Does closing unused accounts improve my credit score?
Published Thu, Oct 11, 2012 Updated Tue, Feb 16, 2021
Well, yes and no. There are two aspects to consider here, your credit worthiness and what you can afford. So let’s look at both:
This is basically what most people refer to as your credit score – although really it’s the whole credit history that matters, not just the number. Your credit score is improved by using credit and paying it off without tripping up along the way.[cta]
Since unused accounts are generally ones that are not in debit, closing them will not actually pay off any debts and therefore will have little (if any) effect on your actual score. Of course if you have unused accounts with balances still on them then paying these off and closing them will certainly be helpful…
What can you afford to borrow?
The other factor is what you can afford. Any time you apply for credit the lender will look at how good you are with money and also whether you can afford the debt. Part of this calculation will depend on your income and part of it will depend on what debts you already owe as well as the cost of monthly repayments.
Since open but unused accounts can still be used, if you have access to, say, £500 on an old credit card, lenders will treat that as if you had £500 worth of debt.[cta]
So closing these accounts will effectively free up your borrowing capacity and if you are as credit worthy now as you were when you got the credit that should add to the amount you can potentially borrow.
So does it improve my score?
Well, no is the simple answer, but it may make it easier to borrow more money and of course that will help your credit score. It will also help you to get a better rate on new debt, so it might save you money as the same time.
All in all then, regardless of credit scoring, closing unused accounts is generally a good idea.