We often hear from readers who are concerned about the effect that closing or opening a new account will have on their credit scores.
Q: I had a store card that had a $2000 credit limit with no balance. It was closed by the issuer due to inactivity. Can this hurt my credit score? I have other cards with no balances on them as well and one main card that I use which I pay off at the end of every month. I currently have a very high credit score and wish to protect that as much as possible.
Additionally I want to open another card to get promotional incentives. I am thinking about closing down one of the unused cards which I will replace with this new card. Should I get the new card first and then close down the unused old card, or does it not matter?
Any advice that you have is greatly appreciated. Thanks!
A: Closing a credit card account—whether you close it or your issuer does—can have an impact on your credit scores. However, it sounds like you have several things in your favor. You already have strong credit scores, $2000 is probably a relatively small amount of your total available credit, and it doesn’t sound like you are using much of your remaining available credit anyway. So the fact that this account has been closed probably won’t have a meaningful effect, if any, on the ratio of your balance to your available credit. It sounds like overall your scores may not drop much, if at all, and will probably recover fairly quickly. You can certainly monitor your credit scores if you are concerned, but I wouldn’t lose sleep over it if I were you.
As for the second part of your question, I’d suggest you apply for a new rewards credit card, but don’t feel like you have to close another account when you get it. If you have a compelling reason to close another account, such as an annual fee the issuer refuses to waive, you may want to wait until your new card is in hand before closing another account. If possible, avoid closing your oldest accounts, since that can have a greater impact on your scores than closing newer accounts. But if you don’t need to close another account, then don’t.
By the way, I recently interviewed Scott Bilker, who has more than fifty credit cards and a great credit score. I wouldn’t recommend trying his approach yourself, but it just goes to show that multiple open credit cards don’t necessarily hurt your credit scores!
Image: 401K, via Flickr.com