Here's What Happens When You Close Your Oldest Credit Card

If you don't use your oldest credit card anymore, you might be considering closing it. Lots of people find themselves in this situation, because as you build your credit, you can qualify for better cards. Once you have cards with more benefits, there often isn't any reason to keep using an old card.

However, there's also a common piece of advice to never close your oldest credit card. The amount of time you've had your credit cards is a factor in your credit score, so canceling your oldest one could negatively affect your score, or so the thinking goes. But that advice is missing some key information. Here's what really happens when you close your oldest credit card.

That credit card remains on your credit history for 10 years

When your credit card is closed, it doesn't get removed from your credit file immediately. Closed credit cards with a positive account history remain on your credit file for 10 years. During that time, they still count toward your credit score. All your payment and account history on that credit card can continue to benefit your credit. Cards with negative information stay on your credit file for seven years.

The idea that you're going to lose your oldest credit account is misleading. You technically will, but not anytime soon.

By the time that closed card falls off your credit file, you'll have had 10 years to build a lengthy credit history with another card. As long as you continue to use other credit cards, your score shouldn't be affected at all.

It could impact your credit score through your credit utilization

While people often worry about what closing an old card will do to their credit history, the real potential issue is what it does to your credit utilization. Your credit utilization ratio measures the balances on your credit cards compared to their credit limits. It's a major factor in your credit score, accounting for 30% under the widely used FICO® Score system.

When you close a credit card, you lose that card's credit limit. If you're carrying balances on any of your other credit cards, then your credit utilization will rise.

To give you an example, let's say you have three credit cards:

That adds up to $5,000 in balances and $20,000 in credit limits, for a credit utilization of 25%. The recommended range is under 30%, so you'd be doing well overall.

Now, imagine you decide to close your oldest account, Card A. You lose its $10,000 credit limit. You now have $5,000 in balances and $10,000 in credit limits, pushing your utilization to 50%. That could hurt your credit score.

If you pay your credit card balances in full, credit utilization won't be an issue. But if you're carrying any balances, then it's important to consider how closing a card would impact your credit utilization.

Other than credit utilization, there's nothing to worry about when closing your oldest credit card. You'll have 10 years before it comes off your credit report, giving you plenty of time to build more credit history with other cards. If you don't want to hang on to an old credit card, it's perfectly fine to call the card issuer and close it.