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Will closing recently opened account improve my credit?

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Will closing recently opened account improve my credit?

Hi all. I am working hard to rebuild my credit to apply for a credit card or two and in a year, hopefully buy a home. I was checking out my Experian credit score. Its 711. But I noticed that the part of "Amount of New Credit" which represents 10% of my score is only "Fair" which means its pretty bad. After "Fair" there's still "Good" "Very good" and "Exceptional." So If we assume grading of A to F a "Fair" score would indicate a D grade, which is pretty bad. Experian shows I have four inquiriesi n the past year and two of those are within the last six months. 

 

Three months ago I had terrible credit and had some difficult issues with breaking up with my ex. My credit was 540 and I had some emergencies. I had maxed out my credit card limit at the time, which was about $6000 and the I needed more so I got a Credit One bank account opened. My brother also added me to one of his AMEX credit cards as an authorized user in last month, and that also shows as "New Credit" on experian. So, to keep it short, I want to improve my credit even more. I want to get it to 750. I am doing much better financially now. I have a strict budget now. And I got a raise at work, so its all looking good. 

 

Would closing down the Credit one card I got in March of this year and removing myself as an authorized user from my brothers AMEX card help improve my credit score from Experian? And the otehr two agencies too? Or would closing those two accounts not mean anything. 

 

Even if it doesn't help my credit I still plan on closing credit one card bc they charge too much annually and offer no rewards or cashback. I am thankful they gave me credit when no one else would. But my score is in the 700's now. If I get a new credit card I want at least one that charges no monthly or yearly fees. 

Message 1 of 10
9 REPLIES 9
Valued Contributor

Re: Will closing recently opened account improve my credit?

Closing the Credit One won't help your scores in regards to new credit unless they remove the account from your reports. And unless you have low utilization it could hurt your scores by increasing that. But getting removed from the Amex will help you in regards to new credit since they only start AU history from the time the AU is added. But again, it could increase your utilization.
Message 2 of 10
Super Contributor

Re: Will closing recently opened account improve my credit?


@roger1987 wrote:

Hi all. I am working hard to rebuild my credit to apply for a credit card or two and in a year, hopefully buy a home. I was checking out my Experian credit score. Its 711. But I noticed that the part of "Amount of New Credit" which represents 10% of my score is only "Fair" which means its pretty bad. After "Fair" there's still "Good" "Very good" and "Exceptional." So If we assume grading of A to F a "Fair" score would indicate a D grade, which is pretty bad. Experian shows I have four inquiriesi n the past year and two of those are within the last six months. 

 

Three months ago I had terrible credit and had some difficult issues with breaking up with my ex. My credit was 540 and I had some emergencies. I had maxed out my credit card limit at the time, which was about $6000 and the I needed more so I got a Credit One bank account opened. My brother also added me to one of his AMEX credit cards as an authorized user in last month, and that also shows as "New Credit" on experian. So, to keep it short, I want to improve my credit even more. I want to get it to 750. I am doing much better financially now. I have a strict budget now. And I got a raise at work, so its all looking good. 

 

Would closing down the Credit one card I got in March of this year and removing myself as an authorized user from my brothers AMEX card help improve my credit score from Experian? And the otehr two agencies too? Or would closing those two accounts not mean anything. 

 

Even if it doesn't help my credit I still plan on closing credit one card bc they charge too much annually and offer no rewards or cashback. I am thankful they gave me credit when no one else would. But my score is in the 700's now. If I get a new credit card I want at least one that charges no monthly or yearly fees. 


Congratulations on the great progress you're making.

 

I think your best bet is to close the Credit One card, get off the AU Amex account, and during the next 13 months (a) make no new applications and (b) pay your remaining accounts down.

 

Follow this and you'll be in great shape for the mortgage application.


Total revolving limits 720500 (594000 reporting) 10/2/19 FICO 8 scores: EQ 744 TU 782 EX 746
Message 3 of 10
Super Contributor

Re: Will closing recently opened account improve my credit?

Hi SouthJ!  If I read Roger's initial post right, he currently has three open credit cards on his report: some unnnamed credit card, a Credit One card, and an AU on an Amex. 

 

You have advised him to close down two of his three cards.  He will then have only one open credit card.  Your feeling is that this would be a good way for him to prepare for his mortgage in a year.

 

Are you sure that's best?  The mortgage models (according to Thomas Thumb) really like it when you have at least three credit cards with most of them showing a $0 balance.  In your approach he'll be unable to do this.

 

My own advice would be to keep his cards as they are and ask his brother if he can help him out by keeping that Amex card at $0.  The goal would be to have two of the three cards at $0 and the other reporting a small balance each month.

Message 4 of 10
New Member

Re: Will closing recently opened account improve my credit?

Thank you so much for the advice. I really appreciate it. I have six credit cards of my own, under my name and credit. My total credit limit from those was $8400 last week, now its $12,900. I managed to get a $4,500 increase from citi and discover, both of which i've had for 11 years (citi) and 9 years (discover). So they both doubled my credit limit. Smiley Happy 

 

My brother added me as an authorized user for his Amex, with $11,000 credit limit in April of this  year. I read on Experian that being added as an authorized user would not affect the "new credit" part of your credit. But when checking my experian credit it does show the Amex as new credit. I also got a credit one mastercard in March of this year, for $1000. That's the only new credit line I've gotten in the last three years, of my own. Both the Amex and Credit one show as new credit. Which are both affecting my "new credit" part, which is 10% of my credit, negativilely. 

 

My total credit line last week was $19,400. Which was $8,400 of my own credit limits and $11,000 as an authorized user. But now, my own credit limit is $12,900. But I plan on clsoing both credit one cards i have under my name. The one I got in march and the one i got in 2014. Both will be closed. So my credit limit will be $11,000 on my own. With around $1800 in credit balance owed. 

 

I also plan on removing myself from the Amex as an authorized user thsi coming week. So my total credit limit will show as $11,000. With $1800 of that owed. Which i plan on paying off within the next three months. 

 

I only have 3 hard inquiries on experian within the last year. One within the last six months. 

 

I want to get my credit up to at least 750 or higher, if possible. Which, should be done by July 2018. As long as I get my credit card balances as close to zero as possible, and don't apply for any new credit. 

 

But thank you all so much for all the advice. It really has helped me more than you can imagine. I plan on sticking to my long term credit plan. To achieve a 750 or higher. And once that happens, apply for a mortgage and afterwards for a few new credit cards that offer juicy rewards and 0% interest for 12-24 months. 

Message 5 of 10
Super Contributor

Re: Will closing recently opened account improve my credit?

So after you close whatever accounts you plan to close, you'll end up having four credit cards in your own name.  Is that right?

 

That turns out to be the key issue: making sure that you still have at least three credit cards, with four being better.  When you are preparing for a mortgage, the size of your credit limits does not matter, since even with a total credit limit of $300 (say) a person can still keep his reported utilization at 2-3%.  Having the multiple credit cards, however, is the only way to show several open accounts with a $0 balance, which the FICO mortgage models really like.

Message 6 of 10
Established Contributor

Re: Will closing recently opened account improve my credit?

 

Is there ANY long-term benefit in closing accounts? I didn't think there was.

 

But I still feel like I should close my RBC and FirstTech cards, neither of which I will *ever* use. They're costing me nothing, no annual fee, etc., but somehow they annoy me. I keep them open because I think the utilization helps me in some minor way. The RBC card is also my oldest card--but only by a couple months. My 2nd oldest is my Amex BCE which I will keep forever so it wouldn't hurt my AAoA by much to kill the RBC card.


Amex BCE $40k || BoA Travel $5k || FirstTech MC $5k || BECU PLoC $10k || Discover Miles $27.7k || CITI DC $27.5k || CHASE Amazon $12.5k || BoA Premium Rewards $31k || BoA Cash Rewards 26k // AU on DW's Costco Visa $12k FICO8 774
Last Inq 04/2018
Message 7 of 10
Super Contributor

Re: Will closing recently opened account improve my credit?


@Canadian-In-Seattle wrote:

 

Is there ANY long-term benefit in closing accounts? I didn't think there was.

 

But I still feel like I should close my RBC and FirstTech cards, neither of which I will *ever* use. They're costing me nothing, no annual fee, etc., but somehow they annoy me. I keep them open because I think the utilization helps me in some minor way. The RBC card is also my oldest card--but only by a couple months. My 2nd oldest is my Amex BCE which I will keep forever so it wouldn't hurt my AAoA by much to kill the RBC card.


Hello C-I-S!  I can think of a number of ways there can be long term benefit from closing accounts..  For example, if the account has an annual fee, then you'll be saving a good deal of money long term.  Closing your store cards has a long-term benefit as far as auto insurance (though you need the accounts to fall off your report or be removed).  If you have a car loan, there can be a benefit to closing it since this too gives you cheaper options for auto insurance (e.g. you could opt for a liability only policy) as well as saving you interest on the remained of the loan.

 

Those are just a few that jump to mind -- there may be others.

Message 8 of 10
Super Contributor

Re: Will closing recently opened account improve my credit?

One main benefit of closing an account IMO is that it reduces your exposure, or another way to look at it is that it frees up additional exposure for other accounts that you may find useful at some point.

Message 9 of 10
Moderator Emeritus

Re: Will closing recently opened account improve my credit?


@Canadian-In-Seattle wrote:

 

Is there ANY long-term benefit in closing accounts? I didn't think there was.

 

But I still feel like I should close my RBC and FirstTech cards, neither of which I will *ever* use. They're costing me nothing, no annual fee, etc., but somehow they annoy me. I keep them open because I think the utilization helps me in some minor way. The RBC card is also my oldest card--but only by a couple months. My 2nd oldest is my Amex BCE which I will keep forever so it wouldn't hurt my AAoA by much to kill the RBC card.


Given the First Tech card is one of the very few C+P PIN priority cards available to us in the States, that does have some value to those of us that ever travel to places where PIN's are used.

 

Just because Signature might be workable there, doesn't mean that's something I want to do personally... but I probably think about things like impacting others way more than I rationally should so /shrug.

 

The reduction in overall exposure and there being absolutely no benefit to my keeping them open is why I'm considering closing a couple of tradelines... when I have multiple default spenders at 2%+, well, why?  The only one I really should close though is the JCB card, AF and it's not getting any use currently and unless I get whacked by Chase it simply doesn't have a place in my portfolio; the rest are just dead tradelines which don't do me any good currently.

 

That said I'm not bothered by it enough to touch them while may need to leverage my credit for a new mortgage within the next year.... overall except for a couple of known things which I'm being penalized for, my best path is to just sit on my hands.




        
Message 10 of 10
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