Don't close maxed-out card after you pay off debt

It once was hurting your score, now it's helping


Credit Wise
Credit Wise columnist Kevin Weeks
With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

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Question for the expert

Dear Credit Wise,
Three months ago I opened a credit card. I maxed it out at $500. I had a late payment. I paid off the amount. Should I close the account?  -- Kelly

Answer for the expert

Dear Kelly,
I understand why you might feel like you need to close the account, but I would suggest you not do that. If the creditor did not close the account when you were late, chances are they will not do so now. It would be in your best interest for your credit score to keep the account open.

Let's talk a bit about the damage that's already been done, and how you need to handle the account moving forward.

First, a look back. You know you made a mistake maxing the card out, and you compounded that mistake with a late payment. You'll need to pull your credit reports and credit score to assess the damage.

Think of your credit as a delicate fabric you wear every day. It picks up some damage on the way. Some stains are hard to get out, others can be quickly washed away.

I hope you were just a few days late on your credit card payment. If that's the case, it's likely you were hit with a late fee, but it wasn't reported to the credit bureaus, so you escaped credit score damage. If you were late by 60 days or more, it's almost certain that it was reported to the credit bureaus and you've suffered damage to your score in the form of a negative mark that will stay on your report for seven years. In other words, it's a deep, long-lasting stain.

Maxing out the card is different. It's a negative in the credit scoring formula, but it's surface dirt, easily washed away with no lasting impact. Paying off a maxed-out card immediately removes the score damage it was doing.

So see where you stand. Pull your credit reports for free at You're entitled to one free report each year from each credit bureau.

Assuming the worst -- that your late payment was a lengthy one -- you may be thinking you want to close the card that is contaminating your credit. Don't. You would do even more damage by reducing your available credit.

It will be best for your score to keep the account open, thus preserving that available credit as part of your credit score. What will be most important for you will be to keep the account in good standing. The best way to do that is to use the card at least occasionally, so it's not closed for lack of use, and pay the bill on time, every single time. The less of your available credit you use, the better it is for your credit score.  So I would suggest you only charge an amount monthly that you can pay in full when the bill comes.

This course of action is best for you in more ways than just because it's good for your score. If you charge only an amount that you know you can pay, you will never find yourself in a situation where you must make your payment late or can't pay it at all. This is a crucial step in learning to live within your means. Doing so will establish a very good habit that will carry over into all aspects of your financial life.  

Be wise with your credit!

See related: Will canceling cards hurt a great credit score?, Tricks to using a low-limit credit card to build a gread score

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Published: January 30, 2016

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Updated: 10-22-2016

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