Effects of Canceling a Credit Card on Your Credit Score
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Effects of Canceling a Credit Card on Your Credit Score
Credit cards can be both a financial tool and a responsibility. For many Filipinos, the first credit card is exciting — but what happens when you close a card?
A lot of first-time users think canceling a credit card instantly improves their credit score. In reality, it can actually hurt your credit standing if not done correctly.
In this guide, we’ll explain:
How credit scores work in the Philippines
The effects of canceling a credit card
When you should and should not close a card
How to manage your credit health properly
Understanding How Your Credit Score Works
Before discussing canceling, you need to know how your credit score is calculated.
In the Philippines, credit scores come from the Credit Information Corporation (CIC) and other private agencies like TransUnion. Lenders — banks, credit card companies, and even loan providers — check this score when you apply for a new card or loan.
Key Factors Affecting Your Credit Score
Factor
Weight
Effect on Score
Payment History
~35%
Late or missed payments lower your score.
Credit Utilization
~30%
Using too much of your limit signals risk.
Credit Age
~15%
Older accounts show stability.
New Applications
~10%
Too many recent applications lower trust.
Credit Mix
~10%
Having different accounts (cards, loans) helps.
When you cancel a credit card, credit utilization and credit age are the two areas most affected.
How Canceling a Credit Card Affects Your Credit Score
Canceling a card isn’t automatically bad — but timing and balance matter. Here’s how it impacts you:
1. It Can Increase Your Credit Utilization Ratio
Credit utilization = Your Total Balance Ă· Your Total Credit Limit
Example:
You have 2 credit cards with a combined limit of ₱100,000
You’re using ₱30,000 → Utilization = 30% ✅ Good
If you cancel one card with a ₱50,000 limit:
New total limit = ₱50,000
Balance = ₱30,000
New utilization = 60% ❌ Bad for your score
Pro Tip: If you’re planning to close a card, pay down balances first.
2. It Reduces Your Average Credit Age
The longer your accounts are open, the better your score. Closing an oldest card lowers your average credit age, which lenders see as less credit history.
Best Practice: Keep your oldest credit card open, even if you rarely use it.
3. It Impacts Future Loan Applications
Some banks view canceled cards as a sign of instability. If you plan to get a housing loan, car loan, or personal loan, it’s better to keep a healthy credit mix.
4. It Can Affect Rewards and Benefits
Some Filipinos cancel cards to avoid annual fees. But if that card gives cashback, miles, or perks, you’ll lose access once you close it.
When You Should Cancel a Credit Card
There are times when canceling makes sense:
High annual fees but low benefits
You have too many cards to manage
Fraud or security issues on the account
You’re switching to a better card
If any of these apply, closing may be the right move — but do it strategically.
When You Should Keep Your Credit Card Open
It’s your oldest card (helps with credit history)
You’re maintaining a low utilization ratio
You want to keep rewards, cashback, or miles
You’re planning to apply for a loan soon
Step-by-Step Guide to Cancel a Credit Card Safely
Pay off your full balance Make sure there’s ₱0 outstanding before canceling.
Redeem your rewards Use your cashback, points, or miles — they’ll be forfeited.
Call your bank Request account closure and ask for a closure confirmation.
Get a clearance letter Some banks provide a document proving the account was fully settled.
Check your credit report After 30–60 days, verify that the account shows as “Closed — Paid in Full.”
Use a Credit Card Cost Calculator Before Canceling
Before closing your card, calculate how much it really costs to keep it open versus canceling. Use the Credit Card Cost Calculator to compare fees, interest, and benefits.
This helps you decide whether paying the annual fee is worth the rewards you earn.
Comparison Table: Best Low-Fee Credit Cards in the Philippines
Bank & Card
Annual Fee
Rewards / Cashback
Best For
BPI Amore Cashback
₱2,050
Up to 4% cashback
Everyday spending
BDO ShopMore Card
₱1,500
5% rebates at partner stores
Frequent shoppers
Metrobank Titanium
₱2,500
1 point per ₱20 spend
Flexible rewards
Security Bank Complete Cashback
₱3,000
Up to 5% cashback
Bills and groceries
TL;DR — Quick Summary
Canceling a card can lower your credit score if done wrong
Keep your oldest cards open to protect your credit history
Always pay off balances before closing
Use the Credit Card Cost Calculator to decide if it’s worth keeping
FAQs — Canceling a Credit Card in the Philippines
1. Will canceling my card improve my credit score?
No. In most cases, it lowers your score because it affects utilization and credit age.
2. Should I close my oldest card?
No — it’s better to keep it open to maintain a long credit history.
3. Can I reapply for the same credit card later?
Yes, but approval isn’t guaranteed. It depends on your credit score and bank policies.
4. How long does it take for the cancellation to reflect on my credit report?
Usually 30–60 days, depending on the bank’s reporting schedule.
5. Is it better to downgrade instead of canceling?
Yes! Many banks allow you to switch to a lower-fee card without closing the account, which keeps your history intact.
