How to Close Credit Cards Without Damaging Your Credit Score

Paying on your credit card accounts and maintaining good credit often results in a credit limit increase and additional credit card offers. There is nothing wrong with having credit card accounts, as long as you use these accounts responsibly. What’s more, bad credit cards have helped many people re-establish their credit and build strong scores – but what if you’re ready to decrease your number of credit cards?
Closing credit card accounts that you no longer use may seem wise, especially if you’re looking to simplify your finances. However, there is a wrong and a right way to close down your accounts. Credit scores are based on numerous factors, including the length of your credit history. The longer you’ve had a credit card (or any type of credit) in your name, the higher your personal FICO credit score. {Also read Why Cancelling a Credit Card Hurts Your Personal Credit Rating}

Whether you have unsecured credit cards or bad credit cards, closing your accounts can possibly reduce your credit score. This is because canceling the account can reduce your overall credit history. The actual damage varies, but your score can drop 15 or 20 points after closing an older account. This single move can damage your prime rating and result in a higher interest rates on loans.

Cancel the Youngest Card to Reduce Credit Damage

Closing or canceling an older card will cause some credit damage, however, you can minimize the damage by keeping your oldest account open and closing your newer accounts. Closing the oldest account can greatly reduce your credit history, but if you were to keep this account open and cancel another account, the length of your credit history remains the same. Thus, helping keep your credit score intact. Read your statements or call your credit card company for information regarding the date that you opened your account.

Lowest Credit Limit

It also helps to close the account with the lowest credit limit. The wider the gap between your balance and your credit limit, the better. Accounts with low limits ($300 to $500) increase the risks of having a high utilization ratio, which can damage your credit score. However, if you have a credit card with a higher $1,000 credit limit and you maintain a balance of $200, your utilization ratio is less than 30 percent, which helps improve your score.

Close Accounts Slowly

Don’t close multiple accounts within the same day, week, or even month. Take your time. Close one account, wait six months, and then close another account. Canceling several accounts within a short period can cause a huge decrease in your credit score.

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