You’re thinking about closing a credit card or loan account... maybe to simplify your finances, avoid an annual fee, or because you no longer use it. But did you know closing an account can actually lower your credit score if not done strategically?

This week, we’ll break down when to close an account, when to keep it open, and how to do it the right way.

How Closing an Account Affects Your Score

Closing a credit account can negatively impact your score in two major ways...

📉 1. It Lowers Your Available Credit (Hurting Utilization Rate)

• • • • Your credit utilization ratio (how much credit you’re using vs. available limit) makes up 30% of your score.
      • Example: If you have $10,000 in total credit and owe $2,000, your utilization is 20%.
      • If you close a $5,000 credit card, your total credit limit drops to $5,000—raising your utilization to 40% (which can hurt your score!).

⏳ 2. It Shortens Your Credit History (Hurting Credit Age)

• • • • 15% of your credit score is based on the average age of your credit accounts.
      • If you close an old account, it can reduce your average account age over time—which lowers your score.

Action Step: Check your credit utilization and account age before closing any account to see how much impact it may have.

The Smart Way to Close Credit Accounts

✅ DO: Pay Off the Balance First

Make sure the balance is fully paid off before closing an account to avoid unexpected interest charges.

✅ DO: Keep Your Oldest Credit Card Open (If Possible)

Your oldest account helps maintain your credit age—closing it could shorten your history.

✅ DO: Consider Downgrading Instead of Closing

If the card has an annual fee, ask the issuer if you can switch to a no-fee version instead of closing it.

✅ DO: Reduce Utilization Before Closing

If you’re closing a credit card, pay down other balances first to keep your utilization ratio low.

✅ DO: Get Written Confirmation

After closing an account, ask for written confirmation from the lender that it was closed in good standing.

When Should You Close a Credit Account?

Closing a credit account isn’t always bad! Here are valid reasons to consider it... 

✔️ High Annual Fees with No Benefits

If the card’s perks aren’t worth the cost, switching or closing might make sense.

✔️ High-Interest Rates You Can’t Negotiate

If you’re not using the card and it has high interest, closing it might be the right choice—but only if it won’t hurt your score too much.

✔️ You’re Tempted to Overspend

If having the card makes it too easy to fall into debt, closing it could be a good self-control strategy.

Mindset Tip: Think of your credit accounts as tools. The goal isn’t to have the most—it’s to have the right ones for your financial future.

Managing Credit Accounts the Smart Way

🔹 Credit Score Simulators – Use tools like Credit Karma to see how closing an account might impact your score.

🔹 Credit Monitoring Apps – Use Experian or MyFICO to track your score before and after closing an account.

Closing a credit account is a big decision—and it’s not always the best move. Before you close, consider the impact on your score, credit age, and utilization rate. If you decide to go through with it, follow the right steps to minimize any negative effects.

Your credit is a long-term game—play it smart! 💡💳

Until next week,
Credit Coach Rob 🚀