A reader had second thoughts after accepting an offer for a preapproved card. After he canceled the card, it still showed up as a closed account on his credit report.
Reader Danny found himself in a sticky situation after being preapproved for an Indigo credit card. He accepted the offer, as he thought it would further his endeavor to rebuild his credit.
On its website, Indigo touts itself as a card that “offers a straightforward opportunity to build and access credit,” and appears to be targeted at those with a less-than-stellar credit profile. From Danny’s telling, it appears the card issuer was just not prepared to let him slip through its fingers.
After accepting the card offer, Danny read “many very unfavorable reviews” about it, which caused him to rethink his decision. Shortly after sending in his online application, he contacted the lender and asked a representative to stop the application.
She tried to entice him to stay with an offer of halving the card’s annual cost, which Danny declined. She then agreed to drop the application. Even then, Danny got notified by email a week later that his card was on the way.
He then talked to an Indigo representative and apprised her that he had discontinued his application and didn’t want the card. He was once again offered the half-price annual cost deal, which he again declined, and then she agreed to cancel the account.
Even then, Danny was surprised to see that the Indigo card account showed up on his credit report as a closed account. Danny is now wondering whether to leave it as it is, or enter into a dispute to have it removed from his credit report.
Newer accounts affect credit score less
Danny, since you are trying to rebuild your credit, it’s no wonder you are focused on this issue. However, the very act of applying for the card has already had an impact.
When the lender preapproved you, it would have made a soft inquiry into your credit score, which doesn’t create much of an impact. When you applied for the card, though, the lender would have put in a hard inquiry with the credit bureaus, and that may have had more of an impact on your score.
The act of closing the account could have had an impact, too, but since this is a brand-new account, the impact depends on your current credit mix. A part of your credit score is made up of your credit utilization ratio, which is how much of your available credit you use.
By closing the card, you have cut down on the total credit available to you, so you could be using a higher percentage of the credit you have available. Credit bureaus tend to view a lower utilization ratio more favorably.
Another way in which a closed account could affect your credit score is in terms of how long it has been open, which goes into the length of your credit history. Closing a card that is brand-new won’t have much impact on this factor.
Closed accounts continue to be reported
Closed accounts that are in good standing stay on your credit report for up to 10 years. Those that have any negative history, such as collection items, could sully your report for seven long years (though the negative impact fades over time).
Putting in a dispute with a credit bureau to get this closed account off your report would be an option if there is any inaccurate information reported.
If there is nothing incorrect reported about this closed account, you could try putting in a “goodwill” request with the lender to have this account removed from your credit report. It is up to the lender whether to accede to such a request, which would depend on whether they want to remain in your good graces.
Danny, depending on whether you have other credit outstanding, it seems any credit impact from this closed card has already occurred. Having this closed account appear on your credit report doesn’t seem like something that would do any additional harm.
Anyway, good luck to you in rebuilding your credit!