Why Closing an Unused Credit Card Hurts Your Score


credit card advice

Laura Slawny
By: Laura Slawny
Posted: June 26, 2015
Our personal finance experts dish out the most trusted credit card advice on the web, including juicy tips, tricks and secrets from inside the credit card industry.

Everyone wants a better credit score. It can help you get better interest rates, mortgages and car loans, as well as great perks that only come with the very best rewards cards.

One of the biggest mistakes people make is they consolidate their debt on to a new low interest card and then close the older accounts.

This can work against you in three ways.

1. Balance transfer carry fees

Whenever you transfer a balance to a new card or account, you usually have to pay a fee and/or a higher interest rate.

Even if you get a new card with a limited introductory zero percent APR, there are usually fees tacked on. Plus, if you don’t pay off the balance within the designated time frame, your interest rate will skyrocket and you can wind up even deeper in debt.

2. Closing your oldest credit lines can lower your score

Fifteen percent of your FICO credit score is calculated based on the length of your credit history. Holding the same credit line for 10, 15 or 20 years shows you have been a steady customer.

Do not close an unused credit card from the past that may have been helping your score.

“A credit history with the same

lender makes you a better risk.”

3. Closing credit lines will change your utilization ratio

This is the percentage of the total amount you could owe if you maxed out all of your credit lines compared to the amount you currently owe. A high ratio can work against you.

Compare these examples that show a combined $1,000 balance if you have two, three or four credit cards, each with a maximum $1,000 credit line.

The balance remains the same, but as you close accounts, the total credit that is available to you shrinks. The percentage of what you owe, divided by what you could owe, is your credit utilization ratio.

Total Cards


Balance Owed

Total Available Credit


Utilization Ratio

4 $1,000 $4,000 25%  (1,000 ÷ 4,000)
3 $1,000 $3,000 33%  (1,000 ÷ 3,000)
2 $1,000 $2,000 50%  (1,000 ÷ 2,000)

You can see that with only two credit lines, you are borrowing 50 percent of your maximum amount – and that doesn’t look good to lenders.

If you want to boost your credit score, don’t close your accounts.

Instead, pay off the balance and quit adding new debt. This will allow you to maintain your maximum credit line in the case of emergencies and lower your utilization score.

Want some other ways to boost your credit score? Check your credit report at least three times a year, pay your bills on time and never let your debt go to a collection agency.

You could also apply for a secured card, which will both prevent you from taking on more debt and also report your activity to the big three credit reporting bureaus.

Photo source: come2dallas.com.