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Improving credit score by closing accounts

New Visitor

Improving credit score by closing accounts

My score was downgraded for "Amount of new credit". Can I improve my score by closing recent credit card accounts, most of which I seldom use?

 

Thanks.

Message 1 of 6
5 REPLIES
Moderator Emeritus

Re: Improving credit score by closing accounts

No, in fact closing some cards could have an adverse impact on FICO. Whenever you open any new account you'll get dinged due to the new credit as well as the potential for a negative hit on your AAoA (average age of accounts). Many post losses after it first report. On average, I've lost 20-25 when adding new CCs, loans, etc. That ding is temporary and usually by one year any impact has been erased. For some, they've posted gains when adding a new CC, but that's usually due to a positive impact on a mix of credit and/or positive impact to CC utilization. Usually after 3-4 CCs then that ding becomes apparent.

 

If you close accounts, then once closed, they'll forever be removed from utilization calcs. So, if you carry balances on your other CCs then closing old ones with a $0 balance will increase utilization and potentially decrease your FICO. In the long term, the CRAs will delete the account usually 10 years from closure. Once deleted you lose a longer history and that can negatively impact FICO as well. It's best practice to keep them open for as long as possible and use them every 3-4-5 months for a cup of coffee and then pay in full.

 

 

Message 2 of 6
New Visitor

Re: Improving credit score by closing accounts

Let me be more precise with my question. If I close a credit card account that home depot automatically renewed for me in Aug 2012, will my score go up? I used it in the past on one of those no interest deals but am not likely to use it again.

Message 3 of 6
Established Member

Re: Improving credit score by closing accounts

No. Closed account will stay on your credit report for 10 years.

Message 4 of 6
Super Contributor

Re: Improving credit score by closing accounts


thomastrout wrote:

Let me be more precise with my question. If I close a credit card account that home depot automatically renewed for me in Aug 2012, will my score go up? I used it in the past on one of those no interest deals but am not likely to use it again.


Closing a credit card won't HURT your FICO score unless your revolving utilization increases as a result of lowering your revolving credit limits  ( i.e. number of cards with balances, utilization%..)

 

Closing a credit card won't boost your FICO score.

 

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 5 of 6
New Visitor

Re: Improving credit score by closing accounts

Thanks for the information.

Message 6 of 6