Does My Credit Get Lower if I Close an Account?

Closing a credit account can lower your credit rating, no matter who initiates the closure. Whether you close the account to eliminate unnecessary statements or if the creditor closes the account for inactivity, your credit score can take a hit. If the account information is positive and it's not costing you anything, keep it open to give your credit a boost.

Revolving Accounts

Credit scores are mathematical computations based on several factors that indicate your financial well-being at a given point. If you or the creditor close an account, your credit rating is affected immediately and over time. Installment accounts, such as mortgages and car payments, must be closed when the account is paid off, but revolving accounts can remain open indefinitely. Revolving credit accounts include consumer, bank and retail store credit cards. In addition to the payment history notations, these accounts have an available balance entry that affects your overall credit score.

Credit Impact

The five primary considerations in a credit rating calculation are payment history, credit history, credit type, outstanding debt and new credit. Of these five factors, closing an account impacts the outstanding debt and the credit history portions of the calculation the most. These two categories combined affect 45 percent of the overall score. The outstanding debt factor takes an immediate hit, but the impact to the credit history factor is long term. Credit reporting agencies delete closed accounts quicker from your credit report if the creditor closes the account, but the agencies may wait up to 10 years before deleting it if you close it. If the account you plan to close has a positive payment history, keeping it open helps elevate the most important aspect of the credit score calculation. Payment history is 35 percent of the credit rating calculation.

Outstanding Debt

Closing an account can lower your credit rating quickly because the outstanding debt factor is affected. Outstanding debt calculations are based on the total amount of available credit in relation to the total amount that you owe. Even though the account you plan to close has a zero debt balance, the available credit is still factored into the equation as long as the account remains open. Removing that portion of the available credit from the overall calculation will cause your outstanding debt to rise, which will lower your score. If the closed account had a minimal available balance, the credit rating will be less affected.

Credit History

Closing an old account has less of an impact on the credit history portion of your credit calculation if you have other open accounts around the same age. Credit history is different from payment history; credit history indicates how long you have maintained credit accounts. Long-term credit accounts with a positive payment history will raise your credit rating, while long-term credit accounts with a negative listing will lower the score.