Video: How closing your card affects your credit score

3 tips for canceling a card so you minimize the impact

Jenny Hoff
Former managing editor, video
International broadcast journalist, podcaster and blogger.



With big sign-up bonuses tempting you to apply for new credit cards, you may wonder if it’s time to close out cards you no longer use to make some room in your wallet. If you do plan on closing a credit card or two, be sure to follow these tips to keep your credit score in check as you check out the new deals.

Tip 1: Close the cards with annual fees first.
If you’re no longer using some of your credit cards, choose the ones with annual fees to close first. While you’ll still get a ding on your credit for closing a card, you’ll no longer be paying for a card you don’t use. It’s better to put that money toward a card offering ample rewards to make up for the cost.

Tip 2: Sign up for a new card or increase your credit limit on old ones.
If you are carrying a balance, closing a credit card will ding your credit score, because it will change your credit utilization ratio. Having more credit available is good for your score. So if you close a card with a big credit limit, and open a new card with a small credit limit, your credit score will fall. To boost your score, you can ask for credit limit increases on the cards you keep (your card issuer may not grant your request).

Tip 3: Close newer cards, not older ones.
That card you got in college may not be paying much in terms of rewards, but the amount of time you’ve had credit counts for 15 percent of your credit score – so that old card is doing its job of ensuring your long history gets the credit it deserves. Opt for closing a newer card instead.

If you’re in the process of re-strategizing your card rewards, don’t be afraid of closing a couple of cards you no longer need (though your credit score will sink a bit). As long as you follow these tips, your credit score should rebound quickly, keeping you qualified for the best rewards cards issuers are offering.

See related:  Credit cards that offer free credit scores, Video: What is your credit utilization ratio?

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Updated: 03-24-2019