credit cards

Card inactivity could doom account

Dear Dr. Don,
I've had an excellent credit score all my life (in the top 1 percent of the country) and tonight I came home to find that one of my two credit cards was closed without notice due to inactivity. The credit line was $16,500.

I only own one other credit card with a credit line of $7,500. I use this one all the time and pay it off in full each month. How much can closing the account with the larger credit line hurt my overall credit score?

By the way, I did call the issuer, and it refuses to reopen the account. Please get back to me regarding this.
-- Karen Kerfuffle

Dear Karen,
Having an account closed for inactivity is a risk when you play favorites with your credit cards. It's a business decision for the lender. The card provider had an obligation to make an unsecured loan to you at any point in time for $16,500. You never took them up on any part of that offer, so they closed the account. It makes perfect sense from the lender's perspective. It freed up the capacity to extend credit to another cardholder that might actually make them some money.

The account closing will impact your credit score by increasing the ratio of credit used to credit available. The account closing will also change your length of credit history. The myFICO.com Web site defines length of credit history as including the following elements.

Elements in length of credit history:
Time since accounts opened.
Time since accounts opened, by specific type of account.
Time since account activity.

There's not much you can do about the length of credit history but you can manage the usage ratio by having the credit line on your remaining credit card increased, or by applying for a new credit card. If you have a mix of loans outstanding, like a mortgage, a car loan and a credit card, then bumping the credit line on the active account is a reasonable approach.

Take your fiscal pulse by estimating your credit score using Bankrate's, " FICO Score Estimator" or pay up to get an actual credit score from one of the three consumer reporting agencies.

Elements of a FICO score

Bankrate provides that contact information. If your estimated credit score is 760 or above after the account closing, then you qualify for a lender's best rates and you should stop stressing over the loss of the account.

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