Does Closing a Credit Card Hurt Your Credit Score in Canada?

Closing a credit card doesn’t erase its history, but it can lower your score in two ways: it removes that card’s limit from your available credit, and over time it can shorten your credit history. How much it matters depends on which card you close and what the rest of your file looks like. This page covers both effects, when closing an old card makes sense anyway, the alternatives, and the timing. It is one of our credit score guides. The steps for actually cancelling, including issuer contacts and product switches, are in how to cancel a credit card.

How closing a card affects your score

Closing a card works on two parts of your file at different speeds: the available credit you lose shows up on the next report, while the history effect comes later.

Less available credit, higher utilization

Your utilization is your balances divided by your total limits. Closing a card shrinks the total while your balances on other cards stay the same.

The larger the closed card’s limit and the more you carry on other cards, the bigger the jump. Paying balances down first reduces the effect. Credit utilization explains the ratio and why the statement balance is what counts.

A shorter credit history, eventually

A closed account in good standing stays on your report for years. FCAC says closed accounts stay on an Equifax report “for up to 10 years”, and at TransUnion “information stays on your report for up to 20 years, even if you close the account.” The history effect therefore shows up when the account eventually drops off, and it matters most when the card was your oldest. FCAC’s example is a new card opened for a balance transfer: it lowers the average age of your accounts, and “If you close the old account, it may hurt your credit score even more.”

What closing doesn’t change

Your past payments on the card stay on your report, good or bad. Closing a card with missed payments doesn’t remove them; late or missed payments stay for up to 6 years.

Cards whose closure matters least and most

FCAC suggests considering keeping an account open if “it doesn’t have annual fees it’s easy for you to manage you can use it occasionally to keep it active.”

When closing an old card makes sense

• An annual fee that outweighs what you use. Paying a yearly fee to keep a small score benefit can cost more than it’s worth, especially when a no-fee card would do the same job.
• A joint card after a separation. Both holders of a joint account are responsible for the balance, including the other person’s new spending; how joint and additional cards work explains the liability.
• Fraud or a security breach on a card you don’t watch closely.
• Too many accounts to manage. A missed payment on a forgotten card can do more damage than closing it.

Alternatives to closing

• Switch to a no-fee card from the same issuer. A product change can keep the account, its history and its limit while removing the fee. Whether the account history carries over depends on the issuer, so it’s worth asking before switching. How to cancel a credit card covers product switches.
• Ask about the fee. An issuer may offer a fee waiver or a retention offer.
• Keep it, but put it away. Locking the card in the issuer’s app, or not carrying it, removes the temptation to spend while the account stays open.
• Use it occasionally. FCAC notes that some institutions charge an inactive account fee and “may even close your account if your card is inactive for a year.” A small purchase paid off right away keeps it active. FCAC also suggests that “To maintain or improve your credit score, consider keeping one account open with a low credit limit.”

Timing around a major application

Mortgage lenders and other lenders look at your report when you apply and may check it again before funding. A higher utilization ratio from a recent closure shows up at that moment, so closing a card shortly before applying for a mortgage, car loan or line of credit can cost more than closing it well beforehand or after the loan is in place. The same applies to opening new accounts; how long a hard inquiry stays covers that side, and improving your score before a mortgage covers the run-up to a mortgage.

If your score already dropped

A drop after closing a card usually comes from the utilization change and eases as balances fall. Why did my credit score drop helps rule out other causes, and what hurts your credit score puts closing in context with the other factors.

How to cancel a credit card

Cancelling a credit card takes a call or a letter to the issuer, but a few steps before and after make sure nothing is left behind: rewards, recurring charges and a final balance. This page covers those steps, the alternative of switching to another card from the same issuer, and what closing a card does to your credit. Cancelling is one of the topics in our credit card basics guides.

Before you cancel

• Use or redeem your rewards. Points and cash back are usually lost when the account closes.
• Move recurring payments. Subscriptions, insurance premiums and bills charged to the card need a new payment method; otherwise, the Financial Consumer Agency of Canada (FCAC) warns, “the company will continue to bill you and the charges will build up until you pay them.”
• Pay off the balance, or plan to. FCAC: “Interest charges will continue to apply to any outstanding balance on your accounts even after you closed them.”
• Ask about the annual fee. Some issuers refund part of a recently charged annual fee when you cancel.
• Consider a product switch (below), which can remove a fee without closing the account.

The steps

FCAC sets out three:

1. Contact the issuer. “Contact your credit card issuer by phone or in writing and ask to cancel your account.” The customer service number is on the card, your statement and the issuer’s website. FCAC adds: “Ask for confirmation in writing that they closed your account.” Once you have it, destroy the card and keep the confirmation.
2. Check your statements after closing. Transactions approved before you closed the account, and recurring charges you didn’t move, can still appear.
3. Check your credit report to confirm the account shows as closed. FCAC says the issuer needs time to report the change, which “usually takes about 30 days.” Checking your credit report for free lists the ways to get it.

Some things don’t cancel a card. FCAC lists “cutting up your card letting it expire not using it.” Links to each listed institution’s help section or profile are in the banking section’s sign-in and help table.

Switching instead of cancelling

If the reason to cancel is the annual fee, most issuers let you move to another card in their lineup, often a no-fee card, without closing the account. A product switch can keep the account open and its limit in place, which avoids the credit effects of closing; whether the account’s history and number carry over depends on the issuer, so it’s worth asking when you call. Switches are usually limited to the same issuer’s cards. Our no annual fee card picks show the no-fee options.

What closing a card does to your credit

Closing a card removes its limit from your total available credit, which raises your credit utilization on any balances you carry elsewhere, and a closed account eventually drops off your report, which can shorten your history. Both effects, and when closing matters little, are covered in does closing a credit card hurt your credit score.

Special cases

• A card that was lost, stolen or compromised is usually replaced with a new number rather than cancelled; call the issuer’s lost or stolen line.
• A joint card or an additional cardholder. Removing an authorized user can usually be done without closing the account, while closing a joint account follows the rules in its cardholder agreement; authorized user vs joint credit card explains the difference.
• A card belonging to someone who has died is closed by the estate; what happens to debt when you die covers the balance.
• Inactive cards. FCAC notes some issuers charge an inactive account fee and may close a card that’s been unused for a year, which is another reason to decide deliberately rather than let a card lapse.