740 Credit Score: Does Closing a Card Hurt Your Score?

A 740 credit score is considered "very good" by most lenders, putting you in a favorable position for loans, mortgages, and credit cards with competitive interest rates. But what happens when you decide to close a credit card? Does it hurt your score? The answer isn’t as straightforward as you might think.

How Credit Scores Work

Before diving into the impact of closing a credit card, it’s essential to understand the key factors that influence your credit score:

1. Payment History (35%)

Your track record of on-time payments is the most significant factor. A single late payment can ding your score, while consistent punctuality keeps it strong.

2. Credit Utilization (30%)

This measures how much of your available credit you’re using. Experts recommend keeping this ratio below 30%.

3. Length of Credit History (15%)

The longer your accounts have been open, the better. Closing an old account can shorten your average credit age.

4. Credit Mix (10%)

Having a variety of credit types (mortgages, auto loans, credit cards) can positively impact your score.

5. New Credit (10%)

Opening multiple new accounts in a short period can be a red flag for lenders.

The Real Impact of Closing a Credit Card

If you have a 740 credit score, you’re already in a strong position. But closing a credit card—especially an older one—can still affect your score in several ways.

Reduced Available Credit & Higher Utilization

When you close a card, your total available credit decreases. If you carry balances on other cards, your credit utilization ratio could spike, potentially lowering your score.

Example:
- Before closing: $10,000 total credit limit, $2,000 balance → 20% utilization
- After closing a $5,000 limit card: $5,000 total credit limit, $2,000 balance → 40% utilization

Shortened Credit History

If the card you close is one of your oldest accounts, your average credit age could drop, which might negatively impact your score.

Fewer Active Accounts

Having fewer open accounts might make you appear less creditworthy to lenders, especially if you only have one or two cards left.

When Closing a Card Might Not Hurt

Not all card closures are bad. In some cases, closing a card may have minimal impact—or even be beneficial:

If You Have Multiple Cards with High Limits

If you have several cards with high limits, closing one may not drastically affect your utilization.

If the Card Has an Annual Fee

Paying an annual fee for a card you no longer use isn’t worth it. Closing it could save you money without major credit damage.

If You’re Avoiding Temptation

If keeping the card leads to overspending, closing it might be the smarter financial move in the long run.

Smart Alternatives to Closing a Card

If you’re worried about damaging your 740 credit score, consider these alternatives:

Downgrade to a No-Fee Card

Many issuers allow product changes to a card with no annual fee, keeping the account open without extra costs.

Use It Sparingly

Make a small purchase every few months to keep the account active without accumulating debt.

Increase Other Credit Limits

Requesting a credit limit increase on another card can offset the loss of available credit from closing an account.

The Bigger Picture: Credit in Today’s Economy

With rising inflation, fluctuating interest rates, and economic uncertainty, maintaining a strong credit score is more important than ever. A 740 score gives you leverage—whether you’re refinancing a mortgage, applying for a personal loan, or negotiating better terms on a car lease.

The Role of Credit in Financial Freedom

A high credit score isn’t just about borrowing—it’s about financial flexibility. It can mean:
- Lower insurance premiums
- Better rental approval odds
- Higher credit card rewards

The Psychological Factor

For many, closing a credit card feels like cutting financial ties. But in reality, credit is a tool—not an emotional commitment. If a card no longer serves you, letting it go might be the right move.

Final Thoughts Before You Act

If you’re sitting at a 740 credit score, you’ve worked hard to build strong credit habits. Before closing a card, ask yourself:
- Will this drastically increase my credit utilization?
- Is this one of my oldest accounts?
- Are there better alternatives (downgrading, keeping it open with minimal use)?

Every financial decision has trade-offs. Weigh the pros and cons carefully to keep your credit score—and your financial future—on solid ground.