Dear Creditnet: I'm thinking about applying for a new hotel rewards credit card, but I already have two other cards with high limits. One card has a $34,000 limit, and I don't even use it. Before applying for the new card, should I ask to have this account closed or the credit limit reduced to the minimum? I don't want to have my credit score dinged too bad by having a new card.
Answer: It's great you still have plenty of available credit. Whatever you do, don't freely give it up! Credit scoring models are quite sensitive to how much you're spending of your total available credit from all cards combined— otherwise known as your credit utilization ratio. Making any decision that reduces your available credit will have a much more negative impact on your credit score than simply opening a new account.
As you may already know, credit cardholders across the country have been dealing with unwanted account closures and reduced credit limits as issuers struggle to maintain profitability and reduce the overall risk in their portfolios. So, you should feel grateful you haven't fallen victim to any of these changes yet. Hopefully you'll be able to continue flying safely under the radar.
Now, unless there's a big annual fee associated with the card in question, it wouldn't be a smart move to request a reduction in your credit limit or close the account at this time. In addition, keeping the card open shouldn't hurt your ability to get approved for a new card, and your credit score should only take a minor hit when your credit file is pulled as part of the application process.
After a few months, your score should return to normal or perhaps even improve as you continue to build a more robust credit profile with additional positive payment history on the new account. If your search is still on for the perfect hotel rewards credit card, you may also want to take a look into the new Chase Sapphire® card. For a travel rewards card with no annual fee, this is one of the best credit card offers you'll find on the market today.
Photo credit: Shutterstock / Denis Vrublevski
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