Keep Your Credit When You Close a Card


You’ve probably heard that closing a credit card is the worst offense you can commit.

While that’s certainly not true, despite the powers that be instilling fear into our lives on a daily basis, your credit score can be impacted by the closure of a credit account.

If you wondering why it can hurt your score, the answer is relatively simple.

For one, that credit card was providing a line of credit, which is no longer available once it’s closed.

This means your aggregate credit limit is lower and your credit utilization is likely higher.

Additionally, you will shorten your credit history because that card will no longer contribute to your credit age once it falls off your credit report. And subsequent accounts will make it even younger.

So closing a super old credit card with a large credit limit could result in a double whammy as far as your credit score is concerned.

Of course, the impact of the whammy might not be all that significant. It will vary based on your overall credit profile, which includes how many tradelines you have open, how deep your history is, and so on.

However, if you don’t have any outstanding balances on your other credit cards, it shouldn’t hurt you because your utilization should remain at zero.

Do the Shuffle

Anyway, one way to minimize this potential blow is to shuffle the credit line before you close the account.

That way you get to keep your old credit while closing the card you no longer want.

This trick can come in handy if you’ve got a credit card with an annual fee that you don’t feel is worth paying.

Or if you simply want to clean up shop and minimize your inactive tradelines. For the record, I close credit cards I don’t use unless they provide some benefit to me.

And cards with annual fees often get the ax, typically after being waived for the first year, unless they are super beneficial.

But before you close your credit card, determine if you can reallocate the credit limit on the card.

For example, if you have an American Express credit card with a $10,000 limit that you never use, and another Amex credit card with a $5,000 limit that you plan to continue using, ask them to move the $10,000 balance to the card you use.

They should be able to move most of the inactive card’s limit to the card you actually use. Once that’s completed you can go ahead and close the card you never used in the first place.

And in the end, you’ll have one credit card with most of the aggregate credit limit, ~$15,000, meaning you’ll only lose out on having that extra account history, not its valuable credit limit.

This could soften the blow of any credit hit related to closing your credit card. And you’ll have a larger line of credit on the card you do use, which could also prove beneficial.

Just keep in mind that it might be more difficult to get approved for a subsequent credit card with the same issuer if you’ve already got the max amount of credit extended.

But you can generally get around this with a phone call and another reallocation to the new card.

Also note that this only works for personal to personal credit cards, or business to business cards, since they are treated separately.

One last caveat. When it comes to Bank of America credit cards, you may want to cut the credit line before closing.

The reason being is that they oddly “freeze” your credit line for around a year after you close the card.

So if you attempt to apply for another card from Bank of America within that time period, they’ll consider any recent closed credit line unavailable.

For example, if you closed a BofA card with a $25,000 limit, and the max they’ll let you borrow is $30,000 in aggregate, you may only get a credit line of $5,000 on the new card.

Or you’ll simply be denied if not enough credit is available!

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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