Does closing a credit card hurt your credit score in Canada?
That card with the annual fee you never use is tempting to cancel. Before you do, it helps to know what a credit bureau actually sees.
The two ways closing a card can matter
Equifax explains that closing a card can affect your scores in two main ways. First, it lowers the total credit you have available, which can raise your utilization, the share of your available credit you are using. Lenders generally prefer a lower ratio. Second, closing a long-held account can shorten your credit history, which is another scoring factor.
A third thing to know: a lender can close a card on its own if you have not used it for a while, so a quiet card is not always safe either.
A worked example of utilization
Say you have two cards and a total balance of $1,000, all of it on Card A. The numbers are made up, but the arithmetic is the point.
| Illustrative example | Before closing | After closing Card B |
|---|---|---|
| Card A limit | $3,000 | $3,000 |
| Card B limit (unused) | $2,000 | $0 |
| Total available credit | $5,000 | $3,000 |
| Total balance | $1,000 | $1,000 |
| Utilization ($1,000 / available credit) | 20% | 33% |
Nothing about your spending changed, yet the ratio went from 20% to about 33%. If you have no balance at all, there is nothing to divide, so the utilization effect matters less.
What happens to the account on your report
The Financial Consumer Agency of Canada (FCAC) says positive information on closed accounts can stay on your report for up to 10 years at Equifax and up to 20 years at TransUnion. Those are maximums, and each bureau has its own rules. So a closed card in good standing does not vanish overnight. See our guide on how to build credit in Canada for the bigger picture.
Before you close a card, check these
Pay the balance and any fees first
Clear what you owe and make sure no recurring charges are still attached. A forgotten subscription on a closed card can fail and cause a mess, so see how to cancel forgotten subscriptions.
Ask about a no-fee version
If the annual fee is the reason, ask your issuer whether the card can be switched to a no-fee product. That can keep the account age and the limit. Whether they offer it varies, so ask.
Confirm it on your report afterwards
Equifax suggests reviewing your reports after closing an account to confirm it is reported correctly. You can learn how in how to check your credit score in Canada.
When closing can still make sense
- You pay a fee for a card you do not use. The fee may cost more than any small score effect.
- The card tempts you to overspend. Protecting your budget matters more.
- You are about to apply for a big loan. Timing is worth thinking through, so ask the lender.
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