Conventional wisdom is that canceling a credit card can hurt your credit score, especially when it’s your oldest card. I recently tested this theory, and my score came out unscathed.
I opened three credit card accounts from September 2018 through February 2020, which doubled my total number of cards. While I know some people who successfully juggle 25 cards, six felt like a lot to me, logistically. It was getting annoying to monitor all of the due dates and transactions and watch for fraud. Personally, I felt like I had hit my limit.
There was one card that I hardly used in recent months. I opened the account way back in 2003 as a college student. It served me well for a while, but over time, I added other cards with better rewards and the card started to sit idle. I tried to use it every so often to demonstrate activity and hopefully ward off an unsolicited credit limit cut or cancellation, but I finally decided to initiate the cancellation myself.
I thought canceling the card might trim a few points off my score, but I figured I could handle it since I have a high score and I’m not planning to apply for new credit in the near future. There was also an element of “I did it for science,” so I could put the conventional wisdom to the test and inform you, the trusty reader.
First of all, I was shocked how easy it was to cancel. I called the 1-800 number on the back of my card and followed the automated prompts and that was it. I completed the task with a few keystrokes in less than two minutes and never spoke with a human. I was actually a little offended they let me go that easily.
The main reasons most people tell you not to cancel cards are because canceling can raise your credit utilization ratio and shorten your account history. Credit utilization, of course, is credit you’re using divided by your credit limit. The general advice is to try to keep the ratio below 30%, and under 10% is even better.
The card that I canceled had a $13,000 limit. But I still have a total credit limit of $93,700 across my other five cards. That makes it easy to keep my utilization ratio low (it’s currently just 2%).
The notion that canceling a card shortens your account history is largely a myth. FICO, the most popular credit scoring company, continues to include positive information from closed accounts for 10 years (negative marks persist for up to seven years).
So in nine years, the account I just closed will still be on there as a 26-year-old account with nothing but on-time payments. When it falls off in a decade, I will not have a 27 year-old account, but all of my other accounts will be 10 years older. If I continue to manage credit responsibly, my score will continue to be high.
See related: How a closed account affects your credit score
Don’t try this at home
Well, you can try this at home, but with a few caveats. I would not recommend canceling a card if it’s going to significantly impact your credit utilization ratio. For instance, if you currently owe $4,000 against a total credit limit of $10,000, canceling a card with a $5,000 limit would raise your utilization ratio from 40% to 80% and make you look like a risky borrower.
I would also urge you to keep your account open if you have a short credit history. Let’s say you just graduated from college and got your first job and are ready to upgrade from a student credit card to something with better rewards. That’s great, but I think you should keep the old card open (alongside your new card) to lower your utilization ratio and contribute to your average age of accounts.
Even though FICO counts closed accounts for many years to come, if you’re just a couple years into your credit life, I recommend shoring that up a bit. I felt more emboldened to cancel because I’ve built a credit history of nearly two decades.
What else could I have done?
I could have insisted on speaking with a customer service representative before canceling to inquire about a retention offer. I probably wouldn’t have gotten one since this was a very basic card, but if you’re looking to cancel a higher-end card, the issuer might try to convince you to stay with an annual fee waiver or some bonus rewards points.
I also could have asked about transferring the $13,000 limit to the other card that I still have with this issuer. I decided against it for simplicity’s sake and because I still have plenty of available credit. But depending on your situation, this might allow you to streamline your number of accounts without affecting your utilization ratio.
In the end, I’m glad I canceled this card. I even convinced my wife to drop her oldest card for the same reasons. That’s two fewer accounts to monitor and three fewer pieces of plastic to stuff into our wallets (she was an authorized user on my now-canceled card).
My FICO score dropped from 811 to 808, but that’s not a big deal. The logistics are now easier, and some lenders actually view you as risky if you have too many cards or too much available credit. I will continue to add accounts when it makes sense. Now, I’ll also feel comfortable subtracting accounts when that makes sense.
Have a question about credit cards? E-mail me at firstname.lastname@example.org and I’d be happy to help.