If you’ve applied for a credit card but decided not to activate it, any impact to your credit score has already occurred. You should then decide if it is worth holding on to the card if you don’t want it.
Reader Judy wants to know, “If you apply for a credit card and then you decide you don’t want it, will it go against your credit score if you don’t activate it?”
It’s not an unusual situation to find yourself in. You may have been preapproved for a card and casually applied, and then decided you don’t want it after all, for instance.
Or, after applying impulsively, you may have decided that you don’t need one more card to track and keep up with. In any event, the deed is done and now you are wondering if not activating this card will have any repercussions on your credit score.
Any impact on your credit score has already occurred
The card issuer has already looked into your credit before approving you for the card. That’s the point at which your credit score is impacted. The lender makes what’s known as a hard inquiry into your credit score before deciding whether to extend you the credit.
Just one hard inquiry is not likely to have much of an impact on your credit score.
But if you had applied for several cards in a brief window of time and several lenders had made an inquiry into your credit score, that would have more of an impact.
The idea is that you may be overextending yourself by taking on too much credit. Your credit score would reflect that potential risk to prospective lenders if there are too many inquiries into your credit score within a brief period from many lenders.
However, the credit scoring process does take into account the possibility that you are shopping for the best terms if you are applying for a major consumer loan such as a home mortgage, student loan or car loan.
In these cases, the credit scoring model will view several of these inquiries within a window of about 14 to 45 days, depending on the model generating the score, as one inquiry. While all the inquiries will show up on your credit report, they will be counted as one for credit scoring purposes.
When a credit card lender checks your credit, that hard pull may lower your score by five points or less. But it will only affect your credit score for up to a year, and it will fall off your credit report after two years.
Using your new card to improve your score
Although you should have considered whether you needed the additional credit before applying, you can’t undo what’s done. In any event, any minor negative fallout on your credit score from the hard inquiry will be overcome in a few months as you engage in positive credit behavior, such as continuing to pay your bills on time.
Now that you have a new credit card, consider that it might even have a positive impact on your credit profile if you activate it and use it responsibly. For one, the card will give you an additional line of credit which will boost the total amount of credit you have available to you.
For instance, if you had three different cards with total credit available of $30,000 and the new card offers you a $15,000 line of credit, the total credit available to you now would be $45,000.
If you typically tap into $15,000 of your available credit, your old credit utilization ratio would be 50%. With your new card, this means that if you don’t boost up your spending you will be using less of your total available credit, at 33%.
That would be a positive for your credit score since you are tapping into less of the total credit available to you. However, this outcome depends on how well you manage your finances by not using up the additional credit.
See related: What is a good credit utilization ratio?
Consider canceling the card
Judy, if you don’t need the additional card and don’t think you will garner any additional benefit, credit score-related or otherwise, from holding on to it, you should consider canceling it.
If not, you could be assessed an annual fee in case the card carries one. Since you don’t have any credit history with this card, there’s not likely to be any much fallout on your credit score if you cancel the card.