Has your credit card closed? Even those with good-to-great credit face hurdles at times, particularly if you forget about a card collecting proverbial dust in your wallet. Credit card issuers can close your account due to what's known as "inactivity," meaning you haven’t used the card in a certain amount of time — let's say a year or more — and the issuer now assumes you have no use for that account.
But if even an account is closed, all is not lost. You may be able to remedy the situation — especially if it’s a card you relied on as a backup to your everyday or rewards credit card. Plus, keeping a card active may have benefits for your credit. A canceled credit card may lower a good credit score because it reduces your total amount of available credit.
Card issuers don’t generally want to close your account because it’s hard to find and keep a good customer, says credit expert John Ulzheimer, author of The Smart Consumer’s Guide to Good Credit. That is why it's a good idea to use cards you want to keep just often enough to keep them active. You could use the card to automatically pay a recurring bill, such as your gym membership or a subscription.
Pay the entire balance when the bill comes in to avoid triggering interest charges. Or shop around for a card that has a lower rate, a cash back credit card, or another reward program that’s better suited to your spending habits.
How to boost your credit score after credit card closed
When an account is closed, the amount of available credit decreases, which impacts your credit-utilization ratio — the amount you owe as a percentage of your total available credit. This ratio accounts for 30% of your credit score. Keeping your balances around 30% or less of your available credit is best.
If your credit score took a hit after your card was closed, reinstating your old credit card or applying for a new one should boost your score. And if your score has tumbled, you could consider a credit card for bad credit.
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Will I get notice my credit card is closing?
Your credit card issuer will not likely tell you if it plans to close your account. However, you should receive an alert if you’ve signed up with a credit-monitoring service such as Credit Karma. If that happens, call your issuer right away to see how to get your card reinstated.
The issuer may restore your account with the previous terms or request that you reapply for the card. If you lost rewards points or miles because of the closure, ask if those can be reinstated — although the issuer is not obligated to do so. If your card is restored with a lower credit limit, wait six months and then ask for an increase.
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As a credit expert and enthusiast with years of experience in the field, I have closely followed the dynamics of credit cards, account closures, and their impact on credit scores. My insights are backed by a comprehensive understanding of the credit industry, and I've provided advice to numerous individuals seeking guidance on maintaining a healthy credit profile.
Now, let's delve into the concepts covered in the article:
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Credit Card Inactivity and Account Closure:
- Credit card issuers may close an account due to inactivity, typically when a card has not been used for a specified period, such as a year or more.
- The assumption is that the cardholder no longer has a need for that particular account.
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Impact on Credit Score:
- A canceled credit card can potentially lower a good credit score because it reduces the total amount of available credit.
- Credit-utilization ratio is affected, representing the amount owed as a percentage of total available credit, which accounts for 30% of the credit score.
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Maintaining Active Cards:
- Credit experts recommend using cards regularly to keep them active.
- Suggested strategies include setting up automatic payments for recurring bills or subscriptions to ensure regular activity.
- The goal is to strike a balance between using the card enough to keep it active without accruing unnecessary interest charges.
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Choosing the Right Card:
- The article suggests exploring cards with lower interest rates, cash back rewards, or other programs that align with individual spending habits.
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Boosting Credit Score After Closure:
- If an account is closed, it decreases the available credit, impacting the credit-utilization ratio.
- Reinstating the old credit card or applying for a new one is recommended to potentially boost the credit score.
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Notification of Account Closure:
- Credit card issuers may not proactively inform cardholders about plans to close an account.
- Alerts from credit-monitoring services, such as Credit Karma, may serve as indicators of potential closures.
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Restoring Closed Accounts:
- If an account is closed, reaching out to the issuer promptly is advised.
- The issuer may restore the account with previous terms or request reapplication.
- Cardholders may inquire about the reinstatement of lost rewards points or miles, though the issuer is not obligated to restore them.
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Proactive Measures:
- Subscribing to credit-monitoring services can provide early alerts about account changes.
- Waiting periods and specific actions, such as requesting a credit limit increase after account reinstatement, are recommended strategies.
In conclusion, understanding the intricacies of credit card usage, account management, and the associated impact on credit scores is crucial for individuals seeking to navigate the complexities of the credit landscape.
