How to Cancel Credit Cards With No Penalty to Your Credit Score

When you want to cancel a credit card, consider the impact on your credit score. If you will be applying for a loan in the future, you should ensure that canceling the card will not decrease your credit score. The main way that canceling a credit card hurts your score is by increasing your credit utilization ratio -- which is the amount of debt you carry relative to your credit limit. The closer you are to your limits, the higher your credit utilization ratio becomes and the worse your credit score gets. When you cancel a card, you reduce your overall limit and can hurt your credit score unless you meet some specific conditions.

Instructions

Decrease Utilization

1

Pay off the credit card balance in full. If you cancel a card that still has a balance, it shows up on your credit report as having an equal balance and credit limit. This is called being maxed out, and it damages your credit score.

2

Add up your total credit limits across all cards. For example, assume the card you want to cancel has a limit of $4,000. Your other cards have limits of $2,000, $7,500 and $4,800. Therefore, your total credit limit is $18,300.

3

Add up your total outstanding balances on all your credit cards. Find these on your most recent credit card statements. For example, assume the card you want to close has no balance, but your other cards have balances of $562, $3,220 and $2,160. Your balances total $5,942.

4

Divide your total balances by your total credit limits to calculate your current credit utilization ratio. In this example, your credit utilization is 0.3247, or 32.47 percent.

5

Subtract the credit limit of the card you want to close from your total credit limit to calculate what your limit will be after you close the card. In this case, it will be $14,300.

6

Multiply your future credit limit by your current credit utilization to determine the maximum balances you can have to avoid increasing your utilization. For example, $14,300 times 0.3247 is $4,643.21.

7

Pay down the balances on the cards you plan to keep until they total no more than the number you calculated, which, in this example, is $4,643.21.

Cancel the Credit Card

8

Call the customer service phone number on the back of the credit card you would like to cancel.

9

Tell the representative you want to cancel the account. Confirm that your account has a zero balance, and if it does not, make any additional payments needed to reduce your balance to zero. Ask for confirmation of the cancellation by mail.

10

Write a letter to the credit card company stating that you called to cancel your credit card and would like a confirmation of the cancellation in writing. Include your name, address, account number and the date you called.

11

Send the letter to the address listed on your credit card statement.