Switching Banks/CC hurt my credit?

[Anonymous]

Hello All!

I have had my current bank account/CC for almost 2 years now.  I'm looking to change (Checking, savings, and credit card - everything) to a CU for better interst rates/perks.  I have had a CC with my current bank for about one year and it is my only CC.  I use the card fairly regularly, but pay it off within a couple of days, so there is no outstanding debt on the card. 

I would like to close the CC at my current bank, and open a new one at the CU, just for simplicities sake (so I can pay/view the accounts in one place).  Will closing my current CC and opening a new one hurt my credit rating much?  Is there a best way to go about this to impact my credit score as little as possible?  (Current score is around 800).

Thanks!

[Anonymous]

First off there is no reason to close the CC you have with your current bank. You can keep it and still open the accounts with the CU. Closing your deposit accounts with your bank (Checking / savings or debit card will have no effect on your FICO score.

As far as opening the new accounts, the CU may do a credit inquiry to open the new account and will almost certainly do a credit inquiry prior to the issue of a credit card. This is a minor effect on your credit score. Credit inquiries count for one year in FICO scoring but are retained on your report for two years. And the effect of the inquiry fades as the months go by in that year.

If you have already decided on a credit union it would be in your best interest to go in and talk to an account representative face to face. Tell them you would like to open the accounts and a credit card and see if this can be accomplished with only one inquiry on your credit. The policy varies between institutions but the account rep will be able to give you the best information.

As far as the NEW account, FICO scoring will see the new account and it will change your Average Age of Accounts (AAoA) which is a slight negative. But mine and others experience has shown that adding a second credit card will usually offset this and actually increase your credit score. There is some reports of even a 3rd account doing this but beyond that the effect seems to be negative with the AAoA having greater weight than the new CC.

Lastly, FICO likes to see a CC account with a major BANK. Credit unions do not fulfill this like to see. Although you may benefit from using your CU credit card extensively over your existing bank card you will want to make a small occasional purchase on the bank card and pay it off right away or set up a recurring bill (Such as utilities, NETFLIX or something that bills monthly) and pay it off right away. Then the FICO Gods will smile happily and bless you abundantly.

Of course most important is NEVER, NEVER, NEVER (I mean NEVER) be late with this or any other bill payment. Good payment history and Time will make your FICO score soar to enviable levels.

If you have other questions or are unclear please just ask and someone will post answers. Actually they will post answers to your original question anyway. Good Luck and keep reading the forums. There is a wealth of info in here.

[Anonymous]

Holy cow, that answered my question and then some...Thank you VERY much for the info!

[Anonymous]

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@Anonymous wrote:

First off there is no reason to close the CC you have with your current bank. You can keep it and still open the accounts with the CU. Closing your deposit accounts with your bank (Checking / savings or debit card will have no effect on your FICO score.

As far as opening the new accounts, the CU may do a credit inquiry to open the new account and will almost certainly do a credit inquiry prior to the issue of a credit card. This is a minor effect on your credit score. Credit inquiries count for one year in FICO scoring but are retained on your report for two years. And the effect of the inquiry fades as the months go by in that year.

If you have already decided on a credit union it would be in your best interest to go in and talk to an account representative face to face. Tell them you would like to open the accounts and a credit card and see if this can be accomplished with only one inquiry on your credit. The policy varies between institutions but the account rep will be able to give you the best information.

As far as the NEW account, FICO scoring will see the new account and it will change your Average Age of Accounts (AAoA) which is a slight negative. But mine and others experience has shown that adding a second credit card will usually offset this and actually increase your credit score. There is some reports of even a 3rd account doing this but beyond that the effect seems to be negative with the AAoA having greater weight than the new CC.

Lastly, FICO likes to see a CC account with a major BANK. Credit unions do not fulfill this like to see. Although you may benefit from using your CU credit card extensively over your existing bank card you will want to make a small occasional purchase on the bank card and pay it off right away or set up a recurring bill (Such as utilities, NETFLIX or something that bills monthly) and pay it off right away. Then the FICO Gods will smile happily and bless you abundantly.

Of course most important is NEVER, NEVER, NEVER (I mean NEVER) be late with this or any other bill payment. Good payment history and Time will make your FICO score soar to enviable levels.

If you have other questions or are unclear please just ask and someone will post answers. Actually they will post answers to your original question anyway. Good Luck and keep reading the forums. There is a wealth of info in here.

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I agree that there is no reason to close the CC account -- if there is no annual or monthly fees. Worst case senario is that you sock drawer the old CC and the bank closes it 3 months to many years from now (at one point I had not used my HSBC GM Card for 6 years 11 months -- though I did see three adverse actions as they slowly reduced my credit limit).

I'm not sure that is true. While Fico definitely treats store cards differently from major credit cards, I'm not sure it treats one Visa/Discover/MasterCard/Amex bank card differently from another based upon the issuing bank.

[Anonymous]

I apologize if I was unclear on this. What I meant was FICO wants to see a card backed by a bank. Credit union backed cards do not fulfill this criteria. There is no particular requirement that it be a certain or preferred bank. It does not for example have to be BofA or Wells Fargo, etc.

I aim to provide correct information and when it is less than clear I appreciate a clarification from others or a question. I learned most of what I know from other forum members and reading a lot of posts.

[MarineVietVet]

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@Anonymous wrote:

I apologize if I was unclear on this. What I meant was FICO wants to see a card backed by a bank. Credit union backed cards do not fulfill this criteria. There is no particular requirement that it be a certain or preferred bank. It does not for example have to be BofA or Wells Fargo, etc.

I aim to provide correct information and when it is less than clear I appreciate a clarification from others or a question. I learned most of what I know from other forum members and reading a lot of posts.

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Actually that's not true. From a reliable source here at myFICO: Credit cards from credit unions count the same as bankcards from big banks.  This wasn't always true, but with the newer models there's no difference.  Specifically, this is true for the EQ BEACON 5.0 and TU04 scores most used by lenders. Not sure about EX, but I believe it treats them differently.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

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@MarineVietVet wrote:

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@Anonymous wrote:

I apologize if I was unclear on this. What I meant was FICO wants to see a card backed by a bank. Credit union backed cards do not fulfill this criteria. There is no particular requirement that it be a certain or preferred bank. It does not for example have to be BofA or Wells Fargo, etc.

I aim to provide correct information and when it is less than clear I appreciate a clarification from others or a question. I learned most of what I know from other forum members and reading a lot of posts.

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Actually that's not true. From a reliable source here at myFICO: Credit cards from credit unions count the same as bankcards from big banks.  This wasn't always true, but with the newer models there's no difference.  Specifically, this is true for the EQ BEACON 5.0 and TU04 scores most used by lenders. Not sure about EX, but I believe it treats them differently.

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Good point!

Just to clarify, that means its true [that CU cards count the same as bank cards] for the Equifax FICO score you'll pull here (the Beacon 5.0). 

The TU FICO you'll pull here is an older model, so although it's true for TU 04, it's an older TU 98 you'll pull here.

And EX, seemingly, treats banks and CU's differently.

IMO, to be on the safe side, and until everyone is pulling the newer models, it's good to have a bank card.  But I'm in uber-love with my CU's; and if I could only have CU cards, I'd be more than happy.  Uber-happy, even.    That being said, I opt for and purposefully keep a bank card open until the FICO bank card/CU card universe is totally aligned.

[Anonymous]

Thanks MVV. I can't read enough or fast enough to keep up with all the changes. A reliable FICO source is always better than forum members opinions or memories.