It started simply enough. For months, I'd had my eye out for a premium travel rewards card, one that had a great rate of return, a sweet signup bonus and a rare miles redemption.
After a week of research, I settled on the Barclayard Arrival Plus World Elite Mastercard, a popular option that packs perks, carries a low annual fee of $89 and offers miles that never expire. It also features a 5% redemption, awarded every time you cash out your miles.
To ensure I'd be able to qualify, I did my due diligence and pulled my credit reports on AnnualCreditReport.com (you can also view two of your credit scores for free on Credit.com.) Nothing looked suspicious: After years of keeping a budget and dutifully paying my credit card bills on time, my hard work had paid off and my credit score was in the solid 800 range.
So you can imagine my shock and frustration when I received a rejection letter from Barclaycard a few days after submitting my application online.
"Too few accounts with sufficient satisfactory performance," read one of the bullets. "Insufficient number of credit cards on your credit report," read another.
What had I done?
Armed with my new information, I gave Barclaycard's customer service line a call. Yes, I was a reliable customer, I explained. Yes, I paid all my bills on time. See? It said so right there on my credit report. After responding to a few more questions, which mainly involved why I'd closed the other cards in the first place, I was approved.
"Consumers should always try to call and speak with a human if they want a different outcome," Lindeen said. "Sometimes they are able to take care of you."
The Curse of Closing Two Credit Cards
I could've avoided all of this. The two cards I'd canceled were the only ones I had — a big no-no in the world of credit, said Eric Lindeen, vice president of marketing for ID Analytics in San Diego, which offers credit-risk management scores to issuers to help them onboard new customers.
"If the two cards you canceled were your only two cards, that would have a big impact on your score," he said. Having "one to two cards is good, three to five is great; zero is not good. That probably was a 30- to 50-point hit to your score." (You can learn how credit utilization — your total amount of debt versus how much credit has been extended to you — affects your credit score here.)
The issuer may also have perceived my lack of cards as a sign that I was "experiencing a high turnover of cards," Lindeen said, referring to the practice of card, or mile, churning. For the unfamiliar, card churning refers to the act of signing up for rewards credit cards, spending just enough to earn the signup bonus and ditching the plastic before the annual fee kicks in.
As evidenced by the wildly popular Chase Sapphire Reserve — which touted an unprecedented 100,000-point bonus for spending $4,000 in the first three months — and the backlash Chase received on dozens of blogs and Reddit after reportedly establishing a 5/24 Rule (you won't be approved if you've opened five or more accounts in the past 24 months) to prevent this kind of behavior, it's no wonder issuers have grown wary. Who wants to give away money and not make a profit?
Certainly not American Express, whose Platinum Card touts some of the best travel rewards out there. Prospective applicants are warned: "Welcome bonus offer not available to applicants who have or have had this product." Likewise, Citi notes that its bonus ThankYou Points "are not available if you have had a ThankYou Preferred, ThankYou Premier or Citi Prestige card opened or closed in the past 24 months."
"Your application was initially declined because the system found that there had been at least two recent account closures — which flagged the application," said Barclaycard representative Nicole DyeAnderson over email.
Now I knew why I was in this predicament.
How to Avoid Rejection (by a Credit Card)
Keeping an eye on your spending and credit behavior is a big deal. Even one purchase can cause your score to plummet, said Lindeen, and the last thing you want is to permanently damage your standing. Keeping debt levels low, applying for cards as your score can handle them and paying bills off on time are the right ways to build up your credit. But all too often, people get carried away or lured by a large signup bonus.
Lindeen also stressed the importance of keeping your oldest credit card open as long as possible. "Mortgages and car loans reach an end point and later drop off your report," he said, whereas a "credit card is something you can keep on file for your entire life." A key metric in most scores is the age of your oldest tradeline, or item on your credit report, so holding onto your credit cards is important for building and maintaining credit.
For yours truly, it might be worth it to call my old issuers and see if they'll reopen the cards with the original open date. Until then, I've learned my lesson — and probably won't cancel another credit card again.
Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
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