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I used to have 5 credit cards in excellent standing : no late payments, credit card utilization < 10%, average age of 0.75 years, total credit line $12K, FICO credit score 725


Last month I got two offers from Discover ($1000 limit) and Priceline ($1000 limit). I accepted the two new credit cards, and guess what . . my credit score dropped to 665 !

I haven't used these new cards yet. I am thinking about cancelling them. However, I read that cancelling will decrease the score even more, because of the credit to debt ratio. But I think this does not apply to me because: 1)the credit line that the new cards gave me was only $2K; 2)and my debt to credit ratio is < 10% anyway . So , as far as I understand : my credit score dropped because of the following two reasons :

1) newly opened accounts is a bad signal for FICO (damn it!)

2) average age of all accounts dropped

So : if I cancel Discover and Priceline, this should take care of the above two issues, shouldn't it ? I want to get back to my 725 score, or at least to > 700. Will cancelling these new cards help ?

Thanks

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    Wondering: Why did you accept those cards, given that they've got a useless limit and presumably duplicate the capability of at least some of the cards you already have? (That reminds me, I should murder my Amazon card.) – keshlam Nov 9 '14 at 17:48
  • Because I didn't realize these assholes would decrease my credit score. I mean come on! What the hell ? Getting preapproved and accepting additional credit card is bad and signals some crap to FICO ? :( – user3191304 Nov 9 '14 at 19:12
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    ACCEPTING a credit card you don't need is bad, from FICO's point of view. It implies careless use of the cards, or perhaps preparation for fraud. Close those cards and chalk it up to a learning experience. Remember that if you don't plan to finance a major purchase any time soon, your credit score really makes very little difference unless it's well below average. – keshlam Nov 9 '14 at 19:16
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    Reminder: "Preapproved" for credit cards means "on the marketing mailing list". Nothing more. – keshlam Nov 9 '14 at 19:30
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    Something to consider: Don't worry so much about your credit score. FICO is using it to manipulate you and get you to dance. If you want to use the new accounts (and pay them in full regularly), use them. If not, cancel them. If you are paying your bills on time, your score will come back up. – Ben Miller - Reinstate Monica Nov 10 '14 at 12:00
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New accounts cause a dip in your FICO score. New credit pulls cause a dip in your FICO score. Applying for a new credit cards triggers a credit pull and a new account report (if approved) - double depth dip. Applying for two of those - double depth double depth dip.

Cancelling an account doesn't trigger any change to your score on its own, the account will remain on the report for many more years. What does cause a dip is a hike in the debt/credit ratio. So cancelling the newly opened accounts will not "reverse" the double depth double depth dip you've just caused. It will, however, have a potential to add another dip if opening your accounts improved significantly the debt to credit ratio.

You need to be careful with what accounts you open or close, but you shouldn't be concerned too much about FICO score in that regard. These dips will go away after a few months and your credit score will get back to where it was.

  • Thank you. I will keep these cards then. Could you give me a rough estimate : how many months do I need to wait until my credit score reaches 700. It is 665 now. It used to be 725 a month ago. – user3191304 Nov 10 '14 at 0:36
  • PS : I am asking this question because I am planning to get a mortgage. I am okay to wait additional 3-4 months until my score is back to >700. However, if I have to wait longer than that . . then I'll just apply for a mortgage now – user3191304 Nov 10 '14 at 0:42
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    What about average age of accounts? Credit Karma indicates that that's also important to the overall score, and closing new accounts raises the average age of open accounts by removing low outliers. – Yamikuronue Nov 10 '14 at 15:42
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    @Yamikuronue closing them doesn't remove them from the report. As I said - they'll stay there for many more years, even if closed. – littleadv Nov 10 '14 at 17:02
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    @user3191304 people - may be. Computers? If they have a setting that "2 new accounts a year is too much" - then "Computer says NO" for you. youtube.com/watch?v=0n_Ty_72Qds – littleadv Nov 12 '14 at 3:53
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You've got to remember lenders use their own methods for calculating your credit score. According to

https://www.creditkarma.com/article/age-of-credit-history

some lenders use the average age of all accounts on your credit report, regardless if they're open or closed. I see this question is over a year old, so it probably doesn't help you, but hopefully it helps someone else.

protected by Community Aug 10 '17 at 13:07

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