Ask Andy: Credit score security - WMC Action News 5 - Memphis, Tennessee

Reported by Andy Wise

Ask Andy: Credit score security

If you're keeping a line of credit open to maintain a good credit score, that's smart.

The problem is the credit card companies are getting smarter.

They're starting to automatically close customers' inactive accounts in the name of "security."

"Gail" of Collierville, TN, sent me this e-mail:

"I got a letter...from Chase credit card telling me since there has not been any activity on the card for the last 24 months they have closed the account to protect my security. Is this going to hurt my credit score in any way?"

Gail, any time something reduces the percentage of your available credit, it can hurt your credit score.

But you would have to have a lot of debt for it to be a significant hit.

"If the person doesn't have any debt, then it wouldn't have much, if any, effect," says Bill Hardekopf, President and CEO of in Birmingham.  "But if they have, say, an $8000 balance, and the available credit goes from $20,000 to $10,000, then their debt-to-available-credit ratio goes from 40% to 80% and that could lead to a decrease in their credit score."

So how can credit card companies just up and shut down one of your accounts, especially if you carry a zero balance, and you've never been delinquent?

Well, remember, it's THEIR credit to lend.  They make the rules. 

In fact, more credit lenders are closing inactive accounts to reduce their risk. The conventional wisdom is if someone has a zero balance on a card, and they haven't used it for a while, they might just be holding on to that card for an emergency purpose -- something they otherwise cannot afford or cover with cash.  The chance they'll pay it off quickly -- if at all -- is slim, and that's a risk to the credit card company.  

To be honest, a credit card company shutting down your inactive account is probably doing you a favor in the long run. That's one less account that can be compromised, and there are other ways to keep a high credit score without having that extra account floating out there.

To read how to get and keep a good credit score, click on this Ask Andy story:


Powered by Frankly