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How to cancel your credit card without hurting your score

How to cancel your credit card without hurting your score

Your credit score is a measure of your financial reputation used by lenders to gauge the risk of you not repaying any credit they have lent you. It can impact not only your ability to secure a loan, but also the loan amount, the terms, and the interest rate. Phone companies and utility providers may also check your credit score when processing your application for their services. 

Since your credit score is based on your current as well as past financial transactions, cancelling a credit card may impact your credit rating. This is just one of the factors that can affect your credit score, and with some research and planning, you can figure out how to close a credit card without hurting your credit score. In fact, you could actually improve your score by cancelling your credit card.

How does cancelling a credit card affect your credit score?

A credit card is one of the financial products that appear on and feeds information to your credit file. So when you cancel it, you reduce the information available to credit rating agencies, which can affect how they evaluate your credit score. If you’re simply cancelling one credit card to apply for another, it may not affect your credit score. You should, however, avoid doing this too frequently as each application appears on your file and can impact your score. 

You also need to consider the credit limit available on the card you’re about to cancel. Be careful if you have several credit cards. If the combined limit of your credit card is significantly high, lenders may see it as a liability. This is unless your income is substantial enough that it can be assumed that you can repay your card debt. If this sounds like you, it might be time to ask will closing a credit card improve your credit score? A smart answer might be yes you should consider lowering your combined credit limit by cancelling the card with the highest limit. This is if the credit limit available to you over multiple cards isn’t proportionate to your income.

How can cancelling a credit card hurt your credit score?

There are multiple ways cancelling your credit card could hurt your credit score. To help avoid this, keep these few do’s and don’ts in mind if you are planning to cancel your credit card, as they are likely to affect your credit score.


  • Make timely payments towards your outstanding balance.
  • Clear the unpaid amount each month to keep your debt low.
  • Avoid cancelling your card if it is the only one you have.


  • Make frequent applications for new cards to take advantage of the new signup offers.
  • Constantly transfer your balance from one card to another for a slightly lower interest rate.
  • Miss your making your payment by the due dates.

Does not using a credit card hurt your credit score?

What if, instead of cancelling your card, you choose to just not use it? Will this hurt your credit score as well? Fortunately, in Australia, unlike in the US, credit utilisation, or the debt-to-credit ratio, is not critical to your credit rating. For this reason, not using a credit card does not hurt your credit score. On the other hand, not having any credit cards or active loans means there is limited information on your credit file. This lack of information may bring down your credit score. 

Will closing a credit card improve your credit score?

By decreasing your overall credit limit, you reduce the risk to lenders when you apply for additional loans or credit cards. This is good for your credit score. Additionally, one less liability could help you maintain repayments in the future. So cancelling your credit card can actually improve your credit rating in the long run. 

How to cancel your credit card without hurting your score

Your credit score may not be affected if you take the following steps before cancelling your card:

  • Clear your entire outstanding balance
  • If you can’t clear the pending debt, pay off as much as possible and transfer the rest to another card
  • Cancel all direct debits or scheduled payments on the card
  • If you have other debts, create a financial plan to ensure other payments are made on time
  • If the reason for cancelling is a high annual fee, consider getting an alternate card with better terms, especially if this is your only credit card

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.



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