Dear Credit Card Adviser,

I just recently received a letter from Chase saying that it was closing my credit card account. It was originally opened with Washington Mutual. I have a $2,000 limit with about $1,000 used. I have never been late on making payments, and I pay more than the minimum.

My question is: Will this hurt my credit rating since they are the ones closing the account?

— Janice

Dear Janice,

Even though your credit report may indicate that the creditor did the shuttering, a closed account is a closed account to your credit score. The FICO scoring model won’t treat a creditor-initiated closure any worse than if you had shut the account down.

The closure itself may hurt the score. If you have a balance at the time of the closure, the scoring formula will continue to include the balance and credit limit when it calculates your debt-to-available-credit ratio, or utilization. Once you pay off the balance, you lose that credit limit in scoring, which can cause your utilization to increase. A higher debt ratio could harm your score.

For example, let’s say you have another credit card, which has a $600 balance and a $1,000 limit. You haven’t paid down the $1,000 balance on your closed account yet. Your overall utilization is about 53 percent. When the balance on your closed account is zero, the scoring model ignores the $2,000 credit limit. Your utilization then shoots to 60 percent.

If that was your oldest account, your credit history could shorten when the trade line comes off your credit report. Closed accounts in good standing can stay on for up to 10 years.

If you can’t talk Chase out of closing your account, pay down your balances to minimize the score damage.

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