Does Canceling an Unactivated Card Hurt Credit Scores?

By Erica Sandberg Published May 17, 2013 Lifestyle and Budget

Why does applying for credit hurt your score

Dear Opening Credits,

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What will happen to your credit score when you apply for a credit card, you get approved and the credit card is sent to you, but you never activate it and never use it? The reason why I never activated the credit card is because the credit line is very low ($400) and the annual fee is very high ($99).

The credit card that you applied for and have now received is an open account. It doesn't matter that you never called the number on the back of the card to bring it to life or have yet to make a purchase with it. To the credit issuer -- and the credit reporting agencies -- it's good to go.

Now that you've taken a closer look at the terms, however, you would rather not have the card at all. I can understand that, as the credit line is on the low side and would not have afforded you much flexibility to charge the things you may need. The annual fee is also quite high compared to that limited borrowing power, too. Had you read about the terms beforehand, you probably would have rejected them before they accepted you.

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So pick up the phone and call the credit issuer immediately to tell them you've changed your mind. If you cancel the account fast enough, you may be able to escape paying the annual fee. As long as the account remains active, however, it will be used in calculating your FICO scores.

FICO scores are the most commonly used of all credit scoring models, and they take into account all the credit information that appears on a consumer's credit file. Some of the data carries greater weight than others, though. Here's how a new credit card -- whether you close it or keep it open -- affects your scores.

When you completed the application, the issuer checked your credit history to see if you qualified for the product. This action prompted an inquiry to appear on the three major credit reports, Equifax, TransUnion and Experian. Even if you had been denied your request for credit, evidence that you gave it a whirl would show up. Such inquires -- also called hard pulls -- result in a temporary ding to your credit score. Still, I wouldn't worry about that too much. Inquiries make up just 10% of a FICO score, and though they remain on a report for two years, they are only factored in for a year.

As for the other scoring factors, Payment history is the most important, as it comprises 35% of the score. Assuming you never charge with the card, there will be no payment history to assess. The next weightiest is amounts owed, at 30%. You will have an available balance while the card is open, which is part of this category, but when you close it that ceases to be a factor. Because you did open (and shut) it, the card will be included in the length of credit history category, which is computed at 15% of the score. Types of credit used, which is the last category, at 10%, won't be included in the score after it's inactive.

I can't tell you exactly how much or how little damage canceling the card will do to your credit since I am not privy to your current credit score and reports, but I wouldn't worry about it too much. If you are trying to rebuild a poor credit score, I would suggest trying a secured credit card (where you put a deposit down to secure a credit line) with no annual fee for a year or so. Use that card responsibly by charging small items and paying them off on time every month.

In the future, save yourself all this unnecessary trouble! Only apply for the best credit card that you qualify for and that you really want. You can do that by researching the current credit offers for people with the type of credit rating that you have. Identifying and obtaining the perfect plastic for you can take a little time, but it's an effort that will pay off in the long run.

Do Credit Inquires hurt your Credit Score?

A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.Not all credit inquiries affect your credit score:You may notice when yo.

A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.

Not all credit inquiries affect your credit score:

You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.

Inquiries that affect your credit score:

There is only one type of inquiry that affects your credit score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.

An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.

Checking your credit report does not affect your credit score:

Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free credit report is part of credit management which will improve your credit rating over time. Ordering your credit report at does not hurt your credit score.

How credit inquiries are factored in your Credit Score:

There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.

Payment History - 35%

Amounts Owed - 30%

Length of Credit History - 15%

Types of Credit in use - 10%

Don't let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don't want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of creditWhy does applying for credit hurt your score, but stay away from too much credit as well You really on need 3 lines of credit reporting on your credit report.

3. installment loan

This type of credit mix accounts for 10% of your score.

Why Does Credit Score Go Down When Checked?

Why does applying for credit hurt your score

Does it seem like your credit score goes down after you check it?

People looking at their own credit report do not make the score go down. The same holds true when banks initiate the process in connection with an account review or promotional offer.

Consumers applying for and opening loans lower their credit score – temporarily at one to three bureaus. In addition, normal fluctuations and industry differences contribute to the misperception that looking means hurting.

  • Soft pulls do not make credit scores go down
  • Hard pulls and new accounts do lower credit scores

When Credit Score Does Not Go Down When Checked

People should not worry about their credit score going down when checked by them. When you pull your consumer report for informational purposes only, the bureau logs a soft inquiry.

Soft inquiries appear only on the file version seen by the person in question. Lenders and scoring equations do not see this information. It does not hurt ratings.

This applies to people using monitoring services and looking at their free annual report. It also applies when banks perform account reviews, and send promotional offers.

Consumers can check their own score as many times as they like without making it go down. Looking too many times will not damage your qualifications. Monitor your ratings safely without affecting it. It will not hurt. There is no penalty.

Anytime the report monitoring service sends an alert, they log another soft inquiry that only the person sees. The same holds true each time the member looks at his or her file to watch for changes. The bank and rating algorithm will never know.

Checking your free annual report does not make the credit score go down. Each agency logs a soft inquiry on the file that only the person in question ever sees.

By law, consumers can look at a copy of their free credit report once every year. They can do so annually at each of the three major bureaus. Go to for more information.

Banks frequently check a person’s credit report and score without making it go down. They examine consumer files in connection with promotional and account review campaigns. They often have implicit permission to pull a consumer file.

  • New borrowers give lenders permission to perform periodic account reviews during the application process.
  • The FCRA gives banks permission to look at consumer information in connection with preapproved offers.

The agencies log promotional inquiries after account reviews and preapproved offers. Only the affected individual ever sees the information. It does not hurt ratings.

When Checking Credit Score Does Lower It

There are also times when checking a credit report does lower the score – or at least it appears that way. The numbers go up and down independently and are often different from what the bank pulls.

However, consumers rarely notice when they rise. They primarily pay attention when they drop, which most frequently occurs after applying for a loan.

Starting a personal loan request could lower one credit score – but not all three.

The bank will request a consumer report from one bureau in order to underwrite the loan. The agency supplying the file logs a hard inquiry, which appears right away and temporarily drops that one credit score.

  • Other lenders do see this information
  • The scoring algorithms do see these data
  • The agencies do not share information with each other

A hard inquiry is an early indicator of new borrowing activity. New borrowing activity makes up 10% of the average person’s credit rating. The more new borrowing activity displaying on your report, the lower your score will be.

Opening a new loan lowers credit scores at all three bureaus. Most lenders communicate the new account information to all three agencies. This second set of new borrowing activity also causes ratings to drop. Ratings recover once positive payment history appears on file.

Checking credit scores seems to lower them because they fluctuate daily. Half the time they may go up. It just may seem as if they drop because we tend to notice and remember the negatives and forget the positives.

Your other behaviors drive much of the increases and decreases. Each month banks report the balance and payment history information. An individual with ten trade lines averages an update every three days, which causes the equations to output a new result.

Changes in agency systems and software generate even more variation. The bureaus face an enormous challenge to bring together inconsistent data from thousands of sources. They are constantly upgrading systems, and redesigning business rules to improve matching results.

Sometimes, checking your credit score seems to lower it, because it is different from what the bank pulls. Lenders often see something very dissimilar because they may use alternative algorithms and agencies, at unique points in time.

  1. Many consumers pull their Vantage while the bank uses a FICO score. Each equation has varying update versions and industry overlay variations.
  2. Consumer reporting agencies have different scores, even when the exact same version is provided to the individual, and then to the bank. An applicant has only a thirty-three percent chance of guessing which bureau their lender will use.
  3. Time elapses between when a person looks at his or her report, and when the bank pulls it.

5 Things You Won’t Believe Hurt Your Credit Score

If you’ve bought a car or a house you understand the value of a good credit score. A credit score is the calculation lenders use to determine creditworthiness. They want to know how much of a risk it will be to lend you money. Your credit score is a measurement of your financial activities and there are things you won’t believe hurt your credit score.

  1. Closing a credit card account. You may think closing a credit card account would be positive on your credit score but it will never improve your score. Lenders are looking for you to be using less than 30% of your total available credit. If closing an account causes you to be above that number, you will be hurting your score. Closing an account will also effectively reduce the length of your open credit history. Your score likes to see account activity
  2. Failing to pay parking tickets. You might think you’ve avoided the system when you ignore parking tickets but most cities are now sending unpaid tickets to collections. That means you will likely see them on your credit report as collection accounts.
  3. Not paying rent. In many cases your positive rent payment history does not go on your credit report, but avoiding or missing payments may end up impacting your credit score negatively. Apartments almost always send unpaid debt to collection agencies, which will report to your credit. These collectors are also very aggressive in filing lawsuits because they tend to have a lot of good documentation. , The bureaus are starting to get apartments to report positive payment history, but even if yours doesn’t, ask your current landlord to provide a letter of reference to show you’re paying rent especially if you’ve lived in the same place a year or longer. It won’t impact your credit score directly but could help you get approved for a loan.
  4. Applying for new credit. It seems counterintuitive but applying for credit could actually hurt your score because it shows as a hard inquiry. Too many hard inquiries can have a negative impact; creditors will wonder why you’re applying for so much credit and may deny your request. A couple of inquiries might only drop your score a few points, but too many in a six month period could have a significant impact.
  5. Applying for store credit. You’ve probably see the ads to apply for credit at a furniture store and receive no interest for a period of time. Avoid this type of credit as it appears as a hard inquiry and is viewed as last resort credit. It will also lower the “average age of all your credit card accounts”, which can drop your score. If you can get a bank credit card (MC/Visa), do that instead, but only if you don’t already have many open revolving (credit card) accounts – three revolving accounts is a good number.

If you’re thinking about making a big purchase in the next couple of years, it’s important to know which financial choices could negatively impact your credit score. If you have questions or would like to review your credit report, make an appointment with Go Clean Credit today.

Does Closing a Savings or Checking Account Hurt your Credit Score?

Ever wonder what type of accounts do and do not impact your credit score and history?

A reader writes in with a good question on closing a checking account and I thought I’d share the answer, to provide some insight:

“G.E., I have an older checking account that I want to close. Will closing a checking account hurt my credit score or credit history in any way? Are there any other possible negatives to doing this?”

The short answer is NO (so is the long… but let me explain why…).

Credit reports and credit scores are out there as a means for lenders to determine if you are credit worthy based on your past and current borrowing and payment history.

Savings and checking accounts, on the other hand, are both assets that you own. As such, they have no impact on your credit (what you borrow). So they won’t show up on your credit reports and your credit score will not be negatively impacted by shutting them down.

The only time your checking account may come in to play in a lending situation is if a lender asks you to prove your assets. I have had this happen when taking out a mortgage. Sometimes lenders like to see that you actually have liquid cash somewhere that you can tap, if needed, to pay them back. But closing a savings or checking an account would still have no impact on your credit score, whatsoever.

I have heard of banks flagging customers for abuse of closing and opening checking accounts to score free promotions. So that might be your only downside. Who would do such a thing?