Can Opening and Closing Credit Cards Hurt Your Credit Rating?

Opening and closing credit card accounts can affect your credit rating. How much your score is affected depends on your situation. According to Bankrate.com, five factors determine your credit score: the amount you owe, your payment history, the length of your credit history, the new credit available to you, and the types of credit you use.

Opening Accounts

When you initially apply for a credit card, your credit score might take a slight hit because the credit card company will look up your credit score. When someone checks your credit, your score goes down a few points. However, after you've had the card a few months, your score will return to normal. Over time, having the extra card should improve your credit if it results in you having a better ratio of credit used to credit available.

In-Store Cards

Many retailers including Target, Macy's and Home Depot offer customers discounts when they sign up for in-store cards. This might sound like a good deal, but applying for several credit cards during a short period of time can damage your credit rating. Credit agencies consider this erratic behavior, and as a result, your credit score can take a hit, according to CNN.com.

Closing Accounts

Closing a credit card will lower your credit score because it lowers your total amount of available credit. If you have two credit cards and each has a $5,000 limit, canceling one card cuts your available credit in half, according to BCS Alliance, a credit and debt solutions website. Closing a credit card account can also affect the length of your credit history. An open card with a good credit history can be part of your credit score indefinitely. A closed account will stay on your credit report only for ten years, according to Bankrate.

Open Cards

Having an open credit card that you never use can also hurt your credit score. If you have an open account that you don't use, your credit card company might stop reporting your activity altogether, according to BCS Alliance. Occasionally purchase items using your card so that the credit card company will continue to report activity to the credit agencies.

Closed by Creditor

Your credit score will take a hit even if the bank that originally issued the card closes it. Your credit report will include a note indicating whether or not the card was closed by the consumer or closed by the creditor. However, the credit agencies don't care why the card was closed or who closed it. They only care whether or not the card is open or closed, according to Bankrate.