My credit score has been steadily going down since last May (740) to now (678). I have not had any negative marks on my credit such as late payments or debtors reporting to the credit bureau.
I cannot think of any reason that my score would go down so much other than having too many credit cards and cancelling them, some without having ever used them.
And now I am thinking of cancelling another I just got approved for which I was going to use for a balance transfer but they approved me for a paltry (and insulting) $1000 limit. The card I want to balance transfer from has a $10k limit. If I cancel this new card (Amex) now will this hurt my credit?
Having too many does not hurt your credit score based on the number alone, but it does decrease the “average age” of credit. And based on how recently the account was opened up, having a hard pull credit check within a short time frame.
Closing a card can decrease your credit score on the basis that a credit line is being closed, so the total available credit to you has decreased. This means that with the same spending habits, you are utilizing a higher percentage of your overall credit - higher credit utilization ratio.
With respect to your question on why the $1k credit limit: I don’t know how many new accounts were opened in a short time frame, but this is something that they consider as well.
Overall, what you are doing is very obviously lowering your credit score, even in the absence of these “negative marks” you are mentioning.
Yes, applying and canceling cards so soon is not good for your credit. The hit from the hard inquiry, then the fact you aren’t letting them age and show good payment records, doesn’t help your credit score either. Why are you applying for cards just to cancel them? Don’t cancel that one you just got because of its 1k limit.
@philip
At this point, I will not be applying for any more credit cards except for the one that I can use to transfer my 10k debt from my Discover card before the % interest time expires.
The Amex card offer was for % interest for 12 months and allows balance transfers, but I was shocked that they only offered me a limit of $1k. I wanted to cancel the offer immediately but felt I would take a credit hit.
@Thorne
You took the hit applying for it already, but canceling the card won’t help show cards in good standing and age. Plus, it looks really bad to banks to open and cancel cards so quickly. How many cards do you have now? And what are your overall credit limits across all cards? So you have a 10k balance that you have on a 0% card that’s about to lose the 0% interest rate and you’re looking to move it to another 0% interest card? How long have you been carrying this balance? You usually carry a balance on 0% cards and pay off prior to the end of the promo period. Essentially, you are using the bank’s money and saving your own while hopefully collecting interest somewhere else.
@philip
I have 5 cards for a total of $27K limit. 1 is an airline miles card, 1 regular visa with good cash back percent, 1 is a credit union card, 1 is the new Amex card I am sorry I responded to, and the last is the Discover card with the 10k balance with the 0% about to expire. I had 3 more cards that I cancelled in the past 2 years: 1 was another airline miles that I cancelled after I met the requirements for the mileage offer, and the other 2 were lower limits that I just didn’t use. I understand now that this surely hurt my credit and limit on new cards.
I used the Discover 0% to renovate a room that I am now renting, and would prefer not to pay off the card with savings, but rather use the rental income. So that is why I would like to find another 0% interest card for a balance transfer, but I doubt I will get approved for a 10k limit as evidenced by getting a 1k limit from the Amex card. They must be leery because of all the cards I accepted and cancelled, and currently have.
@Thorne
You had a 10k+ balance with a total credit limit of 26k when you applied for that Amex card? Your credit utilization ratio was like 40% at the time you applied. No wonder they only gave you $1k on that card. Ideally, your credit utilization ratio should be under 5%. Anything over 30% is kind of a red flag.
I know you would ‘prefer not to pay off the card with savings,’ as would be the case with anyone - but with a credit utilization ratio like that, a new credit card isn’t going to fix that problem. Your credit utilization ratio has closed that door as an option.
You need to slow down and gather information instead of asking questions after the damage is done and can’t be reversed.
I suggest keeping your new card open and eventually getting the credit limit higher, especially because it’s Amex. I have 4 cards with them and they are #1 in my book.
Stop applying for credit. Each time you do, you’ll get a hard pull which hurts your credit. Then when the card gets added to your credit, you lower your age of accounts.
Stop cancelling cards right after getting them; just keep them if they don’t hurt you to hold them (no annual fees).
Having multiple cards by itself doesn’t lower your credit score; it’s how you’re doing it that is lowering yours.
Credit scores are an algorithm. They never change for no reason. It helps to know where you’re checking your score too. If it’s Credit Karma, they use a nearly irrelevant VantageScore 3.0. VS3 is very prone to fluctuations. You should be checking your more meaningful FICO scores if you’ve previously been using Credit Karma.
going to use for a balance transfer
This tells me you’re carrying a balance. Obviously not the way credit cards are intended to be used and you’re also wasting money away in interest. But furthermore, that tells me your utilization is probably high. Utilization can immensely impact a score, but the good news is that it holds no memory. Utilization resets monthly. This is good news because if you pay down your balances (lower utilization), your scores will go up.
If you’re checking VS3 scores, your score may go down due to closed accounts. But on FICO scoring models, even closed accounts stay on your reports for about 10 years and continue to add to aging metrics during that time, the same way they would if the account were still open. So closing an account will not impact your score in and of itself.
What could happen is, you’re carrying a balance of X amount and your total credit limit is Y. So your utilization percentage is X/Y. When you close a card, even on FICO scoring models, you lose its credit limit; therefore, your utilization calculation is different. Now it’s X/Z, with Z being less than Y. So that makes your percentage higher.
It will affect your credit over time because banks don’t like you to open accounts, only use them temporarily, and cancel them. All credit cards you obtain should have a use for them in the upcoming years. If you feel like you have to close a card, make sure you at least used it and wait at least 12 months; do not close anything a month sooner than that.