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Dear Liz: I have only one credit card which I pay off every month, and don’t really need another one. I recently received an offer of many frequent flier miles—enough to pay for a nice vacation—if I would open another account. If I accepted the new card, used it occasionally and always paid in full, then canceled it after about a year, would that hurt my credit score? It’s currently pretty decent, about 750.

Answer: Opening and closing accounts can hurt your more-than-decent score. That’s why the company that created the leading FICO credit scoring formula recommends we apply for credit sparingly.

At the same time, it’s a good idea to have more than one credit card. Having a “spare” card can be handy if your other card needs to be closed temporarily because of fraud, or if your issuer decides to change your terms for the worse.

Opening a card just to get an introductory benefit, such as a pile of miles, isn’t the best idea—particularly if you would have to pay a substantial annual fee, which is typically of frequent flyer cards, to keep the account open. Instead, look for a card you can live with for a good long time. Many rewards cards offer cash back or other benefits and don’t have an annual fee. You can find current card offers at CreditCards.com, CardRatings.com and Bankrate.com, among other sites.

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4 Comments

1

Liz:

I just opened a secured credit card with the intent of rebuiling my credit. How long should those stay open was your score increases? Also, how long after you have had the secured card should on try and apply for an unsecured card?

2

Responsible use of a secured credit card should start helping your score within weeks, as long as the card issuer reports the account to all three bureaus and you use it right (don’t charge more than 30% of your limit, then pay it off in full). Many secured cards turn into unsecured cards with 12-18 months of on time payments. If yours doesn’t, consider applying for an unsecured card after that amount of time.

3

Thank you for this response! How often should one increase their credit limit on a secured card? Is my understanding correct in the amount of the card is not reported on your credit report, just whether you are using it and using it “correctly?”

4

Check your credit reports to make sure your limits are being reported correctly, and follow up with your issuer if they’re not. Accept any credit limit increases that are offered.