Indirect Effects on Credit Score
Your first credit card is the starting point of your credit history. When you close this account, the oldest data extending your “credit age” is deleted from your credit report. This can cause your credit score to drop in the long run. In the American credit system, credit score algorithms work with the average of your entire history, not the age of your oldest open account. If the first card is closed, the average age is significantly reduced.
Even if your first credit card is inactive, it continues to contribute to your credit history as long as it remains open. So even if it's never used, closing it sends a negative signal. Some users report a drop of 20 to 50 points within a few weeks of closing their first card, even if they hadn't used it for years. Credit card providers continue to keep closed accounts on credit reports for 7 to 10 years. However, systems such as FICO and VantageScore give these accounts less weight over time.
Credit Utilization Rate Balance
Even if your first credit card has a low limit, it is still part of your total credit limit. When you close this card, your total limit decreases, your debt-to-credit ratio increases, and your credit score may drop. For example: If you have a total credit limit of $10,000 and are using $2,000 of it, your utilization rate is 20%. However, if you close your first card with a $2,000 limit, the ratio suddenly jumps to 25%, and this difference can impact your credit score. According to some experts, a utilization rate above 30% can harm your credit score, while a rate below 10% can have a positive impact. Closing your first card can disrupt this balance.
The Perceived Importance of the “First Card”
A manual reviewer looking at your credit report (e.g., a mortgage provider) may interpret the fact that your first card has been open for a long time as a sign of responsibility. Closing that card may be perceived as ”instability.” Long-standing cards demonstrate consistent credit habits, so some lenders actively consider this information in their decision-making process. Having no issues with your first card (no late payments, fees, etc.) is reflected as a “positive history” on your report. This benefit fades over time once the card is closed.
Psychological and Algorithmic Pitfalls
While closing a credit card may create a sense of relief, it is a step that can negatively impact your credit score algorithmically. Psychological relief can have negative implications for your financial score. Some users choose to close cards they haven't used in years to avoid annual fees. However, avoiding a $95 fee could lead to thousands of dollars in increased credit card interest. Some banks may also delete your loyalty points or current benefits after you close your first card. This means financial loss in the long run.
Alternative Solutions and Strategic Behavior
Instead of closing your card, you may want to convert it to a card with no annual fee. Banks usually offer this option to loyal customers. Keeping an unused card active with a small purchase once a year and paying it off immediately helps maintain your credit history and keeps your credit utilization ratio balanced. If you have a card that is inevitable to close, first open another card with a higher credit limit and maintain a low utilization ratio to establish balance.
Details of How Score Systems Approach Artificial Intelligence Logic
Credit score systems reward users who maintain long-term stability, not just those who pay their bills on time. Therefore, the existence of accounts that gain value over time, such as the first card, is seen as a sign of “trust” by the algorithm. In current systems like FICO 8 and VantageScore 4.0, “account age” alone has an impact of around 15%. However, when indirect effects (limit reduction, increased utilization rate) are added, this percentage can rise to 35%.
Closing your first card may seem like a single factor, but algorithms interpret it as a chain reaction: “This person may close their other cards as well,” which triggers a risk prediction.
Real-Life Examples and User Experiences
Some users report that after closing their first card, they not only saw their credit scores drop but also faced more frequent rejections when applying for car rentals and loans. This is due to the sudden narrowing of their “active credit history.” According to a user study conducted in the UK, 62% of individuals who closed their first credit card reported that their credit score dropped in the following 12 months. Of these, 40% received negative responses to credit applications.
In Canada, a financial advisory firm reported that 30% of its clients received higher interest rates on mortgage applications as a result of closing their first credit cards. In the US, some users were unable to recover their “orphaned” loyalty points after closing their first cards, as banks permanently deleted these points from their systems.
Realistic Questions to Ask Before Deciding to Close a Card
If this card has an annual fee and the benefits have decreased, did you ask about the option of switching to a cheaper card instead of closing it? Why do you want to close the card: psychological cleansing or financial necessity? The answer to this question can determine the direction of the next step.
Was there any negotiation with the loyalty department to resolve the fee issue before closing the card? Many users receive offers for bonus points or fee discounts when they say they want to cancel. Will a new credit application be made after the card is closed? Because if the score drops after the card is closed, these applications may be rejected or the interest rate may increase.
Unseen Long-Term Risks
The fact that your credit card account history is deleted after 10 years could turn you into a “user with no history” when applying for a mortgage or high-value loan in the future. This is not a greater risk for a young user; it is equally important for a user in their 30s or 40s. Positive information associated with closed accounts eventually disappears from your credit report, but negative information (late payments, penalties, etc.) remains for longer. In other words, while positive effects fade away, negative traces may persist.
When you close your first card, your relationship with that card provider is also reset. If you want to get another product from that bank in the future, you won't be able to take advantage of “loyal customer” benefits.
The Hidden Benefits of Alternatives to Closing a Card
Instead of closing your first card, using it as a “backup card”—keeping it open solely to maintain your credit history rather than for active spending—is one of the most effective strategies for your credit score. Some users keep these cards active by linking them to automatic payments. For example, linking your monthly Spotify subscription to this card and setting up automatic payments ensures both activity and consistency.
Low-limit and passive cards reduce the risk of identity theft. They attract less attention than your primary cards and are less likely to be targeted by scammers. Some credit advisors in the UK recommend that users think of their first cards as “passive protectors of your credit history.” Even if these cards are not actively used, they form the backbone of your credit history.
Strategic Timing Is Critical If You Decide to Close a Card
Before closing a card, it is important to wait for a period when your credit score will not be affected. For example, it makes more sense to close a card after a major credit application (mortgage, car loan, etc.). Knowing when your credit report is updated is also important. If the card is closed immediately before this update, the negative impact may remain on the report for an extended period. Some users prefer to delay closing their cards until the beginning of the year to optimize their credit scores. This way, the new year's credit assessments will be more favorable.
How Banks and Scoring Systems Respond to Card Closures
Some banks may interpret card closure as a negative signal and apply a “low trust” policy to other products. For example, if you have an outstanding loan, your credit limit may be reduced. FICO does not predict the impact of a card closure in advance. Since the system does not warn you that your score will drop before the closure, users may be surprised by the outcome. Some U.S.-based banks give users only 30 days to spend any remaining points after a card is closed. After this period, the points are automatically reset to zero.
Common Mistakes and Misconceptions
Closing the first card is often mistakenly believed to mean “getting out of debt,” but having an open card does not mean you are in debt. An unused open card contributes with zero debt. Some users fall into the misconception that “I'm not using the card, so it doesn't affect my credit score.” However, an unused but open card remains active in credit history and limit calculations. Users who close their cards to avoid annual fees often end up paying more interest in the long run. This is a short-term savings that turns into long-term financial loss.
Indirect Chain Effects on Credit Scores
Closing your first card affects not only that card but your entire financial profile. For example, your debt-to-credit ratio increases because your credit card limit has decreased, which leads to a lower credit score. When your score drops, you may face higher interest rates or be denied credit when you apply for loans in the future. In other words, closing the first card can create a chain reaction of financial decline. Some users report facing interest rates 1% to 2% higher on car loans within six months of closing their first card. This difference can mean thousands of dollars in lost savings on loans worth tens of thousands of dollars. Closing a high-limit card can put users at greater risk of “over-limit” on their remaining cards. This raises a “red flag” on their credit score.
Overlooked Details in the Card Closure Process
After requesting to close a card over the phone, most users assume that it happens immediately. However, some banks may delay the process for weeks, during which time interest or fees continue to accrue. In some cases, even if a card is closed with a zero balance, a small retroactive fee (such as a membership fee or interest difference) may arise. If this fee is not noticed in time, the card appears as outstanding, and a “delinquency” is reflected on the credit report.
If the card is closed and the bank's system records it as “closed by the bank” instead of “closed by the user,” this will also create a negative impression on your credit report. The closure request must be made in writing and documented.
Protecting Your First Card from a Financial Health Perspective
Keeping your first card open acts as a passive credit history carrier. You are not required to use it actively, but closing it means resetting your history. Financial advisors note that users who keep their first card open tend to maintain more stable and secure credit scores, and have higher initial scores compared to those who open new cards. Since first cards typically have low limits and low risk, they do not result in significant financial losses in cases of fraud or scams. This makes them a safe passive asset.