Monday Mailbag: Closing Credit Cards, Different Credit Scores, and AMEX

Monday Mailbag 10/22/2018

Question:

Would it hurt my credit score to close 2 cards and open a new credit card with better points?

Answer:

Short answer, YES.

15% of your credit scores are calculated from something called “Length of Credit History” in which the average age of your open accounts factors tremendously.

By closing your oldest accounts and opening a new card you are severely shortening the average age of your open accounts and this will adversely impact your credit scores.

For example, let’s say that your 2 open accounts are a 4-year-old credit card and a 6-year-old credit card. That would come out to an average length of credit history of 5 years. If you close your 2 active credit cards and open a new account your average length of credit drops from 5 years (60 months) to 1 month (as soon as your new card reports).

This new shortened length of credit will significantly drop your scores.

Instead, feel free to apply for the new credit card (with points) but, keep your other accounts open and active.

This will preserve your credit scores and ensure that you don’t endure a significant drop in your credit scores.

Question:

Why does Discover give me a different FICO score than Credit Karma?

Answer:

Yes. Discover furnishes a FICO credit score, most likely the FICO 08 BankCard Score to be exact, while Credit Karma uses a VantageScore v3.0 scoring model.

The reason for the difference in your credit scores is due to the fact that these 2 different credit scoring models calculate the scores differently using different algorithms, even if based on the same data from the same credit report.