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What Happens If You Cancel Your Credit Card? The Credit Score Impact Explained
Canceling a credit card — especially one you rarely use or have recently paid off — can feel like a smart financial move. It lightens your wallet, eliminates an annual fee, and gives you one less bill to track. However, closing a credit card can also cause your credit score to drop, depending on your overall financial profile. If your goal is to maintain or improve your credit score, it may be worth keeping that card open a little longer.
How Canceling a Credit Card Affects Your Credit Score
Your Account Stays on Your Credit Report
When you close a credit card, the account doesn’t disappear from your credit report. Your payment history and the age of the account will continue to appear for up to 10 years, which helps preserve your credit history length.
Your Credit Utilization Ratio Changes
The bigger concern is your credit utilization ratio, which measures how much of your available credit you’re using. This factor makes up about 30% of your credit score.
When you cancel a credit card, you remove part of your available credit limit. This automatically raises your credit utilization — even if your spending doesn’t change — which can lower your score.
How to Improve Your Credit Without Closing Your Card
If you want to reduce credit card use or avoid annual fees without hurting your credit score, consider these alternatives:
1. Use the Card Less, but Keep It Open
Pay down your balances and use your credit cards sparingly. This alone can help improve your credit utilization ratio.
2. Ask Your Credit Card Company to Waive the Annual Fee
Call your card issuer and ask for the retention department. Keeping an existing customer is cheaper than finding a new one, so companies often offer:
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Waived annual fees
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Bonus points
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Statement credits
It never hurts to ask.
3. Request a Product Change to a No-Annual-Fee Card
Many credit card issuers allow you to switch to a no-fee version of your card while keeping:
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The same account number
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The same credit limit
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Your account age
This protects your credit score because the account stays open and active. The tradeoff is losing premium rewards — which may not matter if you don’t use the card often.
How To Keep an Unused Card Active
If you decide to keep a card open but rarely use it, make sure the issuer doesn’t close it for inactivity. A simple way to prevent this is to:
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Add a small recurring charge (like a streaming service)
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Set up automatic payments
This keeps the account active without requiring you to track additional spending.
Bottom Line
Canceling a credit card may seem harmless, but it can negatively impact your credit score by shrinking your available credit and raising your credit utilization ratio. Before closing a card, explore alternatives like negotiating annual fees, switching to a no-fee card, or simply keeping it open with minimal use. These strategies allow you to protect — or even improve — your credit score while simplifying your finances.
