Not quite correct. If you pay off a balance then close a credit card account, the available credit for that card no longer contributes to your utilization rate. Closing the account may make your credit score drop if closing the account increases your utilization rate for the credit cards that are still open. Closing a paid off account is usually not a good idea. Better to keep a zero balance for a credit card that is just used once or twice a year to keep the account active.