Many actions can affect your credit score, including whether you pay your bills on time and the amount of credit you have available. This list also includes credit card migration. This is when your card issuer changes behind the scenes.
Credit card migrations happen “regularly” and, while they can’t be controlled, they can affect your credit score, said John Alzheimer, a credit expert who has previously worked at credit scoring company FICO and credit bureau Equifax.
Starting February 7, Bilt, the rewards and payments platform best known for offering members the option to earn credit card points when paying rent, will transition its credit card program from Wells Fargo to a new issuer, Cardless. Similarly, Chase will replace Goldman Sachs as the issuer of the Apple Card within two years, the banks announced in January.
A higher credit score may make it easier to get loan approval and potentially lower interest rates, so it might be wise to consider how your credit score will be affected by the transition and what you can do to protect your score as you deal with the changes, Alzheimer says.
Migration may shorten account lifetime
With a credit card transfer, you may receive a new card automatically, or you may need to opt-in. But even if the new physical card doesn’t look any different, Alzheimer says the old account is typically replaced with a new one on the back end.
Moving to this new card won’t erase your credit history, but it could result in a harder credit check or lower the average age of your account, both of which are factors to consider, he says.
A hard credit check occurs when a lender examines your credit history to decide how much new credit to issue you, resulting in a temporary drop in your credit score. But even if a soft credit check (a review of your credit report that itself doesn’t affect your score) is performed, new accounts can affect your score by lowering the average age of your accounts, Alzheimer says.
The age of an account is important because credit rating agencies reward continued use of credit over time, Alzheimer said. Older accounts increase the average age of your credit history and demonstrate experience and trustworthiness to lenders. Conversely, the appearance of new accounts can reduce the average age of your accounts and lower your score.
“If you want to get an elite-level credit score, say 800 or higher, you’re going to need credit reports that are decades old,” Alzheimer said, citing the upper limit of FICO credit scores, which range from 300 to 850. “If you keep adding new accounts to your credit report, it’s mathematically certain that the average will always stay pretty low.”
Keep your old card and use it occasionally
In some cases, like the Bilt transfer, a cardholder may keep their original account open through a product conversion to another card issued by the original bank.
Whether you choose to transfer your cards or keep your original accounts open, if you want to maximize your credit score, “make sure you do whatever it takes to get out of this transition with an open credit card in hand,” says Ulzheimer.
According to Ulzheimer, open accounts help your credit score primarily because they increase your total available credit, which in turn lowers your credit utilization ratio, or the percentage of credit you’re using. A low utilization rate tells lenders that you’re managing your credit responsibly, which can improve your score.
Even closing a card with a $5,000 credit limit “could be very meaningful” to your credit score, Alzheimer said. Also note that your previous credit limit may change after the transfer. Be sure to check with both your new and original issuer to understand how your credit limit may be affected by your new account, he added.
It may be best to keep both accounts open, Alzheimer says. If you don’t want to use either card regularly, he says to keep your account active and prevent it from closing by making a small top-up and paying it off right away every few months.
“From a credit scoring standpoint, you should have as many credit cards with high limits as possible,” says Ulzheimer. “The ratio is so low that it’s never a problem.”
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