Here's What Happens to Your Credit Score When You Close a Credit Card You've Had for Many Years

Your credit score is an important number because it tells lenders how much risk they're taking on by loaning you money. A higher credit score sends the message that you're less of a risk, while a lower credit score indicates that a lender may be less likely to get repaid if it decides to extend you a loan or line or credit.

That's why it's so important to do your best to maintain a good credit score. And that's also why you may want to think twice before closing a credit card account you've had open for many years.

Closing an older account could hurt you

There are different factors that are accounted for when calculating your credit score. One of them is the length of your credit history, and it comprises 15% of your score.

The more long-standing credit card accounts you have open, the more that consistency can help your score. And so if you close an account you've had for years, it could cause your credit score to take a hit (the closed card can stay on your credit report for up to 10 years).

As such, if you're looking to close a credit card that doesn't impose an annual fee, you may want to hang onto it and use it sparingly just to keep the account open. That could mean putting a small recurring expense on that card, like a streaming service, or even just charging small purchases every so often to keep your account active.

Closing an older account could raise your utilization, too

Another key factor that goes into calculating a credit score is your credit utilization ratio, which measures the amount of available credit you're using at once. That ratio comprises 30% of your credit score.

When you close an old credit card, you don't just potentially impact the length of your credit history. You might also lower your total credit limit. And that could send your credit utilization ratio into unfavorable territory.

It's generally best to keep that ratio to 30% or less if you want to keep your credit score in good shape. Let's say you owe $2,000 on your credit cards and have a total credit limit of $10,000. That's 20% utilization, which is generally not a problematic level. But if you close an old credit card with a $5,000 limit, thereby cutting your total limit in half, suddenly, your $2,000 balance puts you at 40% utilization. That's not so great.

In many cases, it pays to hang onto an older credit card rather than close the account. So if you're not facing a fee to keep it open, it could pay to go that route to avoid unwanted damage to your credit score that makes it harder to borrow affordably the next time you need to.