A Surprising Balance Transfer Credit Card Mistake

If you go to the store to buy a furnace filter and then get home and discover it’s the wrong size, you can usually return it and buy the one you need. But if you get a credit card and realize it’s not going to do the job you thought it would, you don’t have a similar option. A reader, Rachel, applied for a new card but now realizes she can’t use a promotional offer the way she planned and she doesn’t want the card. But she is worried about what canceling that card and applying for a different one will do to her credit score.

Credit expert Barry Paperno said the bad news here is that the new card will probably appear on Rachel’s credit reports — even if she never uses it. If she wants it removed, she could ask the card issuer not to report it any longer, but it would be under no obligation to do that.

Fortunately, even if Rachel finds a credit card that’s a better fit, getting another new card shouldn’t have a major impact on her credit scores. The number of credit cards she carries shouldn’t be an issue; after all, there is no “ideal” number of cards all consumers should carry.

And while the fact that she will have inquiries from both card issuers on her reports shouldn’t result in a significant drop in her scores, either. Paperno said a second hard inquiry may or may not even ding her credit scores. “How many points are impacted by an inquiry depends on how many were already on her report within the past year, and a number of other factors, such as overall length of credit history, number of accounts on the credit report, and more,” he wrote in an email.

The age of her accounts is another credit score factor that could come into play. Scoring models typically consider how long ago the oldest account was opened, the average age of accounts, and how recently new accounts were opened. A well-established credit history indicates less risk, and as a result, sometimes consumers find there is a dip in their scores after they open new accounts.

But if Rachel’s credit scores are strong, she probably won’t see a major drop in the long run. “It may be helpful to remember that new accounts and inquiries together only affect about 10% of a credit score, so even in the worst scenario we’re not talking a lot of points,” says Paperno.

Canceling her new account shouldn’t have any impact on her score as long as it does not show a balance, Paperno said.

Still, it’s not a bad idea for her to make sure she’s likely to qualify for the next card she applies for. To improve the odds, she can look at her credit data for free on Credit.com. She’ll get two free credit scores and get an idea of where she stands in comparison to other consumers in the U.S. and her state.