Am I making a big mistake?

[Anonymous]

I have always been careful with my credit, not obsessed, but I make my payments on time and am generally careful before opening new accounts or triggering credit inquiries.

I recently bought my first house and found out my credit score was 795! A few months later I refinanced and was a little concerned that it had dropped to 760, but I figure it will come back.

More recently, I have been thinking that I don't need to be as worried about my score. I already have my house financed at a low interest rate, I'm not planning on buying a new car for the next few years, I really can't think of anything that I need to do for the next few years where my credit score will matter much.

I'm starting to be tempted by all those offers you get for opening new lines of credit and I'm wondering if I would be doing any long term harm to myself. I'm planning on just opening the account, getting the promotion, then closing it. Is this the right way to do it? Will this still be effecting my credit score 2 years from now?

Thanks.

[cdtotten]

Depending on what type of account you open, the impact is as follow usually:

- Any account opening - you will lower your AAoA, add a new account (which is a negative for the first 6-12 months), and will increase the number of open accounts. If you add a balance to the new account, then you may increase your utilization %, affecting your score some more.

-Credit cards will increase your available credit, so may help your score if your util is high, but still will have the negatives above.

-Lines of credit are scored differently depending on the amount of the line.

Overall, I think it's a little foolish to open an account just to get a bonus then close it afterwards. More often then not, you will end up using the new credit and it will cost you more than the bonus you got. But if you want to, no reason not to.

[Anonymous]

So if I open an account, but don't plan to use it, is it better to leave it open or close it right away? I'm willing to take a short term hit to my credit by closing the account, I just want to make sure that any negative side effects will be cleared up within a few years.

Of course, if its better in the long run to leave the account open, then I'd do that. I'd even be willing to put a few auto-pay bills on it so that it gets utilized if that matters. What's the optimal number of credit cards to have? I'm assuming it would be bad for your credit to have 10 different credit cards.

[RobertEG]

Opening a new account, and then closing it right away makes no sense that I can think of.

By even applying for the new acct, you take an inquiry hit.  Sure, it only lasts a year, but it is there.

You will necessarity decrease your AAoA.  That decrease stays with you as long as the account continues to be in your credit file, open or closed.

As soon as it is closed with $0 balance, you will loose its CL in the denominator of your overall % util calculation.

You will loose one account in the denominator of your % revolving reporting a balance calculation.

You credit report will simply look very strange to anyone doing a manual review.  No discernable reason for such activity.

You will most likely not gain the favor of the creditor, should you need their services again.  It costs them $$ to maintain that account, even though closed.  They aint makin' $.

[Revelate]

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@RobertEG wrote:

Opening a new account, and then closing it right away makes no sense that I can think of.

By even applying for the new acct, you take an inquiry hit.  Sure, it only lasts a year, but it is there.

You will necessarity decrease your AAoA.  That decrease stays with you as long as the account continues to be in your credit file, open or closed.

As soon as it is closed with $0 balance, you will loose its CL in the denominator of your overall % util calculation.

You will loose one account in the denominator of your % revolving reporting a balance calculation.

You credit report will simply look very strange to anyone doing a manual review.  No discernable reason for such activity.

You will most likely not gain the favor of the creditor, should you need their services again.  It costs them $$ to maintain that account, even though closed.  They aint makin' $.

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+100000

Hopefully this point will get made to many of the readers on this forum, especially on the credit cards board  That's as concise and well documented explanation as possible for the inanity of closing cards nearly immediately and the drawbacks that one may suffer for the next 10 years that the tradeline remains in one's credit report.

[Anonymous]

It depends on you aaoa currently. The reality that if you did it a lot, the closed lines will help you later as they age. I see nothing wrong with churning cards for rewards. But you should be careful. A thin file gets hurt by it a lot. A deep file hardly feels the effects. Personally, I wouldnt close any cards that have no af. Remember. You want to be over 760 to get whatever you want credit wise. Credit score is a tool and not ends in and of itself. Lowering your credit score a little to get a fat sign on bonus is a personal choice. Your credit should be used to help you financially

[marty56]

One the one side, you never want to be FICO score poor.  The other side is not to apply for credit you don't need.  A new mortgage/autoloan or a good refi is a no-brainier.  New CCs, unless they are for a major purchase at 0% or a 0% BT from a high balance should be avoided.

[js0319]

Anything within the "excellent" credit range should suffice. Your score will bounce back, and to echo what was said before it could be the fact that your AAoA has been lowered slightly. I'd do anything for a 760+ score, heck - I'd do anything for a 660+ score