Closing an account usually lowers your credit score, but the damage depends on which type of account you close and how long you've had it

When you close a credit card, loan, or other account tied to your credit history, the scoring models that calculate your credit score lose information they use to build that number. The impact is not the same for every account. Closing a credit card typically hurts more than paying off and closing a loan. Closing a bank account (checking or savings) does not affect your credit score at all, because banks do not report those accounts to credit bureaus.

The damage is temporary. Your score will recover over time as the closed account ages and as you build positive payment history with your remaining accounts. But understanding which accounts matter and why will help you decide whether closing something now is worth the short-term hit.

Key Takeaways

  • Closing a credit card lowers your available credit and usually drops your score by 10 to 50 points, depending on how much of your credit limit you were using.
  • Closing a loan (car, personal, mortgage) after you pay it off has less impact than closing a credit card, because you were not using that credit anyway.
  • Closing a bank account does not affect your credit score because banks do not report checking or savings accounts to credit bureaus.
  • The older the account you close, the more your score may drop, because credit bureaus value long account history.
  • Your score recovers as the closed account ages and as you keep other accounts in good standing.

Why closing a credit card hurts your score more than closing a loan

Credit scoring models care about two things when you close an account: how much credit you had available, and how long you have been using credit. When you close a credit card, you lose both. The card is no longer available to borrow from, so your total credit limit shrinks. At the same time, the account stops building your credit history.

A loan works differently. When you pay off a car loan or personal loan and close it, you were not using that credit anyway—you were paying it down. The scoring model does not penalize you as much because you were not relying on that available credit. The account still stops building your history, but the loss of available credit is smaller.

The biggest factor is credit utilization—the percentage of your available credit that you are actually using. If you close a credit card and you were using 30 percent of your total available credit across all your cards, your utilization jumps. If you had $10,000 in total credit limits and were using $3,000, your utilization was 30 percent. Close a card with a $5,000 limit and your total credit drops to $5,000—now that same $3,000 is 60 percent utilization. Higher utilization scores lower.

How age of the account affects the score drop

Credit bureaus track how long you have been using credit. Older accounts are worth more to your score than new ones. If you close a card you have had for 15 years, the damage is usually larger than closing a card you opened last year.

This is because the scoring model assumes that a long history of on-time payments is a sign of reliability. When you close that old account, you lose those years of history. The account will stay on your credit report for seven years after you close it, so the damage is not permanent—but the active history stops growing the day you close it.

If you are thinking about closing an old account, consider keeping it open and unused instead. Many people close old cards to "clean up" their credit report, but an old card sitting unused with a zero balance actually helps your score more than closing it.

Bank accounts do not appear on your credit report

Checking accounts, savings accounts, and money market accounts are not reported to credit bureaus. Closing a bank account has no effect on your credit score. Banks look at your banking history (through ChexSystems or Early Warning Services) when you explore for a new account, but that is separate from your credit score.

You can close a bank account without worrying about credit damage. The only consequences are practical ones: you lose access to that account, and if you have automatic payments or direct deposits set to that account, you need to update them before you close it.

How long the score drop lasts

The damage from closing a credit card or loan is not permanent. Your score will begin to recover within a few months, especially if you keep your other accounts in good standing and do not miss any payments.

The closed account stays on your credit report for seven years, but its impact weakens over time. After about six months to a year, the score drop is usually much smaller. After two to three years, the account has little effect on your score. The older the closed account becomes, the less it matters.

If you are planning to explore for a mortgage, car loan, or other credit in the next few months, closing an account right before you explore will hurt your timing. Lenders pull your credit score at the moment you explore, so a recent account closure will show as a lower score. If you can wait six months or a year before explore, the impact will be smaller.

When closing an account might still be the right choice

Even though closing an account lowers your score, there are situations where it makes sense. If you have a credit card with an annual fee and you are not using it, closing it might save you money. If you are carrying a balance on multiple cards and closing one helps you focus on paying down debt faster, the short-term score drop may be worth the long-term benefit of being debt-free.

If you are closing an account because you are worried about fraud or identity theft, close it. Your credit score matters, but your security matters more. You can rebuild your score after you find your accounts.

The key is to think about timing. If you are not planning to borrow money in the next six months to a year, closing an account now will have time to stop affecting your score before you need to explore for credit. If you are planning to buy a house or car soon, consider waiting until after you have closed that loan before you close other accounts.

What to do before you close a credit card

If you have decided to close a credit card, take these steps to minimize the damage. First, pay off the balance completely. Closing a card with a balance still owed can hurt your score more than closing a paid-off card.

Second, make a note of any automatic payments or subscriptions charged to that card. Update them to a different card or payment method before you close the account. If a payment fails because the card is closed, you could miss a payment and damage your score far more than the account closure itself.

Third, contact the card issuer and ask them to close the account. Do not just stop using it and assume it will close on its own. Some cards will close automatically after a long period of inactivity, but others stay open indefinitely. You want to control the timing so you know when the account closure will hit your credit report.

Finally, keep an eye on your credit report after the closure. You can get a free copy of your credit report once per year from AnnualCreditReport.com. Check it to make sure the account is reported as closed and that there are no errors.

Frequently Asked Questions

Will my credit score recover if I close a credit card?

Yes. Your score will drop initially, but it will begin to recover within a few months as you continue to make on-time payments on your other accounts. After six months to a year, the impact is usually much smaller. The closed account stays on your report for seven years, but its effect on your score weakens significantly after two to three years.

Does paying off a loan and closing it hurt my credit score?

Closing a loan after you pay it off has less impact than closing a credit card, because you were not using that available credit. You will see some score drop because the account stops building your history, but the damage is usually smaller—often 10 to 20 points instead of 30 to 50. The impact is temporary.

What if I close a credit card but keep using the other cards responsibly?

Keeping your other cards active and in good standing will help your score recover faster. Make on-time payments, keep your balances low, and do not open new cards right after closing one. The combination of responsible use on your remaining accounts and time will bring your score back up.

Should I close old credit cards to clean up my credit report?

No. Old cards actually help your score because they show a long history of credit use. Closing an old card usually hurts your score more than keeping it open unused. If the card has no annual fee, consider leaving it open with a zero balance. If it has an annual fee, you can call and ask the issuer to downgrade it to a no-fee version.

Does closing a bank account affect my credit score?

No. Bank accounts are not reported to credit bureaus, so closing a checking or savings account has no effect on your credit score. You can close a bank account without worrying about credit damage. Just make sure to redirect any automatic payments or direct deposits before you close it.