I have 4 credit cards, and 3 of them are about 4 years old and 1 of them is less than a year old. I noticed that my FICO-8 went down by around 20 points since I got the new card and it hasn't gone up since. I still have pretty much 0 debt(and all loans paid off, no new loans) so my debt ratio wouldn't get affected if I closed a credit card. Is there any downside of closing a new credit card for my case regarding my credit score? If anyone could point me towards a source on how the credit card age is factored into the score, I would really appreciate that too!
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Every time you open a new account, you take a hit and until it ages a bit, it brings down the average age of your accounts, which also takes a hit, so if you keep opening up new ones and closing, you are keeping your account young and taking a ding. Pick a good card, let it mature and don't jump around too much, or you will keep killing your score.– GµårÐïåñJul 14, 2018 at 23:29
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@GµårÐïåñ ok but how is that relevant if I keep my old accounts and only close the new account? I'm already aware of closing old accounts hurting my credit score. My question was specifically about closing a new account while keeping the older accounts. That will bring the average account age up as opposed to the case you described.– bluesealJul 15, 2018 at 1:08
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Very relevant in the sense that when you keep an "old" account because it is "old" it adds to your average age of account than reduce it. Think like this, you have cards that are 5, 4, 3, 2, 1 year(s) old, your average is 15/5 = 3 years, pretty low but still - now you go and close say the two year old one because you don't want it anymore, it becomes? So if you keep opening up new accounts adding 1 or below year cards, you are adding to the denominator but not to the numerator, so your ratio drops. Get it now?– GµårÐïåñJul 15, 2018 at 19:00
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Now, specific to closing the newest one, the problem there still affects what I explained above but add to it that you now took the hit for the new account, which will last for a couple of years, and you took a hit when it lowered your average age, and now you close it, at the very least you took hits but gained nothing and at worse it will still drop your average after its gone and you still took all the hits, make sense now? So best approach is to get what you can stick with and let it mature, don't hop around, if you are, then you didn't research or pick your cards right to begin with. ok?– GµårÐïåñJul 15, 2018 at 19:02
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What hit are you talking about? There was no hard inquiry. If I close the card, the average age will increase, and I don't have to get a new card until I get mortgage/car loan. Unless I get a new card far in the future, there is not gonna be any negative effect for the reasons you wrote about. Anything else you know about?– bluesealJul 16, 2018 at 2:20
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1 Answer
What was your motive to get the 4th card?
When you applied for the card, the credit inquiry was probably the source of the score hit. The inquiry will last for 2 years. And even if you cancel the card it will show on your history for up to 10 years.
If you want to manipulate your score, I’d suggest you understand when the accounts report to the credit bureaus, and pay it in full the day prior. My score can swing 30 pts depending on that factor.
answered Jul 15, 2018 at 0:34
JTP - Apologise to Monica♦JTP - Apologise to Monica
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I have one credit inquiry from a different place, and it's from earlier for rental application. That's it. Nothing to do with the new credit card. It definitely brings down the average age of my accounts and my credit cards are all paid in full with always less than 3% debt utilization. The last time, it was 1%. I don't see how your first question is relevant, but I got it for the cash back and my other FICO scores are still the same. Only my FICO-8 took a hit.– bluesealJul 15, 2018 at 1:02
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2Getting rid of the last card isn’t likely to help you. Jul 15, 2018 at 1:05
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Why not? It will bring the age up. What part of the score will it hurt?– bluesealJul 15, 2018 at 1:24
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+1 agree with Joe, your strategy should take a broader view, this micro manipulations will not help you and in fact will likely to hurt you in the long run than help you at all. BTW, Joe, thanks for the write up.– GµårÐïåñJul 15, 2018 at 19:04