What happens to your credit score if you close a recently opened card?

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Sometimes we make financial decisions we regret, like opening a new credit card. You may have opened a credit card recently, whether to snag a registration bonus or take advantage of a more generous rewards program. But if you’re unhappy with that card, or it charges you an annual fee, you may be looking to close it now.

In some cases, closing a recently opened credit card could hurt your credit score. Here’s how to know what consequences to expect.

How Credit Card Closures Can Affect Your Credit Score

There are various factors that go into calculating credit scores, and closing a credit card affects two of them.

The first is the length of the credit history. Having long-standing credit accounts could help boost your score, as it’s a sign of consistency on your part. In this regard, closing a recently opened credit card may not hurt your score, if at all.

Say you opened a credit card six months ago, but you have three other credit cards that have been open for five to 10 years. From a credit history perspective, closing that recently opened card shouldn’t really matter.

But there’s a second way closing a credit card could impact your credit score, and it has to do with credit usage. Your credit utilization rate measures the amount of available revolving credit you use at a time. The lower this ratio, the more it will help your score, while a higher ratio – above 30% – can lower your score.

If your recently opened credit card didn’t have a substantial spending limit, closing it may not have much of an impact on your usage. But if losing that spending limit drives your utilization rate into unfavorable territory, it could lead to credit score damage.

For example, let’s say you owe $3,000 on your credit cards and you have a total spending limit of $10,000 between four different cards, including the one you recently opened. This leaves you with a 30% utilization rate.

If closing this account reduces your total credit limit to $8,000, your balance of $3,000 will result in a utilization rate of 37.5%. That’s above the more favorable ratio of 30% it was in before. In this situation, closing a recently opened credit card could end up being bad for your score.

When to keep a new account open

If you are not billed annual subscription on a recently opened credit card, and that card has a generous spending limit, it might pay to keep it and not use it, or not use it that often. On the other hand, it makes no sense to pay expensive fees for a card that you won’t benefit from. In this case, it may be beneficial to reduce your credit card balance to improve your utilization rate, and then close that account as soon as possible, before your next annual fee payment is due.

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