Cancelling a credit card will lower your credit score, usually by 10 to 45 points, because it reduces the total credit available to you and can raise the percentage of your credit you are actually using.
The damage is temporary — your score will recover over time — but the timing and size of the drop depend on your current credit mix, how much debt you carry, and whether you have other cards. If you cancel a card when you have high balances on other cards, the hit is larger. If you cancel a card you rarely used, the hit is smaller.
The decision to cancel should rest on whether you actually need the card. If you are cancelling to stop overspending, closing it makes sense. If you are cancelling because you think it will improve your score, you are making the wrong trade.
Key Takeaways
- Cancelling a credit card reduces your available credit, which raises your credit utilization ratio and lowers your score by 10 to 45 points in most cases.
- The damage is larger if you carry high balances on other cards, because closing a card shrinks the total credit you can use without increasing your debt.
- Your score will recover within a few months to a year as you pay down balances and the closed account ages.
- If you want to close a card without harming your score as much, pay down balances on remaining cards first, then cancel.
- Cancelling a card you never used causes less damage than cancelling one you use regularly, because the unused card was not helping your score much anyway.
Why cancelling a card hurts your score
Your credit score is built from five factors: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%). Cancelling a card damages two of these.
The first is credit utilization — the percentage of your total available credit that you are actually using. If you have $10,000 in total credit limits across all cards and you owe $3,000, your utilization is 30 percent. If you cancel a card with a $4,000 limit, your total available credit drops to $6,000, and your utilization jumps to 50 percent ($3,000 ÷ $6,000). Credit bureaus see high utilization as a sign you are financially stretched, so your score drops.
The second is credit mix — the variety of credit types you hold. Credit cards, car loans, mortgages, and personal loans all count. If the card you are cancelling is your only credit card, closing it shrinks your mix and lowers your score. If you have three other cards, the damage is smaller.
How much your score will drop
The size of the drop depends on your current situation. If you have a high credit score (750 or above), you will usually lose 10 to 25 points. If your score is lower (below 650), the drop can be 30 to 45 points, because you have less room to absorb the change.
The drop is also larger if the card you are cancelling has a high credit limit. A $10,000 limit matters more to your utilization ratio than a $1,000 limit. Cancelling a card with a $500 limit when you have $50,000 in total credit will barely move your score. Cancelling a card with a $5,000 limit when you have $6,000 in total credit will hit you hard.
If you carry balances on other cards, the damage is worse. Say you owe $2,000 total and have $10,000 in available credit (20 percent utilization). If you cancel a $3,000 card, your available credit drops to $7,000, and your utilization jumps to 29 percent. The higher utilization ratio is what hurts your score.
How long the damage lasts
Your score will begin to recover within a few months, especially if you keep paying your bills on time and do not take on new debt. Most people see their score return to its pre-cancellation level within 6 to 12 months.
The closed account will stay on your credit report for up to 10 years, but it stops affecting your score as much once it ages. After about two years, the impact is usually minimal.
The fastest way to recover is to pay down balances on your remaining cards. If you cancel a card and then pay your other card balances down to 10 percent utilization or lower, your score will rebound faster than if you leave those balances where they are.
When cancelling a card makes sense anyway
A temporary score drop is worth it if the card is costing you money or enabling bad spending habits. If the card has an annual fee you do not want to pay, cancelling saves you that fee every year — a trade worth making. If you are cancelling because you overspend when you have the card available, closing it removes the temptation and protects your finances more than protecting your score.
Cancelling a card also makes sense if you have so many cards that managing them is becoming difficult. Fewer accounts to track means fewer missed payments, and a missed payment hurts your score far more than cancellation does.
If you are cancelling to stop fraud or unauthorized use, cancel when ready. The score hit is temporary; identity theft is not.
How to cancel with less damage
If you have decided to cancel, take these steps to minimize the score drop. First, pay down balances on your other cards as much as you can before you cancel. This lowers your utilization ratio on the cards you are keeping, which offsets some of the damage from losing the cancelled card's available credit.
Second, cancel the card with the smallest credit limit if you have a choice. A $1,000 limit matters less to your total available credit than a $5,000 limit.
Third, do not cancel multiple cards at once. If you need to close more than one account, space them out by a few months. This spreads the score damage over time and gives your score a chance to recover between cancellations.
Fourth, do not cancel a card when ready after opening it. New accounts help your score, and closing one right away signals instability to credit bureaus. Wait at least six months to a year before cancelling a new card.
What to do instead of cancelling
If your only reason for cancelling is that you think it will help your score, consider keeping the card open instead. An open card with a zero balance helps your score by keeping your utilization low and maintaining your credit mix.
If you want to stop using the card without closing it, put it away. Cut it up if you need to. An inactive card does not hurt your score, and the issuer will not close it for you unless you have not used it for several years.
If the card has an annual fee and you want to avoid paying it, call the issuer and ask if they will waive the fee or convert the card to a no-fee version. Many issuers will do this to keep your account open.
Frequently Asked Questions
Will closing a credit card hurt my credit score when ready?
Yes. The score drop usually happens within a few days of cancellation, once the card issuer reports the closure to the credit bureaus. You may see the drop reflected in your credit report within one to two weeks.
Can I cancel a credit card without hurting my credit score?
No. Cancelling always lowers your score because it reduces your available credit and can raise your utilization ratio. The only way to avoid the hit is to keep the card open.
Is it better to cancel a card or let it sit unused?
Letting it sit unused is better for your score. An inactive card with a zero balance helps you by keeping your available credit high and your utilization low. The issuer may eventually close it for inactivity, but that takes years.
How long does it take for my credit score to recover after cancelling a card?
Most people see their score return to pre-cancellation levels within 6 to 12 months, assuming they keep paying bills on time and do not take on new debt. Paying down balances on remaining cards speeds up recovery.
Should I cancel a credit card with a high interest rate?
If you are not carrying a balance on it, cancelling will hurt your score more than keeping it open. If you are carrying a balance, paying it down first, then cancelling, is better than cancelling with the balance still there.