Will canceling a new, unused card hurt your score?
Dear Opening Credits,
I applied for and now have a new retail credit card, which has NOT been activated. I have now decided not to use it. Can I cancel the card without any credit rating issues? -- Brad
Did you know that I'm psychic? It's true. In fact, I'm getting a strong vision of you in a store, shopping around for a few things. You reach the checkout counter and the cashier sings out, "Would you like to open an account with us and receive 20 percent off all of these purchases? You'll be eligible for super discounts, coupons and deals on future items, too!"
Now I hear you responding, "sure," either because it sounded quite sensible or you didn't know how to gracefully say no.
OK, I'm not psychic. It's just such a common scenario. Almost all of us have had the same thing happen, and many wind up feeling regret at opening an unnecessary credit line. Here's what you need to know and do now.
Because you applied for and received the new card, it is now live and ready to go. By activation, you probably mean that you haven't called the number on the sticker on back of the card that allows you to start charging. The retailer has probably already sent notice to the credit reporting agencies that the account is active, indicating the date they issued it as well as your available credit line.
As far as your credit rating is concerned, FICO most likely has also taken that information and thrown it into its mathematical soup. Not a big deal. Yes, the score has factored in the hard inquiry (for your credit application when you initially applied for the card), but that comprises only 10 percent of the scoring mix and should only produce a tiny blip downward, if anything. The length of credit history of your FICO score is also affected, but that too is minor (15 percent) when compared to the major slices of scoring pie -- payment history at 35 percent and amounts owed at 30 percent.
So what will canceling the account now do to your FICO score? Not much. You haven't charged with it so you haven't established a history yet. If you want to get rid of it, go ahead and do so.
Call the company and explain that you'd like to close the account. They should honor your request, but don't be surprised if they try to talk you out of it. They extended the line to you because you qualified for it and they'd like you to use the card. After all, while you may continue to shop at the store with cash or another card, you may buy more with their credit card, not pay off the balance in full and generate some interest revenue for the store. Retailers are always looking and trying to retain great charging customers, and clearly you fit their requirements. However, if you really don't need the account, be firm. They'll let you go.
After a month, check your credit report (you can pull one of each of your three credit reports for free once a year at AnnualCreditReport.com). It will show when that trade line was opened and when it was closed. It should also indicate that you, not the company, canceled the account. Nothing derogatory should be read into the situation. If it remains open, contact the company again and give them a firmer nudge.
Next time you're in the mall, think carefully before you agree to a persuasive salesperson's offer. Do you want the account and the benefits it provides? Will it inspire you to spend wisely or overspend? Or maybe you don't need it at all, as it would be nothing more than a redundant piece of plastic that clutters up your wallet. Whatever the case, remember that applying for credit cards should not be done impulsively, but instead with much deliberation.
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Published: August 15, 2012
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