Credit scores
Does Closing a Credit Card Hurt Your Credit Score in Canada?
Closing a card can lower your score, mostly because you lose its credit limit and your utilization rises. When it is worth closing anyway, and how to do it without losing rewards.
Does closing a credit card lower your credit score?
It can. The main effect is on credit utilization: closing a card removes its limit, so the same balances become a larger share of your available credit.
| Example | Total limits | Balances | Utilization |
|---|---|---|---|
| TopBefore closing | $15,000 | $1,500 | 10% |
| After closing a $5,000 card | $10,000 | $1,500 | 15% |
| After closing a $10,000 card | $5,000 | $1,500 | 30% |
The account itself does not disappear from your credit report when you close it. A card closed in good standing stays on your report for years, so its payment history keeps counting.
Put it into practiceWhat happens to rewards when you cancelWhen is it worth closing a card anyway?
When it charges an annual fee you no longer get value from, when you are tempted to overspend, or when you want fewer accounts to manage.
A fee card that costs $120 a year in exchange for perks you stopped using is a real cost; a few points off your score for a month or two usually is not, unless you are about to apply for a mortgage or loan.
What should I do before closing a card?
Redeem or transfer your points first, switch any automatic payments to another card, and pay the balance to zero.
Points in a bank’s own program are often forfeited when the account closes. Ask whether you can downgrade to a no-fee card from the same issuer instead: that keeps the account, its limit and its history open.
When should I avoid closing a card?
In the months before a mortgage, car loan or other important credit application, and when the card is your oldest account or holds most of your available credit.
If you do close it, keep your balances low on your remaining cards for the next few statements so your utilization stays under about 30%.
How long does it take to recover?
Utilization is recalculated every month, so if you keep balances low the effect usually fades within a few reporting cycles.
Check your score with Equifax or TransUnion, or through your bank’s free score tool, a couple of months after closing the card.
Keep reading
Credit scoresWhy Did My Credit Score Drop? 7 Common Reasons in CanadaThe seven usual reasons a Canadian credit score falls, from a higher card balance to a missed payment or an error on your report, and what to do about each.- Credit scoresHow to Improve Your Credit Score in CanadaNine steps that raise a Canadian credit score, in order of impact, with how long each takes to show up.
Choosing a cardHow to Cancel a Credit Card in CanadaStep by step: what to do before you call, how to cancel, what happens to your points and annual fee, and how to protect your credit score when you close a card.- RewardsWhat Happens to Rewards When You Cancel a Credit CardCheck redemption and forfeiture rules before closing an account, and handle recurring payments separately.
Official sources and further reading
Terms vary by product. Confirm the provider’s current terms before acting. This guide does not predict approval, realized value or credit-score changes. How WalletReturn calculates value