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Does Canceling a Credit Card Affect my Credit Score?

Creditors frown on applicants who have a lot of open credit. They can sometimes cause your credit score to lower if you have too many open lines of credit. So keeping many cards may mean that you’ll be turned down for other credit—perhaps credit you really need. And if your credit applications are turned down, your file will contain inquiries from the companies that rejected you. Your credit file will look like you were desperately trying to get credit, something creditors never like to see.

If you want to close some accounts, here are some rules to follow:

• Close accounts you don’t need. You can close an account even if you haven’t paid off the balance. The card issuer will close your account, cancel your privileges and send you monthly statements until you pay off your balance. Or contact the bank whose card you are keeping and ask it to transfer your remaining balance on the account you are closing to the account you are keeping.
• Close accounts on which you are delinquent — otherwise the credit card issuer may close them for you. If you’re delinquent on all your accounts, keep open the most current account.
• If you pay your bill in full each month—that is, you don’t carry a balance—close the accounts with the highest annual fees. Make sure that the accounts you keep open have a
  grace period—a 20-25 day period each month in which you can pay off your bill and not incur any interest.

• If you carry a balance, close the accounts with the highest interest rates and shortest grace periods. Also, read your contract to understand the credit card company’s billing practice. Interest may be calculated on the previous two months’ balance, the average daily balance for the month or your balance at the end of the billing cycle. Keep the cards that charge interest on the balance at the end of the billing cycle.

How to Cancel a Credit Card

If you want to close a credit card account, make sure you do it the right way.

• Write a letter to the company and request a “hard close.” If you don’t do this, the company may give you a “soft close,” which means new charges can go through, even though you asked that the account be closed. With a soft close, you are susceptible to credit card fraud.
• Also request, in writing, that the credit card company report to the credit bureaus that your account was “closed by consumer request.” Accounts that are erroneously reported as “closed by creditor” will hurt your credit rating.
• After 30 days, check your credit report to ensure that it reflects that the account in question was “closed by consumer request.”