Credit Scores: Does Cancelling a Credit Card Hurt Your Credit Score?

Disclosure: We get a commission for links on the blog. You don’t have to use our links, but we’re very grateful when you do. American Express, Barclaycard, Chase, and US Bank are Million Mile Secrets advertising partners. Opinions expressed here are the author's alone, and have not been reviewed, approved or endorsed by our partners. Here’s our Advertiser Disclosure.

Don’t forget to follow me on  Facebook or Twitter!

Additional Reading:

Impact of Applying for Credit Cards

I explained earlier that opening credit cards in the short term will decrease your credit score, but in the long term your credit score could increase if you pay back your debt on time.

However, the impact will not be the same for everyone since there are lots of factors which make up your credit score.  So go slow and see the impact to your credit for yourself before applying for lots of cards.

But lots of readers emailed and commented to ask about the impact of cancelling a credit card to their credit score.

How Is Your Credit Score Calculated?

Let’s have another look at how the FICO website says your credit score is calculated.  Fair Issac Corporation dominates the US credit score business and issues FICO scores which range from 300 to 850.

According to the FICO website, your credit score is determined by:

  • 35% Payment History
  • 30% Amounts Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit
Cancel Credit Card Credit Score

Fico Score Calculation (Image from MyFico.com)

Impact of Cancelling a Credit Card

The act of cancelling a personal credit card doesn’t impact your credit score by itself.  However, cancelling a personal credit card impacts the Amount Owed & the Length of Credit History which could reduce your credit score.

But, applying for more credit cards every time you cancel a credit card could balance things out.

That said, as a general rule, you shouldn’t cancel your oldest cards since it helps your credit score by increasing your Length of Credit History.  And cancelling cards with a very high credit limit (compared to the total credit available to you) could also impact your credit score.

Note that cancelling business credit cards (from Citi, Chase or American Express) does NOT impact your personal credit score since business credit cards do not appear on your personal credit report from Equifax, TransUnion or Experian (unless you default on them).  So they don’t impact your Amount Owed & the Length of Credit History.

What Happens When You Cancel A Personal Credit Card?

Let’s see the specific impact to credit scores when you cancel a personal (not business) credit card.

Impact to Amounts Owed (30%)

Your credit utilization ratio (i.e. the amount of credit which you’re using compared to the total credit available to you) will increase every time you cancel a personal credit card.  That’s because you have, say, $10,000 less in available credit if you cancel a card with a $10,000 limit.

This impact is MORE noticeable and can cause a dramatic decline in your credit score if you have only a few credit cards (say 2 or 3 cards).

For example, let’s say that Jessica has 3 cards each with a $10,000 limit or $30,000 in total credit available to her ($10,000 X 3).  If she cancels 1 card (with a $10,000 limit), she has reduced the total available credit from $30,000 to $20,000 which is a 33% decrease ($10,000/$30,000).

But Mary has 6 cards each with a $10,000 limit or $60,000 in total credit available to her ($10,000 X 6).  If Mary cancels 1 card (with a $10,000 limit), she has reduced her total available credit from $60,000 to $50,000 which is only a 17% decrease ($10,000/$60,000).

If Jessica and Mary both have the same amount of debt (i.e. outstanding balances on their credit cards) and all other factors are the same, the impact to Jessica’s score will likely be higher than the impact to Mary’s score.

But the MORE cards which you have (and a higher total available credit), the less likely it is that cancelling one card will impact your credit utilization ratio significantly.

Some folks like to try to transfer the credit from one card to another to prevent their debt-to-credit ratio from decreasing.  But I don’t really do that because it is too time-consuming for me and not all banks allow you to transfer credit from one card to another.

Instead, I just apply for new cards which should balance the credit limits which I have lost on cards which I cancelled.  If I am cancelling a Chase card and applying for a different Chase card, I usually just call the reconsideration line and explain that I want to cancel a card which I’m not using and ask to be approved for another card which I just applied for.  But I usually just cancel cards from other banks and then reapply for different cards.

However, I absolutely would try to transfer the credit from one card to another (issued by the same bank) if I didn’t have many credit cards.  Or if the credit limit on the card which I was cancelling made up a significant portion of the total credit available to me.

That said, not all banks report your credit limit to the credit bureaus.  Some cards only report the highest balance on the card.

Impact to Length of Credit History (15%)

According to creditcards.com and Equifax, credit cards usually remain on your credit report for 10 years from when you closed them, PROVIDED there was no negative information (like late or non-payment) associated with those cards.

The Length of Credit History or the average age of your credit accounts, will almost always decrease when you start applying (not when you cancel!) for a lot of new credit cards for the 1st time.  That’s because you likely have only a few old credit card accounts and applying for new credit cards reduces the average age of ALL your credit cards.

Note that this impact is MUCH more pronounced for younger folks who don’t have a long credit history than for folks with an established credit history.  So this is another reason for folks to start off slow and gauge the impact to their credit scores for themselves before applying for more cards.

Did you notice that cancelling a credit card will NOT immediately reduce your Length of Credit History?  That’s because your Length of Credit History already decreased when you applied for the card.

The card will remain on your credit report and contribute to your Length of Credit History for 10 years after cancelling, and only then will you see another impact to your credit score.  But, you can reduce the impact of the closed cards falling off your credit report in 10 years by applying for new cards to replace the old cards.

However, I wouldn’t suggest cancelling your oldest card because it helps to have a few old cards which you keep for a long time.

I have fee free cards from all the main banks which I plan on keeping indefinitely to help increase the average age of my credit card accounts.  This will also reduce the impact of opening and closing credit card accounts.

American Express reports ALL your personal accounts as opened on the same date since your FIRST personal card with American Express.

For example, let’s say that I have a no-fee American Express Hilton card which I opened in 2011.  American Express will report all future cards as opened from 2011 even if I applied for them in 2013 or later!  This is a great way to increase the average age of your accounts.

Bottom Line

Cancelling your personal credit cards can reduce your credit score.  The most important factor is to make sure that you don’t have a significantly higher credit utilization ratio because you cancelled your cards.  This usually isn’t an issue to folks who have lots of credit cards with high limits, but it can be an issue for younger folks who are building their credit.

The impact to your Length of Credit History likely won’t be felt until 10 years later.  And it may be minimized if you keep on opening accounts to replace the closed accounts which will stay on your credit report for 10 years and then fall off.

Getting a fee-free card, which you keep for a very long time, is a great way to not only increase the Length of Your Credit History, but to also build a long-term relationship with a bank.

Cancelling business credit cards from certain banks will not impact your credit score.

* If you liked this post, why don’t you join the 10,000+ readers who have signed-up to receive free blog posts via email (only 1 email per day!) or in a RSS reader …because then you’ll never miss another update!

 

* If you liked this post, why don’t you join the 25,000+ readers who have signed-up to receive free blog posts via email (only 1 email per day!) or in an RSS reader …because then you’ll never miss another update!

Editorial Disclaimer: Neither the responses below nor the editorial content on this page are provided or commissioned by the bank advertisers, and have not been reviewed, approved or otherwise endorsed by the bank advertisers. Opinions expressed here are the author’s alone, not those of the bank advertisers. It is not the bank advertisers’ responsibility to ensure all posts and/or questions are answered.

Leave a Reply

Your email address will not be published. Required fields are marked *

49 responses to “Credit Scores: Does Cancelling a Credit Card Hurt Your Credit Score?

  1. Hi, Daraius
    I just applied the SPG card and felt really happy that it was approved. However, the sad and very surprising thing is AMEX only gave me 1000$ CL, which is the lowest one that I have ever got since my first credit card. As I need to spend 5K in 6 months. If I spend 900 $ , pay off it, spend 500 $ and pay off all the debt every month to keep 0 balance. Will this activity on my account affect my credit score?
    Thank you very much!

  2. Which fee free card do you keep from AmEx? Hilton card?
    Thanks.

  3. I am not a math whiz but I think you mean the ratio will INCREASE not decrease. The

    Your credit utilization ratio (i.e. the amount of credit which you’re using compared to the total credit available to you) will decrease every time you cancel a personal credit card. That’s because you have, say, $10,000 less in available credit if you cancel a card with a $10,000 limit.

  4. Isn’t that what he said? “will increase every time you cancel a personal credit card.”

  5. Google hasn’t found me any satisfactory answers but does anyone know whether Chase Sapphire reports your highest balance or your total credit limit to the agencies? What about credit cards with the “visa signature” logo in general? Thanks.

  6. Credit utilization is looked at on an individual card basis and your overall utilization (total used on all cards/total available on all cards). As a general rule I’ve read you should keep your utilization below 30%, so in Mary’s case (6 cards @ $10K each) she shouldn’t go above $3K on any one card or above $18K combined on all cards. One way to keep your utilization rates low is to send a payment in advance of your credit card issuing the monthly statement to stay below the 30% threshold since the statement amounts are what the credit reporting agencies use. As a test I had one card at 90% utilization while all other cards had no charges. My score dropped 50 points that month even though my overall utilization was still below 30%. I paid the 90% card off and my score recovered the following month.

    • @Jesson – I’d pay off the card as soon as possible to minimize the impact of a high utilization ratio.

      @Lantean – I keep the AMEX Hilton card.

      @Gomer @David0603 – There was a typo in one instance which is now fixed. Thanks!

      @Mel – I’m not sure. The best way to check is to look at your credit report.

      @Nunya – A 90% utilization rate will definitely hurt your credit score!

  7. I’ve also noticed that authorized users on an AmEx card get the year of account opening of the primary account holder (at least in my husband’s case). He’s an authorized user on the SPG card I opened in 2007. Where he’s the primary account holder, TransUnion, Equifax, and Experian reports all show him as opening the account in 2007, even though the cards were opened in 2011 and 2012.

  8. Don’t cancel your cards, try to barter your Chase cards for a new Chase credit card signup. Never cancel without trying retention offer or replacing/transferring credit line.

  9. @Jesson – another trick to control the damage to your credit utlization score when you are approved for a lower credit line is to prepay, say $5,000 into the account, that way your credit room is actually $5K as opposed to the granted $1K credit line and you can meet the spend requirement more easily.

  10. Some Business Credit Cards such as the AA business card do show up on your credit history.

  11. @MileHunter – Whoa~~ I never thought about it, wondering whether it is possible to do so. Hopefully it will not trigger the “alarm”.
    Thank you very much!

  12. @Mel, CSP reports a limit, at least it does for me. Visa Signature cards used to not report limits because of the NPSL feature of the card, but I believe most of the major issuers have changed that policy now.

    @Jesson, your card is only going to report once a month. It will report the balance on your bill. So charging and paying in full multiple times in the month will not affect your credit score. The only thing that will affect your credit score is whatever balance you are carrying on your statement close date. That is what will get reported.

    Most cards report statement balance, so you can manipulate your utilization by paying your cards down to whatever you want to report before your statement closes.

  13. Also, as a slight clarification Amex reports new accounts with the month of the new application and the year of the original member since date. While this ins’t a big deal for most people, it can make a slight difference for people with younger credit histories. For example, if your original member date is 2011, and it is near the end of the year, it might make sense to hold off on an Amex app until after the first of the year. An app in December 2013 would report as an account opened in December 2011, while an app in January 2014 would report an account opened in January 2011. You could get an extra 11 months of history by waiting until after the first of the year. Probably not important for most, but those newer to credit or rebuilding can take advantage of that.

  14. I’ve had my Mileage Plus card for over 20 years now and paying $85 annually. I’m not using it nowadays since I got my Club card. I have 12 other credit cards w/ an average age of 6 years. I really want to cancel it but worry that it may hurt my credit score. I don’t think they have a ‘no annual fee’ version that I can downgrade to. Any suggestions?

  15. @Rachel, I don’t think it’s just Amex. I gave two authorized user cards to my fiancee, and she inherited the “credit age” for at least one of those cards. FYI, one of them was FIA Card Services, and the other was Citi.

  16. Which card do you think would be better, United MileagePlus Explorer VISA or Sapphire Preferred MC? I currently have the SP VISA and was thinking about trading places. The signup bonus for SP is 40K, less than the 55K one could get from the United card. So it’s a smaller bonus, but which is the better card? I already have cards with no foreign transaction fee. The only thing I can reason is the SP gives an annual divided of 7% back annually and 2x for dining and travel, whereas United is only 2x for United travel.

    • @ETY – I’d personally keep the card with the 20 year history. You could call Chase and ask to either convert the Mileage Plus card to a Club card and then cancel your newer Club card. Or ask for a fee-free card since they may have a fee free card which they don’t publicize.

      @Bob
      – The Chase Sapphire Preferred is a better all-round card with the 2X points on travel and dining, but the United card does have a higher sign-up bonus. So it depends on whether you plan on keeping the card for a while or not.

  17. Pingback: Best No Annual Fee Credit Card | Million Mile Secrets

  18. @ETY There is a no-fee United miles card. It earns 1 mile/$, call Chase to downgrade yours.

  19. I’m a bit confused. If I were to cancel my youngest credit card, wouldn’t that increase “The Length of Credit History” given that it is “the average age of your credit accounts”? Any help would be much appreciated.

  20. okay, thank you. that’s interesting. This means that if I were to close an existing card (that has long tenure), there would be no credit impact (aside from credit ratio) for 10 years.

  21. Pingback: Business Credit Card Credit Scores | Million Mile Secrets

  22. Pingback: Churning Credit Score | Million Mile Secrets

  23. Pingback: Warning: The 5 Dangers of Applying for Credit Cards | Million Mile Secrets

  24. Hi, this is my first post!

    I called Citi to cancel an AAdvantage Visa card, and they offered to convert it to a no-fee Citi AAdvantage Bronze Mastercard. I accepted.

    Will this count as a new line of credit and negatively impact my length of credit history, or will it be considered one continuous line of credit? (I as assured that Citi would not make another credit inquiry, and I would retain the same account, just with a different card.)

    Thanks!

  25. Hi Daraius,

    I was wondering if you knew whether the Fidelity AX card issued by FIA Card Services works the same as other AX credit cards in regards to length of credit history. I currently have a Fidelity AX. If I get another AX will they report that card as being opened when the Fidelity AX was, or will that not work since the Fidelity AX is issued by FIA Card Services instead?

    Thanks for all your help!

    • @Jonathan – Welcome! It will be counted as one continuous line of credit because you downgraded the card.

      @Daniel W – I believe it will not work because it has to be an American Express bank (not Citi or FIA Card services) card.

  26. Hi Daraius,

    I was wondering if you can help me with a question I have about the Amex reporting you mentioned:

    I’m planning to apply for my first Amex (Amex Premier Rewards Gold) and I do not intend to keep it when the annual fee hits. Now assuming I won’t get another Amex until I cancel the Premier Rewards Gold card, will my future Amex cards that I applied for after I canceled the Premier Rewards Gold card then have the old date of my first Amex (the PRG) that I would then no longer hold (say May 2013 if I applied for the PRG tomorrow) or would it be the date of that future application since I did not hold an Amex at the time of that application?

    Hope this is somewhat clear.

    Thanks a lot!
    Jan

  27. I already have a Chase Disney Visa– I’m reasonably happy with it. I ALSO have an AMEX Blue Sky Preferred (for about 6 years) & a Discover Card I’ve had over 12 years. To get a $200 statement credit on a reasonably large purchase ($600+ dollars), I opened a NEW Disney PREFERRED Visa instead of just upgrading my current Chase Disney Visa (which was only offering an extra $50 reward certificate. I have high limits on the cards I’ve had a long time and carry zero balances on all of them as I pay them all off in full each month. After I receive my statement credit and pay off the Disney Preferred Visa– I’d like to cancel it as I don’t really want to keep a card with an annual fee. Will this negatively effect my credit score??? The lease is up on my car in the next two months and I don’t want my otherwise basically perfect score to take a hit right before I need to apply for a new lease…

  28. I have had the Chase SW card for 2.5 years. I am wondering if cancelling will hurt my credit score. I have been on time with all payments and I don’t have any balances.

  29. Does anybody know when I can apply for a card after I have canceled the same card that I would be re-applying for? For instance, if I cancel an Aadvantage Citi card now when should I apply for a new card? 1 year, 18 months or 2 years? And are all cards the same in the re-application time?

  30. @Leah – no way to know without details on the rest of your credit report. It won’t affect your Average Account Age, however.

    @StephenM Citi has a very YMMV rule on getting another bonus for personal AAdvantage cards. It doesn’t matter how long it’s been since you canceled the card, but you must not have opened any kind of personal AAdvantage card in the last 12-26 months. If it’s been more than 26 months, you are almost certainly safe to apply for a new AAdvantage card that will get you the bonus again. Less than 12 months, you are almost certainly not eligible. in between, YMMV.

  31. Hi! My name is Greg. I am 25 y/o. I have 2 questions. I have a Capital One Credit card that I have had for 5 years. Me and my parents want to cancel it because Capital One gave a credit card to someone who stole one of my parents SSN, w/o verifying who that person is what so ever. But if I close my CC account with Capital One, could that hurt my credit score big time?

    Also, I made the mistake of getting an American Express Card that I have had for less than a month now. My parents told me AE is not as accepted everywhere else as a VISA card is. I didn’t know that, which I found out on my own recently when I tried to pay for a trim at a hair salon, and it would not accept the card, so I had to get out my Capital One Visa Card. I plan to cancel the new American Express CC as well, even though I have had it for less than a month. So I applied for a new VISA card from a different bank/company, which I will get in the mail 7 days from now.

    I know my Credit scores range from 742 to 765 when I last checked. Plus my FICO I checked last was 763, which is pretty good unlike other young ppl my age. I don’t know much about credit scores or what goes into it (it confuses me), but I want to maintain my good to excellent credit scores for future purposes. Thank you!!

  32. Hello,

    I opened a credit card with Bank of America back in college in 2006 and due to some circumstances, I fell back on making my payments but I paid it all off including interest rates in 2010. However, bank of America will not remove this from my report even after I used Lexington Law to help me approach them in deleting the report, they still will not. The account showed paid in full and closed on my report still.

    How do I go about making BoA remove this from report? Please advise. Thanks.

  33. Pingback: Chase Freedom Sign-Up Bonus Increased to 20,000 Points ($200 Cash Back) | Million Mile Secrets

  34. Pingback: Can Spouses Share an American Express Starwood Preferred Guest and Chase Freedom Account? | Million Mile Secrets

  35. Pingback: When Should You Cancel Your Credit Cards? | Million Mile Secrets

  36. Pingback: Citi Credit Card Refund | Million Mile Secrets

  37. It has been over two years since I received 50,000 bonus signup points for a SouthWest Chase Card. I still have one of them open. How long do I need to wait to reapply after canceling this card?

  38. Hello
    I recently opened a credit card through citi bank (Brandsource) and ive only had it for 6 months now and was wondering if it was a good idea to cancel since i dont use it. I have a 1600 dollar credit line and i dont use it. I was wondering if it was a good idea to just cancel it or just keep it? It dosnt have a annual fee.

  39. Pingback: Does Cancelling Your Credit Card Ruin Your Credit | credit card bonus

  40. Pingback: Effect Cancelling Credit Card Credit Score | credit card bonus

  41. Pingback: Credit Card Conferences 2013 | credit card bonus

  42. A family of each have a capital one venture card for 6 yrs. Should I cancel the card or retain and get each of us another card ( looking for a travel miles card) . Keep the card and get each another card . Any suggestions. Got the delta sky miles and the citi AA dvantage platinum Select in the mail recently. Any help.