A credit card can be canceled without harming your credit score; just remember that paying down credit card balances first (not just the one you're canceling) is key. Closing a charge card won't affect your credit history (history is a factor in your overall credit score).
In general, it's best to keep unused credit cards open so that you benefit from a longer average credit history and a larger amount of available credit. Credit scoring models reward you for having long-standing credit accounts, and for using only a small portion of your credit limit.
You shouldn't close a credit card that has been open for a long time or a card with a high credit limit. Closing the account could negatively affect your credit history and credit utilization, and in turn, lower your credit score.
The numbers look similar when closing a card. Increase your balance and your score drops an average of 12 points, but lower your balance and your score jumps an average of 10 points. Two-thirds of people who open a credit card increase their overall balance within a month of getting that card.
Credit utilization — the portion of your credit limits that you are currently using — is a significant factor in credit scores. It is one reason your credit score could drop a little after you pay off debt, particularly if you close the account.
When you close a credit card, you'll no longer be able to use it. You're still responsible for making payments on the outstanding balance of the card. Depending on the type of rewards earned from the card, you may lose access to them. It's important to consider your rewards before closing an account.
Cons of Closing A Credit Card
When you close an account, you lose the credit limit available on the card. This will increase your credit use or the percentage of credit you're using. Your credit utilization is one of the factors credit bureaus use when determining your credit score.
Closed accounts that have missed payments associated with them will remain on your credit report for seven years. While your scores may decrease initially after closing a credit card, they typically rebound in a few months if you continue to make your payments on time.
Canceling a credit card — even one with zero balance — can end up hurting your credit score in multiple ways. A temporary dip in score can also lessen your chances of getting approved for new credit.
Closing unused credit card accounts may sound like a good idea, but it could hurt your credit score because of increased utilization and, eventually, shorter credit history.
Key Takeaways. People close credit cards for many reasons, including excessive spending, avoiding high-interest rates, or protection from identity theft. Closing credit card accounts can have an adverse effect on your credit score, mostly because it decreases your credit utilization.
"Too many" credit cards for someone else might not be too many for you. There is no specific number of credit cards considered right for all consumers. Everyone's credit history is different. Lenders tolerate different levels of risk, and different credit scoring formulas have different criteria.
How many credit accounts is too many or too few? Credit scoring formulas don't punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
In general, you shouldn't close a credit card unless you have a good reason. A credit card cancellation will not improve your credit score, and it won't remove a negative account from your credit report either.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Keeping just one credit card in your wallet means there's no margin for error if your card gets declined. You're probably not maximizing rewards. Although using one credit card will help you build rewards faster, you're probably not maximizing the miles, points or cash back you're earning.
Cardholders with unused credit cards often won't pay attention to cards, billing statements or notifications. This is usually fine when there's no balance to pay off, but after a long period of inactivity a card issuer may close a credit card account. The exact length of time varies among issuers.
Bottom line
Experts generally don't recommend you ever cancel a credit card, unless you're paying for it (such as in the form of an annual fee) and not ever using it. And if this is the case, canceling a card once probably won't hurt you as long as you have a healthy credit history otherwise.
It's Best to Pay Your Credit Card Balance in Full Each Month
Leaving a balance will not help your credit scores—it will just cost you money in the form of interest. Carrying a high balance on your credit cards has a negative impact on scores because it increases your credit utilization ratio.
Your FICO® Score falls within a range, from 740 to 799, that may be considered Very Good. A 750 FICO® Score is above the average credit score. Borrowers with scores in the Very Good range typically qualify for lenders' better interest rates and product offers.
Despite what you may have heard through the grapevine, it's always better to pay off your entire balance — or credit debt — immediately. Not only will this save you time and money, but it'll reflect well on your credit score.
A 0% credit utilization rate has no real benefit for your credit score. Instead of aiming for no utilization, keep your credit utilization rates below 30%, and preferably under 10%, to help your credit.
Most conventional loans require a credit score of at least 620 to buy a house. But, you'll find that there are several other loan types that have much lower requirements. A lot of first-time home buyers worry that their credit scores are too low to buy a home.