Credit scoring effect of opening vs. closing credit cards

The negative impacts of both opening and closing cards are short-lived

Speaking of Credit with Barry Paperno

Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO  and consumer operations manager for Experian. He writes “Speaking of Credit,” a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared on Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.

Ask Barry a question, or see if your question has already been answered in the Speaking of Credit answer archive.

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My old card offers no rewards. If I close it in order to apply for a new rewards card, will this hurt my score?

Keeping your old card open while applying for a new card is completely doable. This will allow you to keep your length of credit history and not hurt your credit.

In any case, the negative effects of both opening and closing a credit card account on your score are both short-lived, as long as you keep a low balance on your cards and make on-time payments.

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Dear Speaking of Credit,
My Chase Slate card has a long credit history. But it is barely used because it does not have rewards or points. However, the Amazon Prime Rewards card (which I do not have) has perks that I can actually benefit from.

Closing a credit card with long history will jeopardize my credit score. And, I really do not want to apply for another credit card.

If I can apply for the new card and keep my long credit history, but NOT affect my credit score negatively, that would be ideal. Any advice? – Geno

Dear Geno,
It would be ideal to be able to open a new card, keep your old card’s history and do no harm to your credit score, which is easy to achieve.

You don't need to close a card to open a new card

For starters, don’t close the Slate card.

There is simply no good reason to close the book on a card that has served you well, especially since the card carries no annual fee and Chase does not require it be closed as a condition for opening a new card.

If you are concerned Chase may close the Slate card for lack of use, simply start using it more frequently for small purchases that you pay in full without incurring interest each month.

Not only is the bank more likely to leave it open, but it may even raise your credit limit with continued good behavior.

However, should you decide to close it for reasons of your own, don’t necessarily assume that doing so will hurt your score. Or if it does, don’t expect the harm to be severe or longlasting.

See related: How to cancel a card without hurting your score

A couple of ways closing an old card can hurt

While never helping your score, closing a card can hurt your score in a couple of ways – one of them immediately; the other one, about 10 years after closing.

These are:

  • In the short run, eliminating the closed card’s available credit can lead to a higher existing credit utilization percentage if you carry a balance on any other cards.
  • In the long run, your closed card and all of the positive history associated with it will be removed from your credit report after about 10 years, which could lower your score at that time.

But that's not always the case.

Then again, closing a card may not hurt your score at all, provided that:

  • Any other cards you have carry low utilization, as the loss of the Slate’s available credit isn’t likely to raise an already low percentage.
  • You have other open cards of a similar vintage as the Slate, so that its future loss won’t be felt in the score calculations that measure your length of credit history.
Tip

Tip: The negative effects of both opening a card and opening a new one can be minimized if you keep a low balance on any existing accounts and pay their balance on time.

Credit scoring impact of opening new card

Now that we know closing the Slate card may or may not affect your score, let’s examine three possible scoring impacts of opening a new card.

The first two tend to be negative, while the third can actually raise your score.

When all of the various scoring factors are considered, a new card opening can go either way in terms of its impact on your score.

The three major changes to your credit report from adding a new account are:

Hard inquiry

When evaluating your credit application, the card issuer will access your credit file at one of the three credit bureaus, followed by a hard inquiry posted to your credit file at that bureau.

Inquiries of this kind, which only affect your score for the first two years on your credit report, initially tend to lower your score by about five points or less.

New account tradeline

Adding any new account that hasn’t yet built an established track record can diminish the score factors that measure your length of credit history, such as average account age and the ages of your oldest and newest accounts.

Fortunately, negative impacts to this scoring category lessen over time as the new account ages.

Higher total available credit

The addition of a new card’s credit limit can increase your total available credit, which can lower your overall utilization when balances remain the same or drop.

Opening a new card while simultaneously closing an older one with a similar credit limit can often offset any utilization damage from the closed one being excluded.

Credit scoring effects hard to predict

As you can see, offering a simple single piece of advice is hard to do when so many positive and negative scoring impacts are in play at any given time.

Yet a reliable rule of thumb when deciding whether to open or close accounts continues to be:

  • If your current overall utilization is low, opening or closing a card isn’t likely to have much impact on your score.
  • Any negative impact from openings or closures is likely to be short-lived, with consistently on-time payments, no overall rise in spending and only the occasional new account.
  • Leave all older cards open, so their credit lines and histories can continue to contribute positively to your score well into the future.

Best of luck applying for a new rewards card!


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Updated: 07-18-2018