Saturday, December 19th, 2009

How and why is my credit card affected when I open and close a credit card?

credit card
Double Negative asked:


I see a great deal at a store to open up a credit card and get a prize or a rebate. If I want the big discount I open the credit card and then get the discount but I don’t want or need the credit card at all.

Is it better to close down this new card or keep it open with a zero balance? How does opening and closing account affect my credit score?

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3 Responses to “How and why is my credit card affected when I open and close a credit card?”

R T Says:
December 21st, 2009 at 2:48 am

Your credit score is based on history. If you open an account, your score will temporarily go down. It will eventually recover from that.

Closing an account is a slightly different matter. Depending on how much total credit you have (add up the limits on all of your accounts), closing an account can cause your score to go down if it significantly reduces your total credit. From that standpoint, leaving the card active with a zero balance would help your score.

However having an account open can create another avenue for potential fraud. I, personally, close accounts I don’t use for that reason. Many card companies will also close an account automatically after a period of inactivity; 3 years is common.

There are a lot of things that can make your score vary a few points. Honestly, don’t worry about your score that much. Use credit responsibly, NEVER be late on a payment and pay it off every month. Your score will take care of itself.

Maltese Mamma Says:
December 21st, 2009 at 9:02 am

Too much available credit is bad because it pegs you as a risk because you could all of a sudden go on a manic spree and charge up a bunch of debt. Not having enough established cards with strong payment historys and lengthy relationships is bad because it shows you fly by the seat of your pants and are unstable. Opening a card is a hard hit on your score and takes points. Keeping a card open with a zero balance seems like you don’t trust yourself to make faithful payments, and will be closed eventually by the issuer for inactivity. To assist in payment history, I always advise just using your card for what you’d normally pay in full anyway. Like gas or utility bills, and then when you get your statement pay of all but 10 dollars, you won’t be charged much intrest and it shows you can responsibly carry a revolving balance. Paying in full each month does no good, as it shows that you don’t responsibly manage a revolving balance, that’s not to say it doesn’t help your payment history, it does help with that. Also, as an FYI, creditors don’t like those that *float* from 0% (or another low promotion) on one card to another. They become pegged as rate floaters, and low promotion offers will become few and far between.

chris c Says:
December 22nd, 2009 at 6:58 pm

PLEASE do not ever ever ever get a retail credit card. They charge the highest fees and have the highest interest rates.

Think of credit as proving yourself. The more history of good payments over time the better. Credit shows how responsible you are.

BTW, I own my own credit repair company. If anyone viewing this post needs credit repair, please visit my site below.

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