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Say I have a score of 800 and one credit card account. I pay off the due balance every month, and the credit utilization rate is around 10%. I want to open another credit card account and plan on also paying its due balance every month. I understand that my overall utilization rate will go down given that I don't plan on necessarily spending more per cycle. Perhaps that may raise my credit score somewhat.

If I decide after a year that I no longer want to use the new card and close the account altogether, will my score drop below the original 800 despite that my utilization rate goes right back to where it was before?

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  • Phil - welcome to Money.SE. As on SO, members can drive by with a downvote and not offer a comment. Obviously, I thought your question was well presented and worth responding to. Another member, not so much. – JoeTaxpayer♦ Jan 9 '17 at 1:49
  • Just out of curiosity, why close the account? To not have the cost of the annual fee? Or just for security's sake? (Either way, under the current system, it will hit your score, but only a little bit. @JoeTaxpayer answered that already. Of course, if the credit card companies change the rules again...who knows what will happen.) – LiAnn Jan 9 '17 at 2:02
  • Hi LiAnn, you mean FICO, right? The card issuers are a customer of the credit reporting agencies, they don't dictate the rules. – JoeTaxpayer♦ Jan 9 '17 at 2:24
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Yes, a tiny bit. The thing that doesn't just go back to a year ago is the inquiry. A hard inquiry sits on your report for 2 years before falling off completely. The impact between 0 and 1 inquiry is minimal.

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Adding on to the answer above, it may be best to keep the card open since it will decrease your utilization rate and boost your overall available credit. Your credit score is a mix of different factors:

35% Payment history 30% Amounts owed 15% Length of credit history 10% Credit mix in use 10% New credit

http://www.myfico.com/credit-education/whats-in-your-credit-score/

By having more credit available to you, it shows that you are responsible. You do not have to use the second credit card, but you could use it once a month for only small purchases (coffee ~$5) and pay that off - this will ensure that the account stays open and active. That way, it shows on your credit report that you have been paying it off and are responsible with handling multiple lines of credit. This may be best if you are trying to establish credit in the event you apply for bigger loans in the future (think mortgage).

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I would also say yes for the simple fact of your average account length. Lenders like to see long standing accounts.

If you have one credit card for ten years then open and close one in a year, your average just dropped significantly.

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