Many actions can affect your credit score, such as if you pay your bills on time or how much available credit you have. Also on that list: credit card transitions — when your card issuer changes behind the scenes.
Credit card transitions happen “periodically,” and though you can’t control them, they may affect your credit score, says credit expert John Ulzheimer, who has previously worked at credit scoring company FICO and credit bureau Equifax.
Starting Feb. 7, Bilt, a rewards and payments platform largely known for allowing members the option to earn credit card points on rent payments, is transitioning 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 in two years, the banks announced in January.
Because a higher credit score can make it easier to get approved for loans and pave the way for lower interest rates, it may be wise to consider how your credit score will be impacted by a transition and what you can do when navigating the change to protect your score, Ulzheimer says.
Transitions can lower the age of your accounts
In a credit card transition, you may receive a new card automatically, or in some cases you may need to opt in. But even if your new physical card doesn’t look different, your old account is typically replaced by a new one on the back end, Ulzheimer says.
Transitioning to this new card won’t erase your credit history, but it could trigger a hard credit check or lower the average age of your accounts, which are both factors to consider, he says.
A hard credit check occurs when a lender reviews your credit history to determine how much new credit to issue, resulting in a temporary drop in your credit score. However, even if a soft credit check — a review of your credit report that doesn’t in itself affect your score — is performed, a new account could still affect your score by lowering the average age of your accounts, Ulzheimer says.
Credit rating agencies reward long-term, consistent use of credit, which is why the age of your accounts matters, Ulzheimer says. Older accounts raise the average age of your credit history, signaling experience and reliability to lenders. On the flipside, when a new account appears, it can lower that average age of your accounts and cause a dip in your score.
If you care about getting “these elite level credit scores, like 800 and above, you’re going to need to have a credit report that is decades old,” Ulzheimer says, referring to the high end of FICO credit scores, which range from 300 to 850. “If you keep adding brand new accounts to the credit report, it’s a mathematical certainty the average is always going to stay fairly low.”
Keep the old card and use it occasionally
Sometimes, as with the Bilt transition, cardholders may keep the original account open through a product conversion to another card issued by the original bank.
Whether you choose to transition your card or keep your original account open, “absolutely do whatever is necessary to walk away from this transition with an open credit card in your hand,” if you want to maximize your credit score, Ulzheimer says.
Open accounts help your credit score mainly because they increase your total available credit, which in turn lowers your credit utilization, or the percentage of your credit you’re using, Ulzheimer says. Lower utilization signals to lenders that you’re managing credit responsibly, which can boost your score.
Even closing a card with a $5,000 credit limit “could be very meaningful” to your credit score, Ulzheimer says. Also note that your previous credit limit could change after a transition. Make sure to check with both your new and original issuer to understand how your credit limit could be impacted with a new account, he adds.
It may be best to keep both accounts open, Ulzheimer says. If you’d rather not use one of the cards regularly, he says to make a small charge on it and pay it off immediately every few months to keep the account active and prevent it from being closed.
“From a credit scoring perspective, you want to have as many credit cards as possible with high limits,” Ulzheimer says. “Then those ratios are very, very low and will never become a problem.”
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