Closing a credit card can hurt your credit score — but whether it actually does depends on your specific credit profile. The two main risks are increased credit utilization and reduced average account age. Here's when closing a card matters and when it doesn't.
Risk 1: Credit Utilization Increases
Credit utilization — the percentage of your available credit you're using — makes up 30% of your FICO score. When you close a credit card, you lose that card's credit limit, which increases your overall utilization ratio.
Example: If you have $10,000 in total credit limits and $2,000 in balances, your utilization is 20%. If you close a card with a $3,000 limit, your total limit drops to $7,000 and your utilization jumps to 28.6% — a meaningful increase that can lower your score.
✓ Pros
- Build or rebuild credit history
- Earn rewards on everyday spending
- Fraud protection & zero liability
- Free FICO score on statements
✗ Cons
- High APR if you carry a balance
- Low initial credit limits
- Annual fees on some cards
- Hard inquiry on application
Risk 2: Average Account Age Decreases
The length of your credit history makes up 15% of your FICO score. Closing an older account reduces your average account age, which can lower your score — especially if it's one of your oldest accounts.
However, closed accounts remain on your credit report for up to 10 years and continue to factor into your average account age during that time. The impact of closing an old account is often smaller than people expect.
When It's Safe to Close a Credit Card
Closing a card has minimal impact if: (1) you have multiple other cards with high limits (so utilization barely changes), (2) the card has a high annual fee that outweighs its benefits, (3) it's not one of your oldest accounts, or (4) you're not planning to apply for a major loan (mortgage, auto) in the next 6–12 months.