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Doredeb

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Should I close new accounts to stop my score from plummeting?
I've just started building credit and have tried to do so very carefully. I've appreciated the advice I've gotten here and on other sites, but I've obviously made a huge misstep and I need help!

As of January 1, I had no open credit accounts and, therefore, didn't generate a credit score. I started by opening two secured credit cards with small limits (<$400 each), Discover and Capital One. I was told I could expect to see a credit score generated after about six months of on-time payments, so I was shocked to see a score come up after only having the Discover card about 3 weeks. My score was higher than I expected - 670! I was encouraged that my score would start to climb, especially with the Capital One on the way! While the Discover card kept reporting, my score kept going up, even though the Cap One wasn't reporting at all. In the meantime, I accepted four different pre-approved offers using the shopping card trick, as some people suggested getting some of these to "beef up" my total available credit. All four cards combined only gave me an additional $1100 in credit, but since they were only soft pulls, my thinking was it was better to open them now before my other accounts aged. If I opened these retail cards later in the year, I thought my credit score would be affected (after my hard work and patience!) when it lowered the average age of my accounts. I really tried to do this the right way.

Fast forward to this weekend. My credit score after only two full months of activity was 677 and I felt great. Early last week, one of the new retail cards reported the account to the CRAs and my score went up again - now 684. Woohoo! Then, just four days later the Cap One account I opened in January (and have used/paid in full several times!) FINALLY reported - and instead of going up a few more points my score plummeted to 631 (a 53 point drop!). I am literally sick to my stomach.

Did the score drop because of the Capital One card specifically? My score bumped a bit when the retail card showed up a few days earlier, so I actually expected another small bump with each new account. Or, did it drop because "two cards are great but three is considered a risk?" I'm terrified because, as I mentioned earlier, I have THREE other retail accounts that will soon be added to my reports as well. Am I seriously in danger of seeing my score get dinged 50 more points for EACH of the new accounts? I never imagined that I could lose 200 points for opening these accounts. I felt it was a wise choice to open them now, when it would affect my average age of accounts the least, since ALL my credit is relatively new. Again - the only hard pulls on my reports are the 2 secured cards I opened in January.

My question is this: am I better off closing these three other new accounts (I haven't used any of them) to "stop the bleeding?" Or, will I take just as big a hit by closing them? Will they report to the CRAs as "closed accounts" and will that look even worse on my credit report? If the accounts are reported (and my score takes a huge hit), will closing them give me back any of the points I've lost by opening them?

I apologize for the length of my post, but I want to fix this the best way I can. Right now my credit "advice" on one of the monitoring sites (based on my current 631 score) says "You're doing great! With on-time payments and no changes to your credit report, you can expect to be 90 points higher in 6 months." I can live with this - but I'm afraid those three new accounts are going to ruin all this work. Any advice?

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No, your score will not drop from 684 to below 500 solely based on you opened 5 additional cards. Credit scores has diminishing returns on both positives and negative things, one new account "might" drop 20 points, that doesn't means your second new account will drop additional 20 points. Assumes all things remains the same, no more new accounts, no lates, same/samliar utilizations? Yes, I fully expect your FICO score would be back at 680 in 6 months, more importantly by then, your credit profiles will have 8 months of positive payment history. Most of times your credit profiles are weighted much more than your credit scores to potential lenders.

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In FICO scoring models, they uses both open and closed accounts into your age/average of credit. Closed accounts in good standing can remain on your report for next 10 years, so your age/average of credit in FICO score models woulndnt be affected for 10 years or until whenever it's rolled off your reports, so simply closing them now won't change it one single bit.

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Take easy with SCT, contrairy to popular beliefs, inquiry has much less impact to your scores than new accounts itself, they are easy to get but offers no long term value, unless you get their Visa, M/C.

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No, closing the accounts will not reverse the damages rom opening it. No, your score went up isn't just because a new card reported, adding new account usually will lower your scores due to inquiry(s), lowering your average age of credit and potentially taking on more debt or higher utilizations been reported, new account itself also have negative effect on the secondary scorings like "time since new account" and how many new accounts in certain time periods. Generally your score would recover from adding new accounts in 3~6 months depending on One's profiles.

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You need to make sure you are following the exact same scoring model, Discover offer FICO 8 Experian to its card members, but it's ScoreCard scores for non-members is from FICO 8 TransUnion, Credit Karma offers VantageScore3, CapOns's CreditWise is also from VantagScore3 TransUnion. Discover only update its score once a month, someone like you, lots thing can happen in that 30 days, make it that much harder to decipher what did/didn't affect your score. Not all score models created equally, if it were?  Then there would be no reason to have more than one model.

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Total limit in itself isn't part of FICO scoring, same line of thinking as your income, assets aren't part of your scores, because no matter how much income/assets you have? Someone will always have more than you, no matter how much credit limit you have? Someone will have more than, so no one can or should ever gets to 850. Having higher total limit would reduce your overall utilizations, therefore might lower your scores but it dose nothing to padding your utilizations on individual cards, easier way to reduce your utilizations effect on your scores is to pay it down, rather than adding more credit to make it "look" lower.

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Lenders usually only reports once a month, it's the balance on that date gets reported to CRA and that amount is going into your utilizations, tho yes, you use it and paid it off, but it still might affect your utilizations depend when you pay it. At this point, I wouldn't worry too much about that, as long you pay it off before the due date. You can research it bit more down the road if you need to micro manage your utilizations.

Reply by
Doredeb

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I understand most of what you're saying, but I'm still confused.  Are you suggesting that my score will "recover" in 3-6 months if I make on-time payments...when that score will have dropped to under 500?  I was at 684 earlier this week and if I really end up losing over 200 points (total) once the three additional cards report as "opened" on my credit reports, I just don't see how I'll be back up to almost 700 in 3-6 months.  Remember, my OLDEST card is only 2 months old at this point, so closing these accounts won't effect the average overall age of my accounts that much at this point, right?

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