Does closing a credit card hurt your credit score in Canada?

It can. Closing a card reduces your total available credit, which raises your credit utilization ratio (the percentage of available credit you are using). A higher utilization ratio lowers your credit score. Closing your oldest card also shortens your average credit history length, which is another score factor. The impact varies: if you carry no balances and have multiple other cards with high limits, closing one card may have minimal effect. If the closed card represents a large share of your total credit limit, the impact can be more significant.

When is it OK to close an old credit card?

Closing a card makes sense when the annual fee exceeds the value you receive from it, the card has an interest rate encouraging you to carry a balance, you have strong credit otherwise (750+ score, multiple accounts, low utilization), and the card is not your oldest account. Closing a newer card with an annual fee while keeping your oldest no-fee card is low-risk and often the right call.

Does keeping a credit card open with a zero balance help your credit score?

Yes. A card with a $0 balance and a high limit lowers your credit utilization ratio and maintains your credit history length. Both factors positively affect your score. Keeping an old no-fee card open with zero balance is one of the easiest ways to maintain a strong credit profile with no cost.

What is credit utilization and why does it matter?

Credit utilization is the percentage of your total revolving credit you are currently using. It is calculated as (total balances ÷ total credit limits) × 100. For example, $3,000 in balances across $15,000 in total limits = 20% utilization. Most lenders and scoring models prefer utilization below 30%; the best scores typically show below 10%. Closing a card with a $5,000 limit when you have $3,000 in balances shifts your utilization from 20% to 30% — a meaningful change.

Should I close a credit card if I never use it?

Not necessarily. If there is no annual fee and no risk of fraud from inactivity, keeping a dormant card open helps your utilization and account history length. The credit card company may eventually close an inactive card on their end, which has a similar credit impact. To prevent this, make a small purchase on unused cards once or twice a year and pay it off immediately.

Can closing a credit card affect my mortgage application?

Yes — timing matters. Closing a card before a mortgage application can raise your utilization ratio and slightly lower your credit score. Mortgage lenders typically review your credit score at pre-approval and again closer to funding. Avoid closing credit cards or opening new ones in the 3–6 months before a mortgage application. Check with your broker before making any credit moves during this period.

When Should I Close an Old Credit Card in Canada?

Short Answer

Closing an old credit card raises your credit utilization ratio and may shorten your credit history — both negatively affect your credit score. Closing a card makes sense primarily when the annual fee exceeds the card’s value and you have strong credit otherwise. For no-fee cards, keeping them open almost always costs nothing and protects your score.

What Closing a Card Actually Does to Your Credit Score

Credit scores in Canada (Equifax and TransUnion) factor in several components. Closing a card can affect two of them:

Credit factor	Approximate weight	How closing a card affects it
Payment history	~35%	No impact if closed with $0 balance
Credit utilization	~30%	Increases utilization (negative)
Credit history length	~15%	May decrease if it’s your oldest card
Credit mix	~10%	Minor impact if only revolving account
New credit inquiries	~10%	No impact when closing

The Utilization Ratio Calculation

Scenario	Your balances	Total available credit	Utilization
Before closing card ($5,000 limit)	$2,000	$20,000	10%
After closing card	$2,000	$15,000	13.3%
Closing a card with $10,000 limit	$2,000	$10,000	20%

Closing a card with a large limit causes a proportionally larger utilization jump. If you are carrying balances on other cards, the effect is amplified.

When Closing a Card Makes Sense

Situation	Reasoning
Annual fee exceeds earned value	Paying $150/year for a card with unused rewards is a direct cost with no benefit
Card encourages overspending	Closing removes the available credit and temptation
Divorce or separation — joint card	Close joint accounts to remove financial liability to a former partner
Identity theft or fraud risk	Closing a compromised card is appropriate regardless of credit impact
Card is with a lender you want to exit	Rare, but simplifying lender relationships is valid

When to Keep an Old Card Open

Situation	Reasoning
No annual fee	Zero cost to hold; only benefits to credit score
Oldest account you have	Protects average credit history length
Highest credit limit	Contributes most to lowering utilization ratio
Card provides ongoing perks (insurance, lounge access) you use	Benefits worth evaluating against any fee

Alternatives to Closing

Before closing, consider these options that preserve your credit profile:

Alternative	How it works
Product switch (downgrade)	Ask card issuer to convert your card to a no-fee version — keeps account open, preserves history, eliminates fee
Reduce credit limit instead	Lowers exposure without closing; smaller utilization effect than full closure
Freeze / cut the card	Keep the account open but remove the physical card — no risk of spending, no credit impact
Periodic small purchase	Make one small purchase per year and pay it off to keep the account active

The Timing Rule: Avoid Closing Near Major Applications

Time before application	Action
6+ months	Low-risk window to close a card if needed
3–6 months	Cautious — avoid closing unless necessary
Under 3 months	Keep all cards open regardless of annual fees — do not disrupt credit profile

This applies to: mortgage applications, car loan applications, large personal loan applications.

Bottom Line

Keep old no-fee credit cards open — they cost nothing and protect your credit score by maintaining utilization headroom and account history. Close a card only when the annual fee isn’t justified by the benefits, you are not approaching a major credit application, and the card is not your oldest or highest-limit account. When in doubt, ask the issuer about a product downgrade instead of closure.