Closing an old credit card might feel like the right decision. You reduce clutter, avoid annual fees, and simplify your finances. But many Australians are surprised when their credit score suddenly drops soon after.
Even if you have a spotless payment record, closing an old account can lower your score by 20 to 100 points. This happens because Australian credit scoring places importance on payment history and the age of your accounts. When you close an account, you shorten your credit history and reduce the amount of positive repayment information available to lenders.
If you are planning to close an account or already have, here is everything you need to understand and what you can do to recover.
Key Takeaways
- Closing old accounts shortens your credit history and removes positive repayment records.
- Scores can drop by 20 to 100 points depending on your overall profile.
- Australian credit reports value payment history and enquiries more than utilisation ratios.
- Keeping an old account open with a zero balance helps preserve your score.
- Most people recover their score within three to six months of consistent positive behaviour.
- Annual fees can often be waived or reduced instead of closing the account.
Why Your Credit Score Drops After Closing an Old Account
When you close a credit card you have held for years, you are removing a record that shows lenders you can manage credit responsibly over time. Australian bureaus like Equifax, Experian, and illion calculate your score by looking at your credit history length and payment consistency.
A closed account stays on your report for several years, but it no longer contributes to your active profile. If that account was your oldest, your average account age drops immediately, and your score can dip as a result.
Why Your Score Drops Even If You Did Everything Right
A drop in your score does not always mean you made a mistake. Credit bureaus consider several factors beyond missed payments, including:
- Recent credit applications
- Changes to your credit limits
- Account closures
- New accounts opened
- The mix of credit types you hold
Even with perfect payments, your score can still fall if you recently applied for new credit or closed an old account. These small changes temporarily signal risk to lenders, which is why your score fluctuates.
Does Checking Your Own Score Lower It
No. Checking your own credit score through trusted platforms like Equifax, Experian, or Credit Savvy is a soft enquiry and does not impact your score. You can review it as often as you like.
Your score only drops when lenders make a hard enquiry during a credit application. Each hard enquiry can lower your score slightly, especially if several happen within a short time frame.
Can You Fix Your Score After Closing an Account
Yes, you can recover your score. The key is consistency and time. Once an account is closed, you cannot reopen it, but you can rebuild your credit strength through positive actions.
First 30 Days
- Avoid new credit applications.
- Review your credit report for possible errors.
- Make all payments on time for existing accounts.
One to Three Months
- Keep card balances low.
- Pay every bill in full and on time.
- Avoid closing any more accounts.
Three to Six Months
- Continue consistent payment behaviour.
- Keep your oldest accounts open.
- Monitor your progress through free credit check platforms.
If you stay disciplined, your score often begins to rise again within three to six months.
Afterpay and Buy Now Pay Later in 2025
Buy Now Pay Later services like Afterpay and Zip Pay have become part of daily life for many Australians. In 2025, new regulations changed how these accounts appear on credit files.
Your file now shows hard checks during applications, missed payments, and defaults. What does not appear are on-time payments, the number of accounts, and how much you spend.
Although timely BNPL payments do not boost your score, missed ones can lower it. Lenders also review your bank statements during loan assessments. If you have several BNPL accounts or frequent use, lenders might view you as financially stretched, even if your credit score looks fine.
To stay safe, limit BNPL accounts, make every payment on time, and close unused ones only after clearing all balances.
Why Your Score Might Drop After Applying for a Car Loan
When you apply for a car loan, the lender performs a hard credit enquiry. This can reduce your score by a small amount for a short period. Multiple applications in a few weeks can cause a bigger drop.
If you plan to compare loan offers, submit all applications within a short window so they count as one enquiry in most scoring systems. Always review your credit file after loan applications to confirm that all information is correct.
How Long It Takes to Improve a Credit Score
The time it takes depends on what affected your score.
If the cause was a recent enquiry or a closed account, improvement can happen within three to six months. If your score dropped due to missed payments, it can take a year or more. Defaults stay on file for five years but have less impact after the first two.
Correcting file errors can improve your score within one to three months once the dispute is resolved. Consistency is the real key to progress.
How to Prepare Before a Mortgage Application
Improving your score before applying for a mortgage can make a big financial difference. Lenders often offer better rates to borrowers with higher scores. Raising your score by even 50 points can move you into a lower interest rate bracket.
People with low scores usually face higher rates or lower approval chances. Taking three to six months to improve your credit can save thousands of dollars over a mortgage term.
Focus on reducing credit card balances, correcting any report errors, and maintaining a perfect payment record before applying.
Should You Repair Your Credit Yourself or Get Professional Help
You can repair your credit yourself if you have time and understand how the system works. You will need to contact all three bureaus, gather evidence, and follow up on disputes.
DIY repair works well if your issues are minor and you do not have urgent loan plans.
Professional help becomes useful if you have complex problems such as identity theft, multiple defaults, or upcoming loan deadlines. Specialists already know how to communicate effectively with credit bureaus, prepare documentation, and identify mistakes that are easy to overlook.
They also save time and reduce stress by managing the full process for you.
How to Dispute Errors on Your Credit File
You have the right to correct inaccurate information on your credit report. Follow these steps carefully.
- Get your full report from Equifax, Experian, and illion. Each offers one free copy per year.
- Identify incorrect details, such as wrong account amounts or inaccurate payment dates.
- Collect proof like receipts, payment confirmations, or bank statements.
- Submit your dispute through the bureau’s website or by mail.
- Wait up to thirty days for investigation and response.
- Follow up if the issue remains unresolved and escalate to the Australian Financial Complaints Authority if needed.
If the lender confirms the error, the bureau will remove or correct the entry. If they fail to respond in time, the entry must be deleted.
Check all three bureaus separately since they do not automatically share dispute results.
How Long Defaults and Old Bills Stay on Your Credit File
Defaults stay on your report for five years from the date of default. Paying off a default does not remove it, but it updates the status to “paid,” which looks better to lenders.
If your unpaid phone bill or small debt is nearing the five-year mark, it will naturally expire after that time. Some defaults under one hundred fifty dollars or listed incorrectly can sometimes be removed early.
Does Paying Off Debt Instantly Improve Your Score
You will see improvement, but not immediately. Most lenders report updates monthly, and it can take sixty to seventy-five days before the new information appears on your credit report.
That is why anyone preparing for a mortgage or major loan should begin improving their credit several months in advance, not just a few weeks before applying.
When Professional Credit Help Makes Sense
Credit repair services can help when:
- Errors or duplicates exist on your file
- You have defaults that were listed incorrectly
- You are preparing for a loan soon and need faster results
- You do not have time to handle multiple disputes
Professional help can lead to meaningful score improvement by resolving issues efficiently. It can also save you money over time, since even a small rate reduction on a loan can equal thousands in interest savings.
Conclusion
Closing an old credit account may seem harmless, but it can affect your financial profile more than you realise. Understanding how credit scoring works helps you make better choices before closing accounts or applying for loans.
If you have already closed an account and noticed a score drop, or if you need to prepare your credit before a major application, professional guidance can help.
At Easy Credit Repair, we assist Australians in identifying and correcting errors, managing disputes, and rebuilding credit with confidence.
Check out our services or book a free consultation to see how we can help you move forward with a stronger credit profile.
Disclaimer: All the information is based on research and our views only. If you have questions, please reach out to us.
