Can Closing a Credit Card Account Hurt Your Credit Score?

According to financial guru Stephen Snyder, “closing credit card accounts is a fast track to lowering your FICO credit score.” And as usual when it comes to credit, Mr. Snyder is exactly right.

He even offers a personal experience of how a bad encounter with a customer service employee at American Express led him to cancel a card — a decision he profoundly regrets.

Snyder recalls, “I was in a rare fit of anger. Last summer I got so mad at American Express, I closed a personal credit card account that I had just opened with them. The lady I spoke with at Amex was a complete idiot...and clearly working in the wrong department. I thought I was talking to a person in customer service...she obviously worked for the sales prevention unit. It felt empowering when I told her to, ‘close the account,’ and promptly hung up the phone. Then I realized what I had just done...”

As he frequently discusses in his columns and on television appearances — in media outlets such as CBS, CNN, Newsweek, Smart Money, The Wall Street Journal, and The Washington Post, among others — canceling a credit card is a serial credit score killer.

Why is closing a credit card bad for your credit score?

I’ll let the expert explain it to you.

Per Mr. Snyder.

“Here's why...one of the categories that makes up your FICO credit scores is called "time in file."

In English, "time in file" translates to:

- How old the oldest account on your credit report is, and
- The average age of all the accounts on your credit report

The longer you have the same accounts the better it will be for your FICO credit scores. (And it is in your favor if those accounts are in good standing.)

I've had the opportunity to study a few credit reports where the consumer obtained FICO credit scores of over 800.

These folks are like the white buffalo. They're very rare and rank in the top 5.85% nationally. This means their credit scores are higher than 94.15% of the rest of the people in the country.

One thing the "800 Club" members all have in common are several old accounts appearing on their credit reports. When I say "old," I mean really old...decades in some cases.

One example is from a guy from Georgia who had a Sears credit card on his credit file that was opened in 1954. It actually said that on his credit report...opened in 1954. (That means that his credit report is 52 years old.) His lowest FICO score was 809.

Bottom line: an old credit history is good for your credit scores. And you can't achieve an old history if you close your accounts.”

I would highly recommend reading the entire article and several of Mr. Snyder’s other columns for more reasons on why you should think twice before canceling a credit card.