credit cards

'Instant approval' yields unwanted card

Leslie McFaddenq_v2.gif Dear Credit Card Adviser, 
I have a credit score of 780 and have no problems getting by without a credit card. Recently, I thought it would be a good idea to have one just in case of emergencies. I filled out an application with Simmons (they have one of the lowest APRs). I did this online and was directed to a page flashing "your application has been sent." Now here's my problem: I didn't know that by submitting an application I may be approved without any further steps. I thought they would let me know first if I was qualified. Then I would be able to make a final decision (as to) whether or not I want that particular card. So, after filling out and submitting that application I went to another credit card company and applied online as well. This time I was instantly approved. It is now bothering me that I may have two credit cards when I only intended to have one. My question is, if I have two "new" credit cards with zero balance and I cancel one of them right away, have I jeopardized my credit score? It was a mistake and I was unaware how this process worked. I read all the fine print and never saw anything about the approval process. I would just like to be able to fix this without hurting my credit score. Thanks.
-- Michael

a_v2.gifDear Michael,
If it makes you feel any better, I've heard of far worse blunders. Thankfully, you only applied for two credit cards and not a slew of them. Numerous inquiries could've knocked your score down a bit.

If you cancel the undesired card quickly enough, and depending on the issuer's reporting policy, the closed account may not even show up on your credit report. If it's not on your report, it won't impact your credit score at all, except for the ding from the inquiry. The score is based on the information in your credit report.

The damage from the two inquiries on your credit report, which resulted from the two credit checks, can't be undone by closing the unwanted account. The point deduction will remain permanent for a full year, even though the inquiries will stay on your credit report for two. An inquiry will usually lower your score about five points, according to FICO, the firm that created the FICO score.

Further impact to your score depends on whether the extra account appears on your credit report. I suggest you get a copy of your report and review it.

Thanks to the Fair Credit Reporting Act, consumers are entitled to free copies of their credit reports from each of the three major credit reporting agencies once every 12 months. Make sure you order yours from the official site for government-mandated free credit reports: AnnualCreditReport.com. Other sites may try to sign you up for a fee-based credit monitoring product.

If you close the account after it has been reported, it can remain a part of your credit history for up to 10 years.

Normally, closing accounts can reduce your available credit and drive your score down. An important measure in scoring models is the proportion of your revolving balances to credit limits. When you cancel a card with a zero balance, you lose the available credit from that account, which can increase that utilization ratio and lower your score. You don't have any credit card balances, though, so your debt ratio wouldn't fluctuate.

Canceling a card can also shorten your credit history when the account comes off your credit report. That rule of thumb also doesn't seem to apply since you acquired both accounts around the same time.

If you want peace of mind, check your credit score after dropping the unwanted card.

All that said, I don't see any particular reason to dump that second account. Simply having another open credit card account won't hurt your score. In fact, having a second card may come in handy if one gets lost or stolen, a merchant doesn't accept a particular brand or one issuer changes your agreement unfavorably.

If you really want only one card in your wallet, cancel the other one soon. Go easy on the applications in the future!

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

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