Q&A: Will My Credit Score Go Down if a Credit Card Company Closes My Account for Non-use?

Leticia asks: I received a letter from a credit card company saying that since I have not used their credit card for over a year they will be closing my account. I have had the card for over five years and kept in good standing, but have used other accounts with lower rates. Will this lower my credit score?

This is a tricky one. The quick answer is yes, your bank closing your credit card for non-nus probably will lower your credit score, but not by much, and it will hopefully bounce back in a few months. There are a few factors that will determine how much your score could drop:

How long have you had that particular card open relative to your other accounts? If you have had the account longer than any other card, then your credit score could take a bigger hit when the bank closes the account. It will be better if you’ve had other cards for at least five years or longer.

What was the credit limit in relation to your overall available credit? If the card being closed had a high credit limit, the closure will affect your credit score more dramatically because it will reduce your overall available credit by a larger percentage. If you have balances on other cards, it will also increase your debt utilization ratio (the difference between your balances and available credit), which could lower your score until those balances are paid down.

Do you have a balance on the card? (I’m assuming you don’t because you haven’t been using it). But if your creditor closes an account while you still have a balance, your debt utilization will increase because the closed credit line is no longer counted towards your available credit.

Finally, how will the closure be reported to the credit bureaus? Banks notify the tree credit bureaus whenever a credit account is opened or closed. When they are closed, the banks also tell them whether the credit account was closed at the consumer’s request or the bank’s. When the bank closes an account, it reflects negatively on your credit report; the bureaus assume the bank had a reason to close it. But when you close an account, your credit score is not affected.

Here’s what I’d do: First, call the credit card company and see if you can’t keep the account open. Use it a couple times next month, pay it off, and forget about it again for a while. If that doesn’t work, ask them at least to report to the credit bureaus that it was closed at your request. This is what they should do, because you choose not to use the account, but you never know.

At the worst, your credit score will dip 10-15 points as a result of the account closure, and as long the account didn’t make up a large chunk of your available credit, your score should rebound within 3-4 months.

Do you have money questions about credit, saving, budgeting, investing, etc.? I love answering them, so send ‘em in! If I don’t know the answer, I’ll research it for you!

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