Is it better to let a credit card expire or close it?

Asked by: Otis Shanahan  |  Last update: February 9, 2022
Score: 4.7/5 (66 votes)

You've likely heard that closing a credit card account may damage your credit score. And while it is generally true that cancelling a credit card can impact your score, that isn't always the case. Typically, leaving your credit card accounts open is the best option, even if you're not using them.

Is it better to cancel unused store credit cards or keep them?

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.

What happens if you let a credit card expire?

After a credit card expires, it will no longer be possible to use it to make purchases—either in-store or online. Most credit card issuers automatically mail cardholders a replacement card 30 to 60 days before the card's expiration date. The new card will have a new expiration date and new CVV security code.

Why shouldn't you close your old credit card?

If the credit card is one of the oldest accounts on your credit report, closing it will shorten the average age of your credit history and negatively affect your score. Your credit utilization may also be affected by reducing the amount of credit you have available.

How many points does closing a credit card affect your credit score?

Closing a credit card won't immediately affect your length of credit history (worth 15% of your FICO Score) by lowering your average age of credit. Even after you close a positive account, it may remain on your credit for up to 10 years.

Should I Close a Paid Credit Card Or Leave It Open?

35 related questions found

Should I cancel my credit card after I pay it off?

I'm guessing you are asking about credit cards. If so, the short answer is usually no, you don't need to close the accounts. Paying down or paying off your credit cards is great for credit scores, but closing those accounts will likely cause your credit scores to dip, at least for a little while.

What is an excellent credit score?

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.

Is 2 years of credit history good?

Most lenders (and scoring models) consider anything less than two years of credit history to be little more than a decent start. ... It's not until you have seven to 10 years of solid credit history that you'll score top marks for this credit factor.

Does closing credit accounts hurt your credit score?

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).

How old should your oldest credit card be?

You have to have seven years of credit history to have “good credit” at all. Because of the seven-year rule, you can have a spotless payment history, but still get turned down for certain credit cards if your history doesn't go back at least seven years. Why is that?

When your credit card expires Do they send you a new one?

Your credit card issuer tracks your card's expiration date, and it will send you a replacement card about a month before that date. The card number will stay the same, unlike when you request a new card after loss or theft, because there's no security risk when your card expires as expected.

How far out do credit card expiration dates go?

Like all good things in life, credit cards must at some point come to an end. More specifically, all credit cards have expiration dates. They typically fall three years after a card is first activated, and you can use your card without interruption through the end of the listed month (e.g. 12/16 means Dec. 31, 2016).

What do I do with expired credit cards?

All you have to do with expired credit and debit cards is cut them up with scissors and throw them away in the trash. Some paper shredders also have a slot for credit and debit cards that makes it easy to destroy them along with other important documents you no longer need.

How do I get rid of a credit card without hurting my credit?

How to Cancel a Credit Card Without Hurting Your Score
  1. Consider the Timing and Impact on Your Credit. ...
  2. Pay Down the Balance. ...
  3. Remember to Redeem Any Rewards. ...
  4. Contact Your Bank to Cancel. ...
  5. Don't Accept Their Offers. ...
  6. Write a Letter for Your Records. ...
  7. Check Your Credit Report to Ensure the Account Is Closed.

Do banks close inactive credit card accounts?

Banks can and do close inactive accounts. So make sure you keep your accounts active to avoid potential damage to your credit score. ... Unfortunately, you may get a letter in the mail saying the company is shutting down your credit card due to inactivity if you don't use a particular card for an extended period of time.

Is four credit cards too many?

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. Having very few accounts can make it hard for scoring models to render a score for you.

What happens when you close a credit card with zero balance?

By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.

What are the disadvantages of closing a credit card account?

Cons of closing an old credit card
  • You could reduce the average age of your credit history: The average age of your account history affects your credit score. ...
  • You could hurt your credit utilization ratio: You could also damage your credit in another way by canceling an old credit account.

Why did my credit score drop when I close an account?

You closed your credit card. Closing a credit card account, especially your oldest one, hurts your credit score because it lowers the overall credit limit available to you (remember you want a high limit) and it brings down the overall average age of your accounts.

Can I buy a house with a 702 credit score?

A 702 credit score is considered a good credit score by many lenders. “Good” score range identified based on 2021 Credit Karma data. With good credit scores, you might be more likely to qualify for mortgages and auto loans with lower interest rates and better terms.

Can I buy a house with 716 credit score?

Can I get a home loan with a credit score of 716? The minimum credit score is around 620 for most conventional lenders, so you should be able to qualify.

What's a decent credit score to buy a house?

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.

Is it better to have a 0 balance on your credit card?

The standard recommendation is to keep unused accounts with zero balances open. A zero balance on a credit card reflects positively on your credit report and means you have a zero balance-to-limit ratio, also known as the utilization rate. Generally, the lower your utilization rate, the better for your credit scores.

What does FICO stand for?

A FICO score is a credit score created by the Fair Isaac Corporation (FICO). 1 Lenders use borrowers' FICO scores along with other details on borrowers' credit reports to assess credit risk and determine whether to extend credit.

Is paying off a car good for credit?

Paying off your car loan will reduce your DTI ratio, making it easier to get other types of loans. You Have a Good Credit Mix. A car loan helps to improve your credit mix, which contributes to a better credit score.