Dear Credit Card Adviser,
I heard that closing a credit card has a negative effect on the FICO score and have read your thread. My question is two parts: If I cancel a credit card that has never been activated, does this affect my FICO score? What about canceling a credit card that was unsolicited and sent to me (and) that was never activated? Thanks for your help.
A spokesman from FICO, the company that created the FICO score, told me it depends on whether the account was reported to the credit reporting agencies. Once an account is reported, it will affect your FICO score. The score doesn't care about whether a card is activated.
"Basically it's either reported or it's not, and if it is, it's either open or it's closed," says Barry Paperno, the consumer operations manager at FICO.
If you cancel the card after the issuer reports it, the closure could ding your score. If you cancel it before it gets reported, then it won't harm your credit rating. Of course, the inquiry from the application will still appear on your credit report for two years but will only factor into your score for one year.
For example, American Express says it reports new credit card accounts one billing cycle after the application gets approved, regardless of card activation. So if you waited a few months to formally close the account and never activated the card, the new trade line would still show up on your credit report. Closed accounts in good standing can stay on the credit report for up to 10 years.
To see if the new account landed on your credit report, request a free copy at www.annualcreditreport.com. Through this site, you can obtain a free credit report from each nationwide consumer-reporting agency -- TransUnion, Equifax and Experian -- once every 12 months.
As for your second question, you really shouldn't be receiving unsolicited credit cards, unless they're replacements for existing cards. Check your credit reports if you receive unsolicited cards, as this could be a sign of identity theft. If you're talking about a replacement card, not activating it wouldn't hurt your score, but eventually the issuer might close the account because of inactivity. If you cancel the new card, then you've closed your existing account. The FICO scoring model treats both issuer- and consumer-initiated account closures the same way, even though you might see a distinction on the credit report.