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Keeping Score

My credit score fell and five of my card accounts were closed. How do I fix this?

Your flurry of applications likely spooked your issuers, so you’ll have to wait for your score to recover

Summary

If you applied for a several new credit card accounts and they were all shut down, it may be because your actions spooked your card issuers. You may have to wait a few months and add one or two new card accounts to improve your score.

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Dear Keeping Score,

I have been working really hard on my credit and got my score up to 720. I applied for five credit cards. I was approved by all of them, but then my credit score dropped to 620 and they closed all the accounts. So now I have all the hard credit checks and closed accounts. What can I do to fix this? – Tami

Check out all the answers from our credit card experts.

Ask Steve a question.

Dear Tami,

Sadly, there are no quick fixes for your situation. I’m afraid you are going to have to chalk this one up to hard lessons learned, and wait it out. While your lesson may have cost you credit score points, at least it didn’t cost you any money.

What happened was that you scared everyone – the card issuers and the credit scorers.

From your point of view, this was the culmination and reward for a lot of good behavior. You had worked hard, gotten your score up to a good level and then you wanted to go credit shopping. What could be wrong with that? After all, what is a good credit score for, if not to get new credit?

But from the point of view of the credit card scorers, you looked like North Korea with nuclear credit weapons. Why does she suddenly have so much credit and what does she plan to do with it? Quick, apply sanctions to reflect this new level of risk unpredictability!

From the credit issuers’ point of view, a lower score made you too high a risk for the products you just received, so they canceled your cards that required a good credit score.

See related:  When can an issuer close your credit card account?

Applying for many cards at once can spook issuers

Credit scores look at your history and predict the likelihood of you having a problem with your next loan or line of credit. Up to the point that you exploded on the scene with five cards at once, you looked like a slow moving and responsible credit user.

But getting five cards at once made you seem unpredictable. Maybe you’d max them all out; maybe you’d use one to pay the other until they all imploded or maybe you were planning some other nefarious scheme. After all, you never opened five cards at once before!

Credit scoring impact of opening too many cards at once

I am a bit curious how you managed to get your score up to 720 – a very respectable score, by the way – without understanding how applying for credit affects your score.

While it is true that new credit doesn’t count as much as the other factors in credit scoring, as you have seen it definitely does count. And the five new accounts likely reduced your average age of accounts, which is a key element of the length of credit history scoring factor.

Those factors, combined with the five hard inquiries, likely all contributed to the steep drop in your score.

The only time it is ever okay (credit-score wise, anyway) to make multiple applications for credit is when you are shopping for a mortgage or a car loan or something like that.

In these cases, the applications will only count as one inquiry if done in a short enough time period. This is mainly because, in these instances, the person applying is only going to choose one lender for their mortgage or car loan.

Your score should rebound after a few months of good credit behavior

For people with a thin credit file (not an extensive credit history spanning decades), the effects are much more pronounced. I suggest you wait a few months and monitor your credit. It should stabilize or even rebound a bit when nothing else bad shows up on your credit reports.

Then, you might try to open one credit card account. I’d suggest a retail store card, as they are easier to get and still report your history to all the bureaus. But they also tend to have higher-than-average APRs and advertise deferred interest deals that can cost you in the long run.

Then, as your score rebuilds, open a second account. I’d stop there. One of the best ways to keep a great credit score is to only open accounts when you actually need them.

So, where do you go from here? The hard credit inquiries are going to stay on your credit reports for two years, but the good news is that as time goes by they will become less important. You should start to see some recovery in a few months or so, but I want you to be prepared to wait.

Remember to keep track of your score!

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