Affect of new Creit card account on FICO score

[joeblow2]

I understand when you apply for a credit card you lose approx 5 pts for the INQ. But when you open the new account how does that affect your socre and how long does it take to recoup the points lost. Also if you open 2 CC accounts does that double the damage and how long to recoup the points from that?

[Anonymous]

Hi joe,

There's no real formula for how many points you will lose for an inquiry.  Sometimes it's zero.  Depends on your specific credit report.

When you open the new account, the impact on your score will also vary depending on your specific credit report.

It will depend on what type of account it is, what accounts you already have open, how the new account impacts your AAofA (it's always a good idea to to the math), and significantly -- what bucket you are in.  Evidently rebuilders or those new to credit see a very different impact than those with a positive established credit file.

When DH opened his first CC, he saw a 26 point FICO increase.  That's because it was his first (open) CC, and additionally, his first bank/national revolving acct.  He certainly didn't see that type of response when he opened his second, or subsequent, accounts.

With some inquiries, I'll see a point hit, and at other times I will not.  It just depends.

The same information applies to assessing the potential for two cc accounts vs. one.

If you tell us more about what's already on your report (including AAofA before and after new cards & number of inquiries) and what you're considering apping for, you'lll get some good feedback.

[joeblow2]

I have an aaoa of 6 yrs. i am looking at closing 3 out of 7 cards 0 bal on all cards. the 3 i am closing have annual fees which i cant get rid of tried everything and they will not wave the fees. Just wondeing how a new CC account or 2 will impact my score and how long to recoup the points

[Macroman]

I don't think you'll get hit too bad with 0 balances but you might want to try the new accounts 1 at a time.

I wouldn't keep the AF on a 0 balance card regardless of score impact. 

[RobertEG]

Opening a new revolving account has one intiial postive, one intiial negative, and one that depends on your CR.

The positive:

Any new account will give you additional CL.  How much, and thus its affect, depends how much this increases your overall % util.

For example, if you overall CL is currently $5,000 and you owe $1,000 in debt, that is a 20% current util.  Opening a new card with a $300 CL will raise your CL to $5,300, thus lowering your % util to just under 19%.  But if the new CC had a new CL of $5,000, that would reduce your util to 10%.

The negarive.

Any new card carries with it the need of the creditor to to a check of your CR before approval.  Most will code this as a "hard pull," which depending on your credit bucket, could cost you 5-10 pts, but that does away in a year.  So part of that decision is whether you seriously plan to apply for new credit within the next year.  If not, no FICO impact after the year melts away.

The "maybe."

Does it improve your credit mix?  Do  you already have other revolving accounts, thus making this a non-issue in showing diveraified use of credit in your scorng?

It will lower your AAoA, so what was your AAoA before and after?

No one can tell you, yes, go for a new CC, or no, dont, until they understand the above factors, and their separate impacts.on your individual credtit report.

[Anonymous]

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@Macroman wrote:

I wouldn't keep the AF on a 0 balance card regardless of score impact. 

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Me too.  Actually if all your balances are zero, there'll be zero score impact for closing the accounts.  I would definitely close AF accounts.

Now, OP, do the math on your AA of A.  If you add one new account - will you still be at six years or will you drop down to five? 

Some folks think that one of the buckets for AAofA may be 2-5 years.  If that new account brings you down to the five year category, you may be rebucketed.  And remember AAofA is always rounded down.

And check out how many inquiries you have for the CRA that will pull for your new card.

I'm guessing, like Macroman, that you won't get hit too hard.  And I would definitely add accounts one at a time - always calculating the AAofA, and checking number of inquiries, before apping.  It took six months to recover AAofA after I opened my last account.  Now that I've recovered, I'll decide if it's wise to app for another card now or wait for a bit.

You're actually sitting in a pretty good spot with four open cards.  Is there a reason you'd like additional cards?