Will Opening or Closing Credit Cards Hurt Your Credit Score?

As I have shared the story of our reduced-cost travel with friends and family I have heard a common line of feedback:

“Signing up for credit cards like that must have killed your credit score!”

Though it’s understandable people may think that’s the case, the reality is exactly the opposite – my credit score is at 825!  I write that not to brag, but to allay the concerns that many have – that taking advantage of lucrative credit card offers will crush your credit score.

This Infographic Shows My Credit Score History as I Opened and Closed Cards

Many writers will talk about their credit score history in general, vague terms.  I’ve gone much further.  I created an infographic by overlaying my actual real-world credit card account opening and closing information on top of my actual real-world FICO credit score history plot from my Discover It card.

I created this infographic to show that even after opening and closing many credit cards my credit score is very high. (Click image for high-res version) ©The Honeymoon Guy

You may wonder how my credit score can be very strong when I hold many credit cards.  The answer is actually pretty simple: your credit score is not generally harmed by having a lot of credit cards.

Having Many Credit Cards Can Improve Utilization Ratio

In fact, by having many credit cards you will most likely increase your available credit and that means that your credit-used to credit-available ratio (also known as credit utilization ratio) will be low.  That is viewed positively by creditors.  As always, the key move here is paying off your credit card bills in full each month as on-time payments are the number one element to a high credit score.  On the flip side, if you’re paying interest on credit card balances you’re offsetting the gains you might be getting in points or miles.

More Details on How Your Credit Score Is Calculated

Your credit score is driven primarily by your payment history and the amounts you owe.

It should go without saying but the most impactful step you can take to achieve and maintain a high credit score is to pay your bills on time.  Creditors consider your payment history the biggest indicator of future financial behavior. The impact of negative remarks on your score will of course be reduced over time but those remarks are factored in to some extent for up to seven years.

Credit Score Calculation Pie Chart
Credit score is driven primarily by your payment history and your credit utilization. Number of credit cards is not a major factor.

Coming in second in terms of importance, just behind payment history, is the amount you currently owe to creditors.  A creditor isn’t going to be very generous in lending to you if you already owe others large amounts.

The actual absolute amount of credit you’ve utilized is considered but perhaps even more importantly, the amount you’ve borrowed is compared against the credit that’s been extended to you, to calculate your credit utilization ratio.  Creditors want to see that when you’re extended credit, you don’t go overboard and run up large debt haphazardly.  This is an area where having more credit cards can actually help raise your score.  The additional credit lines associated with additional cards actually contribute to keeping your credit utilization ratio low, which positively affects your credit score.

Key Packing Items for Long Honeymoon or Vacation Featured Image 105

Related Page: Key Travel Gear for A Long Honeymoon or Vacation Consider grabbing these items for yourself or friends and family members that travel.

Length of credit history accounts for 15% of credit score calculation.  Of course you can’t create a long credit history out of thin air but you can make a concerted effort to keep longstanding credit accounts open to increase the average age of account metric.  This is one reason that holding a few cards with no annual fee is beneficial – you can keep them open in perpetuity, free of charge, improving the length of your credit history.

New credit only accounts for about 10% of your credit score calculation.  This surprises many people who think that opening a few credit cards will cause a major hit to their credit score.  The reality is that applying for a new card or cards will usually have only a small impact (2-3 points) on your credit score, and that impact is very temporary.  The reason for that is that opening a new account usually prompts a “hard inquiry” from the bank.  However, the small impact of a hard inquiry fades away after a few weeks.

How to Get Your Credit Score for Free

It’s a good idea to check your credit score every few months to make sure nothing is amiss with your credit.

Prior to about 2014, checking your real FICO credit score (not a 3rd party’s estimate) usually cost you about $10.  That changed though when FICO started a program they call FICO® Score Open Access.  The program allows creditors who have already paid to get your credit score the option to share it with you free of charge.  Consequently many credit card companies now offer customers their credit score free, usually updated on a monthly basis.

You can get a free look at your true FICO®credit score with these credit card providers (log into your account online or check your monthly statement):

  • American Express is providing free FICO credit scores, based on Experian credit reports, for all personal and consumer cards.  From Elizabeth Costa, vice president of public affairs for American Express: “The FICO score we provide is the FICO Score 8 … based on data from Experian.  This is the actual credit score used [by Amex] to manage card members’ accounts.”
  • Discover is providing free FICO credit scores, based on Transunion credit reports.  Discover provides, online, a clear graph of your credit score history of the past year.
  • CitiBank is providing free FICO credit scores, based on Equifax credit reports, to select cardmembers.  A credit score history is also offered online.
  • Barclaycard is offering free FICO credit scores, based on Experian credit reports, to all cardholders, online and on monthly statements. A credit score history is also offered online.
  • Chase surprisingly seems to still only be providing free FICO credit scores to holders of their Slate credit card.

If you don’t hold any of those credit cards, you can instead get estimates of your FICO®credit score from providers such as Credit Sesame and Credit Karma.

Of course your credit score is a numerical summary/reflection of your credit report.  Under the United States’ Fair Credit Reporting Act (FCRA) you are entitled to a free copy of your credit report from each of the three major credit bureaus once every 12 months.  Be careful as there are all sorts of sites designed to trick you into believing you’re accessing the government-mandated reports when they’re not the “real” site.  The official site you should use is annualcreditreport.com (or you can call 1-877-322-8228).

Join hundreds of other subscribers and get my free credit card tracking spreadsheet!

If you have questions on this topic, please feel free to post them in the comments section below and I’ll be happy to address them.

4 thoughts on “Will Opening or Closing Credit Cards Hurt Your Credit Score?

  1. Thank you THG for this very informative article on how opening multiple credit cards affects a person’s credit. Thank you for sharing the graph with specific details about how your credit was affected. The pie graph was extremely helpful in understanding the impact of payment history vs new credit. Thank you for taking the time to write this article!

  2. Hey Michael!

    Question for you – When is the best time to ‘cancel’ your credit cards? Before the first year is up so you don’t pay annual fees or does that have any affect on your points? Thanks so much for everything!!

    1. Good question, Nicole!

      If you’re not interested in paying the annual fee for a credit card, it is usually best to cancel around the time the annual fee is charged. However, don’t do so without hearing out a retention agent with the bank. When you call in to potentially cancel, ask to be transferred to the retention department if you aren’t automatically connected to it. Tell the agent what you like about the card but also be clear in that you have or know of other cards that offer great benefits without the annual fee and that you aren’t willing at this time to pay the annual fee. You’ll often be told of a retention offer that may just be sweet enough to warrant keeping the account open. Check out my post on the retention offer I received for my SPG AMEX.

      As for whether canceling affects points… That depends on the card type. There are generally two types of cards – those which earn points/miles in a partner’s program and those which earn points in the bank’s own program. Examples of the former include the Southwest Plus and Premier card and the Hyatt card. Examples of the latter include the Chase Sapphire Preferred and the Citi ThankYou Premier.

      If you have a card that earns points or miles in a partner’s program you will keep any points/miles which have already been transferred to the partner if/when you cancel the credit card. Essentially, once they’re transferred the credit card bank no longer has control of them.

      However, if you have Ultimate Rewards points associated with, say, your Chase Sapphire Preferred and you cancel it, you’ll lose your Ultimate Rewards points unless you’ve already transferred them to a partner or to another Ultimate Rewards account. If you’re going to cancel a card which has earned you points in the bank’s own program, be 100% sure you’ve transferred those points out first.

      Note that you will generally forfeit any points or miles accrued since your last statement when you cancel a card, regardless of card type.

      Keep in mind that there are many credit cards with renewal perks (e.g. free hotel night) that are worth way more than the annual fee.

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