How Much Does Opting Out Hurt Your FICO Score?

Congress overhauled the credit card industry with the 2009 Credit CARD Act, which allows people to opt out of term changes 45 days in advance of them taking effect. Opting out of changes to your credit card agreement could hurt your FICO score, but the severity of the damage relies on other information on your credit report.

Prescreened Offers

If "opting out" refers to removing yourself from the list of creditors who tender credit offers without an application, it will have a neutral impact on your credit score. Prescreened offers run a "soft pull" on a person's credit history, which means the inquiry was not initiated by the borrower, and thus, not an application for credit.

Opting Out of Term Changes

The act of opting out of changes to a card's terms and conditions will not hurt your score unless failing to agree to the new contracts requires closing the account. If you have to close your credit card account, it will hurt your credit utilization ratio and possibly your mix of accounts. Lowering your overall credit limit could make it appear you need a higher percent of your credit than you really do. Also, if you only have one card, closing it will reduce the variety of your accounts---10 percent of your credit score.

Is It Worth Opting Out?

If you can withstand the temporary hit to your credit score and do not plan on needing credit for the foreseeable future, you can probably opt out safely to avoid higher interest charges. On the other hand, if you are shopping for a mortgage or other large loan, you want the highest score possible to get the lowest rate, so accepting the changes could be in your best interest. Just a half-point on a $300,000 mortgage, for example, would outweigh any increase on, say, a $2,000 balance on a credit card.

Tip

You could transfer the remaining balance on a card instead of opting out. Credit card companies often allow new accounts to transfer balances from other cards at zero percent for six to 18 months. Also, if you cannot pay off the balance immediately, you will continue making payments under the old terms on the card, which could include discretionary rate increases.