Does My Credit Score Decrease if I Close an Account?

The Fair Isaac Corporation -- the company responsible for formulating and assigning FICO credit scores -- does not release its scoring blueprint. It does, however, provide consumers with information regarding the types of financial actions that can raise or lower a credit score. Closing a credit account, for example, does not improve a credit score, and can actually lower it.

Credit Ratios

If you have a high amount of revolving credit on your credit cards, closing an account could cause indirect harm to your credit score. While FICO does not penalize the action of closing the account, it will penalize you for using a high percentage of your available credit. An account closure means a loss of available credit, meaning the gap in your debt-to-credit ratio will get smaller. According to myFICO.com, you should aim to use no more than 35 percent of your available credit at all times.

History

When you close a credit account and pay it off, your creditor will stop reporting your payments to the credit bureau. According to Barry Paperno, a product support manager at FICO, your payment history on a closed account with no balance only remains on your credit report for 10 years. If the account is your oldest account, the closure could negatively affect your score a decade from now, because credit history makes up 35 percent of your FICO credit score.

Credit Types

Consumers who use multiple types of credit receive FICO score boosts. Fair Isaac Corporation ranks types of credit -- categorizing accounts by mortgages, auto loans, personal loans, bank credit cards and store credit cards. If by closing an account you effectively eliminate one of these types of credit from your credit report, your FICO score may decrease. The type of credit you use affects 10 percent of your credit score. The degree to which your score will lower depends on the type of credit account you cancel. For example, closing all of your store credit cards will inflict less damage to your score than closing your major bank credit cards.

Considerations

Do not close any accounts with the sole intention of improving your credit score. Paperno says that closing an account will never improve your credit score -- no matter how poor your account history. Instead, improve your score by making timely payments, maintaining a low debt-to-credit ratio and diversifying the types of credit available to you.