Credit being closed?

[TimberTDI]

I've never been a big fan of credit cards but I will take advantage of 12 month no payment type deals and what not.

Over the past week I've received letter from three different banks that they are closing my accounts do to inactivity. These are accounts that I opened paid and never used again. I used them to take advantage of whatever deal was be offered.

I"m wondering now if this will negatively affect my credit score.

All the three state that it will show up as credit line closed-closed by credit grantor.

Is this happening to anyone else? I have been reading reports that the credit card companies are going to be the next industry to topple.

 

[marrone]

I had Amex close my account down for inactivity and it had no impact on my credit report. Not to long after closing my account down Amex sent me a pre-approved card.

 

[TimberTDI]

That's thing. You closed them and that the way it shows on a credit report. These are being closed by the companies. From what I've read so far, it's okay as long as it's not a charge off. My score will take a slight hit because my debt to available credit ratio is less. I have zero revolving debt so it really doesn't affect me.

 

[marrone]

Sorry I met to say it was Amex who closed down my account for inactivity.

 

[asianer]

There is too much risk for the credit card companies - In this economy people are losing their jobs having to rely on cash advances from credit cards to pay the bills. Banks are also closing down Home Equity Lines of Credit, increasing fees, and downsizing to face this financial challenge. But to answer your question, I think if your credit card is closed by the creditor it has no negative scoring impact. From my limited knowledge anytime you, as the cardholder, close an account it is a "derogatory" event.

 

[TimberTDI]

I think that these companies should concentrate on eliminating fraud. :irked:

 

[marrone]

I think that these companies should concentrate on eliminating fraud. :irked:

The CC, which I use most of the time, does crack down on any transaction they think is suspect. I've actually have had a couple of transaction denied because they thought they were suspect. The security area then called me up asking about the transaction, I then had to have them release the transaction so I could purchase the item.

 

[Killerdrgn]

Yeah it's just the credit card companies trying to minimize their risk. In this bad economy they're afraid people will just run up their credit card bills and then just refuse to pay, especially the homeowners about to declare bankruptcy.
And if you have a good credit score already this shouldn't affect it much at all, as long as your not going to try to get a massive home equity loan tomorrow you really shouldn't worry about it.

 

[Hitsnorth]

Your score will only get lowered if you utilize over 35% of your available REVOLVING credit. As long as you have a few open accounts and you dont utilize over 35% of your revolving credit you wont notice a hit on your credit. Remember though even if you pay your credit cards off every month whatever amount you have on there is reported BEFORE you pay. So if you had 10k credit line you would never want to charge more than 3500 in a month.

 

[Killerdrgn]

Your score will only get lowered if you utilize over 35% of your available REVOLVING credit.

Thats actually not the only thing affecting your credit score. Even frequent credit checks can adversely affect your credit score. Not to the extent of utilizing more of your available credit, and definitly not as bad as delinquent payments. But tiny things do affect your credit score in kind. Some examples: divorce, job loss, opening many credit/debt accounts, etc.

 

[Hitsnorth]

I understand other things are involved in the Fico score. He was asking about closing his account. The only thing to be concerned about with closed accounts is your debt utilization ratio which is a big factor in your score. Divorce does not show up on your credit file.

 

[TimberTDI]

What I normally do is this:

Currently I have $8,000 on a Home Depot Account. It's on a 12 month no pay no interest. In the 11th month I will payoff the entire account in one shot. Meanwhile I have $8000 sitting in a Money Market @ 3.15percent (percent key doesn't work)

 

[masterswimmer]

Steven, the reason the CC companies are closing accounts for inactive accounts is primarily due to it costing them hundreds of thousands if not millions of dollars of fees they can otherwise collect.

Picture this.....if you are a lender who has $10 million in outstanding credit card AVAILABLE balances. You can potentially earn your fees on the consumer making $10 million in purchases. Lets say your depositors have balances in their accounts that don't warrant you making more than that $10 million in credit available. So you are now potentially maxed out with potential consumer debt.

If that same lender has $2 million of inactive accounts then they won't earn any fees on that $2 million. Since they are already maxed out on the debt they can assume, they don't have any other way to earn those fees other than to close your account and reissue that money to new customers.

Banks can only lend up to a certain amount, just like we can only borrow up to a certain amount. They have liabilities too.

swimmer

 

[jejton]

Five Parts to Your FICO Credit Scores
As a rule, credit scores analyze the credit-related information on your credit report. How they do this varies. Since FICO scores are frequently used, here is how these scores assess what is on your credit report.

1. Your payment history – about 35% of a FICO score
   Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score.
2. How much you owe – about 30% of a FICO score
   FICO scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.
3. Length of your credit history – about 15% of a FICO score
   A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.
4. New credit – about 10% of a FICO score
   If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.
5. Other factors – about 10% of a FICO score
   Several minor factors also can influence your score. For example, having a mix of credit types on your credit report – credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit – is normal for people with longer credit histories and can add slightly to their scores.

http://www.quick-guide-usa.com/credit-score-fico.html

 

[muntai]

not only r credit accts being close. they r also cutting down lines of credit due to the financial meltdown. banks r whorin cash n scare to lend.

 

[Killerdrgn]

not only r credit accts being close. they r also cutting down lines of credit due to the financial meltdown. banks r whorin cash n scare to lend.

Thats funny cause I just got an increased available credit line and a access line of credit. Maybe they want me to spend more or something? And they make no fee's off of me, I always pay the full balance on time.

 

[masterswimmer]

Thats funny cause I just got an increased available credit line and a access line of credit. Maybe they want me to spend more or something? And they make no fee's off of me, I always pay the full balance on time.

They make fees on EVERY purchase. When you pay finance charges because you carry a balance then you're paying them more than what they make from the vendor on the sale end.

Also, active accounts are not having their credit lines reduced. What is being reduced recently is the lines of credit associated with 2nd mortgages. Since home values have plummeted nation wide the lines of credit are no longer attached to assets. They're basically attached to liabilities.

swimmer

 

[Killerdrgn]

They make fees on EVERY purchase. When you pay finance charges because you carry a balance then you're paying them more than what they make from the vendor on the sale end.
swimmer

I literally meant off of me, no finance charges. And yeah i know they charge the stores to accept credit cards, but thats the credit card companies making money off of them.

 

[masterswimmer]

I literally meant off of me, no finance charges. And yeah i know they charge the stores to accept credit cards, but thats the credit card companies making money off of them.

Exactly. And it needs to be known though, that if a card is dormant then the CC company doesn't make money on the store either. So they can still make money if you don't carry a balance but still use the card. Hence closing the account if it is dormant for a preset period of time.


swimmer