is there any penalty for your credit rating to cancel a credit card?

[hlg0606]

Hi all,

I was wondering if there is any penalty for my credit rating if I am cancelling a credit card and to apply for a different credit card at the same time?
Secondly, if I am currently holding an american express reserve card, can I also apply for an american express edge card or david jones card, and cancel the reserve card later on?
I really appreciate your help.
Lee

 

[sjf]

Hi Lee,

In Australia we don't really have a public uniform credit rating system. In a nutshell this means that cancelling a card will not have any negative impact on your ability to apply for other cards.

Lenders generally only see enquirys on your credit file from when you apply for a card as well as any defaults etc..

With the second question, you are able to apply and be granted multiple Amex cards, I believe (but could be wrong) that if you do have multiple Amex cards and decide to cancel one that you may be able to transfer your credit limit to your new card.

 

[burmans]

Hi Lee,

In Australia we don't really have a public uniform credit rating system. In a nutshell this means that cancelling a card will not have any negative impact on your ability to apply for other cards.

Lenders generally only see enquirys on your credit file from when you apply for a card as well as any defaults etc..

With the second question, you are able to apply and be granted multiple Amex cards, I believe (but could be wrong) that if you do have multiple Amex cards and decide to cancel one that you may be able to transfer your credit limit to your new card.

+ 1 on that, people don't currrectly know you have cancelled your card. Worth noting that privacy laws are currently being drafted (after a lot of consultation) that would allow more information to be held on your credit facilities so at some stage in the future lenders will be able to see this. But given lenders main concern is your ability to pay it's unlikely to be a negative factor if you can cancel a card as as it indicates you can/have paid that card out.

 

[hlg0606]

Hi Lee,

In Australia we don't really have a public uniform credit rating system. In a nutshell this means that cancelling a card will not have any negative impact on your ability to apply for other cards.

Lenders generally only see enquirys on your credit file from when you apply for a card as well as any defaults etc..

With the second question, you are able to apply and be granted multiple Amex cards, I believe (but could be wrong) that if you do have multiple Amex cards and decide to cancel one that you may be able to transfer your credit limit to your new card.

Thanks a lot for the information.
It helps a lot. Should really asked you here earlier. I will wait for the next great offer from Amex.
BTW, will Amex reject me for my application due the cancellation of my previous card?

 

[sjf]

Amex will take your previous history in to consideration (payment history, defaults, limit etc) but simply cancelling a previous card shouldn't be held against you. Actually, I'm pretty sure the Amex application forms ask if you've ever held a card and what the number was.

 

[JohnK]

I do not believe we have a credit rating in Australia and in my experience I believe most credit card providers do not check credit history when applying for a credit card....

 

[wxxnxs]

I do not believe we have a credit rating in Australia and in my experience I believe most credit card providers do not check credit history when applying for a credit card....

No, they do check your credit history, especially they will check how many times you have applied any credit facility which include mobile contract, credit card, loan etc. If you apply too many times within a short period, they will decline your application immediately.

 

[The Rok]

We do have a Credit Rating. it's fairly new, only in the last 12 months. It's supplied to the Credit Provider by Veda and is based on a scale of 0 - 1200. Anything less than 600 and you will struggle to get a credit of any sort. Every enquiry on your file regardless of weather you accepted the credit or cancelled the card will deduct points from your 1200. Home lenders will look for a credit score of 700 +.

I do not know how many points each enquiry deducts as that information is not released.

 

[sjf]

We do have a Credit Rating. it's fairly new, only in the last 12 months. It's supplied to the Credit Provider by Veda and is based on a scale of 0 - 1200. Anything less than 600 and you will struggle to get a credit of any sort. Every enquiry on your file regardless of weather you accepted the credit or cancelled the card will deduct points from your 1200. Home lenders will look for a credit score of 700 +.

I do not know how many points each enquiry deducts as that information is not released.

The Rok,

I do remember Veda trying to get this off the ground. Do any banks actually subscribe/rely on this service?

As banks have internal risk departments which will calculate your own internal score so I'm not too sure if banks would lend much weight to Veda's scoring system.

I thought the new system was aimed mainly at smaller businesses who are providing credit but without dedicated risk management departments?

 

[AdMEL]

I do not believe we have a credit rating in Australia and in my experience I believe most credit card providers do not check credit history when applying for a credit card....

As wxxnxs said, this is not correct.

No, they do check your credit history, especially they will check how many times you have applied any credit facility which include mobile contract, credit card, loan etc. If you apply too many times within a short period, they will decline your application immediately.

Agreed.

We do have a Credit Rating. it's fairly new, only in the last 12 months. It's supplied to the Credit Provider by Veda and is based on a scale of 0 - 1200. Anything less than 600 and you will struggle to get a credit of any sort. Every enquiry on your file regardless of weather you accepted the credit or cancelled the card will deduct points from your 1200. Home lenders will look for a credit score of 700 +.

I do not know how many points each enquiry deducts as that information is not released.

I have recently used this in my job, just to see what the Veda scoring system was like (the actual score was not relied upon at all) and made the following observations:

- default score for a brand new file is 750-833, which I feel is too high;
- average acore is about 775-800
- highest score I've seen is 995, which was for a 25 year old file
- key drivers appears to be: age of file; lack of defaults
- number of applications doesn't seem to greatly affect score

Personally, I don't think their scoring algorithm is that great.

Out of interest, how do you know about this and the specific figures?

The Rok,

I do remember Veda trying to get this off the ground. Do any banks actually subscribe/rely on this service?

As banks have internal risk departments which will calculate your own internal score so I'm not too sure if banks would lend much weight to Veda's scoring system.

I thought the new system was aimed mainly at smaller businesses who are providing credit but without dedicated risk management departments?

You are correct - banks do not as far as I am aware.

 

[zinkle]

Secondly, if I am currently holding an american express reserve card, can I also apply for an american express edge card or david jones card, and cancel the reserve card later on?
I really appreciate your help.
Lee

Hi Lee,

I had a gold amex credit card and have applied for three new amex cards (Plat Edge, Plat Velocity & David Jones) in the last 3 months.

Amex did not decline any of my applications,

the first went through, no problems, (Plat edge)

but i received a call from them in early january and was told my second and third applications could not go through as Amex has a new policy as of early 2011 that they would limit a single customer to two lending products (read: can only hold two credit cards with them). So I had to choose to cancel cards or applications.

They advised that they were not able to alter customers prior to this change so if you currently have more cards with them, you may think twice about cancelling them.

 

[hlg0606]

Hi Lee,

I had a gold amex credit card and have applied for three new amex cards (Plat Edge, Plat Velocity & David Jones) in the last 3 months.

Amex did not decline any of my applications,

the first went through, no problems, (Plat edge)

but i received a call from them in early january and was told my second and third applications could not go through as Amex has a new policy as of early 2011 that they would limit a single customer to two lending products (read: can only hold two credit cards with them). So I had to choose to cancel cards or applications.

They advised that they were not able to alter customers prior to this change so if you currently have more cards with them, you may think twice about cancelling them.

Thanks for the information shared. This is really helpful.
I had a Amex Plat reserve card. They have waived my first year annual fee. But I have not used the complementary return flight. Not sure if I could ask them to waive my second year annual fee, if I am not going to use the complementary return flight benefit. Otherwise, I have to change it to Plat Edge or David jones. Unfortunately I missed the 30 000 bonus points offer from David jones card. But, Plat Edge is still a great card to go with.
Thank you for your help again, and happy Australia Day.

 

[lovetravellingoz]

but i received a call from them in early january and was told my second and third applications could not go through as Amex has a new policy as of early 2011 that they would limit a single customer to two lending products (read: can only hold two credit cards with them). So I had to choose to cancel cards or applications.

They advised that they were not able to alter customers prior to this change so if you currently have more cards with them, you may think twice about cancelling them.

FYI I was told in early 2012 that one was limited to THREE Amex credit cards. And indeed my third was approved.

 

[zinkle]

FYI I was told in early 2012 that one was limited to THREE Amex credit cards. And indeed my third was approved.

I didn't get so lucky with the Amex CSR, two was the limit they told me. As I already had two, they told me I had to cancel either my card or applications beyond the first two.