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Why Closing Credit Cards Destroys Your Credit

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impact of closing credit card on credit score

Managing your credit can be overwhelming. The slightest action can have a long term negative impact on your credit score and cost you thousands of dollars in interest payments.

Let’s take a look at the most common mistake consumers make while working on their credit.

Closing Old Credit Cards Accounts


Although it is logical to think that paying off your credit cards and closing the accounts should increase your credit score, the reality is actually quite the opposite.

    • Closing your credit cards will lower your credit score because 30% of your credit score is calculated by how well you manage your debt and use your available credit. Ideally, you should use no more than 30% of the credit limit on your credit cards, meaning if you have a card with a $1,000 limit, your balance should never exceed $300.
    • Closing old accounts will lower your average length of history and decrease your credit score. 15% of your credit score is calculated by the average length of your accounts.
  • Closing your credit card accounts may put your mix of credit out of balance and decrease your credit score. 10% of your credit score is calculated from having a good mix of credit. This means that you should have a mix of both installment accounts such as mortgages, auto loans, student loans, and revolving accounts such as credit cards.

Most debt counselors advise consumers to close old credit card accounts so that they won’t be tempted to incur more debt.

Although it’s a great way of cutting off the temptation to use your credit cards, it absolutely destroys your credit score.


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