***HELP!!! Short Term Amex Open Account: Affect on Credit Score?***

[Anonymous]

Hi All-

So I just opened and AMEX Gold Platinum Rewards card a few weeks ago, when today in the post I find an offer to open the exact same type of card but if I opened this one and spent $500 in the first couple of months (something I surely will do) I get a bonus of 50,000 valuable AMEX Rewards points.

I called AMEX and asked them if I could apply the offer retroactively to my account, but they stated that they could not.

Question: If I open this new account and then close my other (NEVER used) how would that affect my credit score knowing:

35% of the score is based on payment history.

30% of the score is based upon the balances of revolving credit cards, not installment accounts 

15% of the score is based on your credit history.

10% of the score considers the type of credit you have. 

10% of the score is affected by the number of inquiries on your credit report.

More specifically, since 10% of the score is inquiry volume, I'll surely take a short term hit, but what are the longer term implications for having this "dead beat" one month old, never used, credit around?

Thank you so much in advance!

Matt

Message Edited by idlewild on 12-12-2008 07:11 PM

[Anonymous]

Instead, why don't you keep the card you have, but do a product change to something else. Then you can app for this one too. Honestly, I think the effects will be minimal considering you have already been dinged for the first inquiry.

Good luck.

[llecs]

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idlewild wrote:

Hi All-

So I just opened and AMEX Gold Platinum Rewards card a few weeks ago, when today in the post I find an offer to open the exact same type of card but if I opened this one and spent $500 in the first couple of months (something I surely will do) I get a bonus of 50,000 valuable AMEX Rewards points.

I called AMEX and asked them if I could apply the offer retroactively to my account, but they stated that they could not.

Question: If I open this new account and then close my other (NEVER used) how would that affect my credit score knowing:

35% of the score is based on payment history.

30% of the score is based upon the balances of revolving credit cards, not installment accounts 

15% of the score is based on your credit history.

10% of the score considers the type of credit you have. 

10% of the score is affected by the number of inquiries on your credit report.

More specifically, since 10% of the score is inquiry volume, I'll surely take a short term hit, but what are the longer term implications for having this "dead beat" one month old, never used, credit around?

Thank you so much in advance!

Matt

Message Edited by idlewild on 12-12-2008 07:11 PM

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Actually 10% is not based on inquiries alone, but a vast majority of it is new credit. If you open a new card, you will take a new hit for credit, just as you did with the first Amex. On avg. I have lost about 20-25 points for adding new accounts. Reason for the hit is because of the new credit (creditors don't like to see new TLs - sign that borrower may be desperate for credit), hit for the drop in your Avg. age (AAoA), and for the inquiry (very minor).

So, adding another card will hurt, but the newness of the credit will wear off for you within a few months and a large majority of those points lost will bounce back over time.

If you close the older Amex, you may take a hit for utilization if you are carrying balances and if scores as a revolving card. Your history will not change as it will remain for the next 10 yrs.

[Anonymous]

Thank you for the reply.

I'm not sure what you mean by "do a product change" as the offer is for a new account only.

Can you clarify?

[Anonymous]

Thank you for the reply.

Follow up question: you mention you took a 20-25 point hit for the new line of credit, but that "the newness of the credit will wear off for you within a few months and a large majority of those points lost will bounce back over time" - how long for the complete restoration would you guess?  I'm looking to buy in 6 months to a year...

I have never used the existing card so I'm not sure your point about my taking a hit "for utilization if you are carrying balances and if scores as a revolving card" - correct?

Thanks again.

[Anonymous]

With AMEX they will sometimes allow you to change one card to another. This is called a product change.(gold to green, green to plat, etc.

My suggestion is for you not to close the card. Instead I suggested that you change the card to something else that might be useful to you.

This, however, does not prevent you from apping for the card with the benefits you want.

The end result is two different cards. Keep the one you have and apply for the one you want.

[llecs]

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idlewild wrote:

Thank you for the reply.

Follow up question: you mention you took a 20-25 point hit for the new line of credit, but that "the newness of the credit will wear off for you within a few months and a large majority of those points lost will bounce back over time" - how long for the complete restoration would you guess?  I'm looking to buy in 6 months to a year...

I have never used the existing card so I'm not sure your point about my taking a hit "for utilization if you are carrying balances and if scores as a revolving card" - correct?

Thanks again.

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It will take about 1 yr to regain about 95% of those points, though most will return within 4-6 months. You may also get a small bump at the 1 yr mark.

If that card is reporting, and if it is factoring into utilization, and if you have any CC balances reporting on your CR, then closing it will remove the CL from the utilization calculation thereby increasing your overall utilization and decreasing your score.

If the card is not reporting yet, then you may see a drop in utilization and an increase in your score if you are carrying any balances on your other CCs, but any positive effect would be wiped out by the new TL reporting (that 10% of your score).

Whether you activate the card or not, it will still report.

[Anonymous]

I haven't received one of these offers, but... have you read all the terms & conditions etc very, very carefully? Are you sure there's nothing on there about the bonus points being "only available to first-time AmEx Gold cardholders only" or somesuch? The fact that you've already applied for, and been approved for, that same card (minus the bonus points) might specifically disqualify you from receiving them even if you do get rid of the existing card and accept the new, improved preapproved offer.

[Anonymous]

Thanks for the help, all.

To DIZZIER who asked me to check about a product switch:  I have the same card now as the offer, so a product switch is out of the questions.

To FEVMLO, who asked about whether or not this offer applies to new AMEX customers only (and not an opening of an account for existing AMEX customers): yes, I have read them and it will apply to me. There's nothing in the offer about it only applying to new AMEX customers. In fact, I've been a corporate AMEX customer for 2+ years now and this offer appears to be targeted at me.

To IILECS (and all others): I have called AMEX and it appears certain that I can't retroactively apply this offer. I'm still very much tempted by the 50,000 points so, being a FICO newby, I'm still confused as to how the new LC would affect my FICO score, other than the initial hard pull.

IILECS, since I haven't used the AMEX (no limit) utilization is somewhat irrelevant, correct, as I understand the credit limit on this card is pretty much determined by the highest monthly debt, which in my case, is 0.

Am I being overly cautious here??

Thanks again for all the help!

[llecs]

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idlewild wrote:

Thanks for the help, all.

IILECS, since I haven't used the AMEX (no limit) utilization is somewhat irrelevant, correct, as I understand the credit limit on this card is pretty much determined by the highest monthly debt, which in my case, is 0.

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Correct. If you have not used the card at all, and it is not scored as revolving (e.g. no reported balance) then there will be no impact to your utilization if the card is closed (short life that it had).