Does Closing a Credit Card Hurt Your Credit?

Closing a credit card might seem like a good idea when you're trying to simplify your finances or limit spending. But before you cut that card, you should know how it might affect your credit score.

How closing a credit card can hit your credit score

Yes, closing a credit card can hurt your credit score. Two main factors get affected:

• Credit history - Older accounts boost your score

• Credit utilization - The percentage of available credit you're using

Together, these make up about 45% of your credit score. When you cancel a card, especially one you've had for years, you might:

1. Shorten your average credit history

2. Increase your credit utilization ratio (bad news)

Credit scoring models like it when you have long-standing accounts and use less than 30% of your available credit. Cancelling changes both.

What to consider before closing your credit card

If you're still thinking about closing a card, weigh the impact carefully. The hit to your score might be worth it if the card has high fees or you struggle with overspending. But there might be better options than cancelling altogether.

Your credit utilization goes up

When you close a card, you lose that available credit. This bumps up your overall credit utilization ratio - the percentage of your total credit limits you're using.

Credit utilization is super important for your score. Lower is better, and going above 30% can start hurting you.

Quick Example

Say you have:

• Card A: $10,000 balance, $15,000 limit

• Card B: $2,000 balance, $25,000 limit

With both cards: You're using $12,000 of $40,000 = 30% utilizationIf you close Card B: You'd be using $10,000 of $15,000 = 67% utilization

That jump from 30% to 67% could really hurt your score.

Your credit history gets shorter

The age of your accounts makes up 15% of your credit score. Older accounts make your score stronger.

Closing your oldest card lowers your average account age. The good news? Closed accounts in good standing stay on your report for 10 years, so you won't feel the hit right away.

Less credit variety

Having different types of credit (cards, loans, etc.) is good for your score. If you're down to one type of credit after closing a card, it might affect your score a bit.

When to keep vs. when to close

Keep your card if:

• It's your oldest account

• You have few other credit accounts

• Closing it would spike your utilization

• The account is in good standing

Consider closing if:

• The annual fee is too high

• Interest rates are sky-high and you carry balances

• It tempts you to overspend

• You want better rewards from a different card

Need to cut back on cards but worried about your score? Consider downgrading to a no-fee version instead of closing completely.

What to do instead of cancelling your credit card

If you're thinking about closing a credit card but worried about your credit score, you have other options. Here are some smart alternatives that let you solve your card problems without the credit hit.

Ask for a fee waiver

Hate paying that annual fee? Just call and ask them to waive it. Many companies will drop the fee for a year if you mention you're thinking about cancelling. It's worth a quick phone call - the worst they can say is no.

Downgrade your card

Most card companies let you switch to a different card while keeping your account history. This is called a product change. Trade your premium card with a hefty annual fee for a no-fee version from the same bank. Your account age stays intact, which protects your credit score.

Keep it active with a small bill

Have a card you rarely use? Card companies sometimes cancel inactive cards after a year. Keep yours alive by putting one small recurring bill on it - maybe your Netflix or Spotify. Just set up autopay so you don't forget.

Put temptation out of reach

If overspending is your worry, physically hide the card somewhere hard to get to. Don't save the number on shopping sites. Some banks even let you temporarily freeze the card through their app while keeping the account open.

How to safely cancel your credit card

Still want to cancel? Do it right:

1. Pay off the balance first

2. Use up any rewards points

3. Move all your automatic payments to another card

4. Call to cancel and ask for written confirmation

5. Cut up the card and throw pieces in different trash bags

6. Get a free credit report from KOHO to make sure it shows "closed by consumer"

Think before you cancel

So what's the verdict on cancelling credit cards? In most cases, keeping an old card open is better for your credit score. But real life isn't just about perfect credit scores.

Sometimes closing a card makes sense. If high fees are draining your wallet or you can't trust yourself with available credit, cancelling might be the right call despite the credit impact. Your financial health is about more than just numbers.

Before you make the final cut, try the alternatives first. Ask for fee waivers, downgrade to no-fee versions, or just stash the card somewhere safe. These options let you address your card problems while keeping the credit benefits.

If you do decide to cancel, do it the right way—pay off balances, move automatic payments, and properly close the account. This minimizes the damage and keeps you in control.