending beyond your means, you'll close the only revolving credit account on your credit limit and your score will be damaged.

If you’re worried about overspending, consider keeping a card open solely for automated monthly payments. You can keep it out of sight, but the automated payments on your regular spending (utilities, streaming services, other subscriptions) will keep your account current and your credit mix active. Here are some examples of cash rewards cards that could be useful for automating monthly payments:

3. Closing a card lowers the average age of your credit accounts

If the card you want to close is one of your oldest accounts, closing it will have a more significant impact on your credit. Closing the account will reduce the average age of your remaining credit accounts, and your score could potentially decrease.

As an alternative, you may want to ask your issuer for a product change if your oldest credit card no longer suits your needs. For example, maybe you opened the Capital One QuicksilverOne Cash Rewards Credit Card when you were building credit. But now you have an excellent credit score and would prefer a cash-back card without the $39 annual fee.

Instead of closing the card outright, call and ask whether you qualify to upgrade to the regular Capital One Quicksilver Cash Rewards Credit Card with no annual fee and some other added benefits. Or even a travel rewards card that may offer more value for its cost, like the $95 annual fee Capital One Venture Rewards Credit Card. That way, you can keep your existing account but still get your preferred card.

How much does closing a card affect your credit?

How many points will your score drop if you close a card? Unfortunately, it's impossible to know in advance. Credit scoring models use complex formulas to calculate your score, and changes depend on your existing score, the length of your credit history, how many credit accounts you have open, and how much credit you have available to you.

In general, closing a card will have more of an effect on your credit if you have a limited credit history, if the card was your only credit card, or if it made up a large percentage of your available credit. If you have a more robust credit history and several credit card accounts, closing one card will have less of an impact.

Good reasons to close a credit card

If closing a credit card can hurt your credit, does it ever make sense to close one? It can, in the following scenarios:

  • You have a card meant for users with bad credit: Cards for people with no credit history or poor credit often have very high rates and monthly or annual fees. As your credit improves and you can qualify for cards with better terms, you can save money by closing the old cards.

  • You have a joint card, and your relationship ends: Joint credit cards are typically used by married couples, and you're responsible for any charges your partner makes. If you separate or divorce, you're still responsible for charges to the account; the only way to end your obligation is to close the account.

  • You are trying to limit credit card debt: For some people, credit cards make it too easy to rack up debt. Switching to only using cash or debit can help them control their spending, and canceling the card can help them resist the temptation of using the card.

Closing a card can negatively impact your credit, but your score will recover over time if you follow other good credit habits. Make all of your required payments on time, limit new credit applications, and pay down existing balances to improve and maintain your credit score.