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Notice by Bank of Closure Due to Inactivity

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Anonymous
Not applicable

Notice by Bank of Closure Due to Inactivity

I received a letter advising me that my bank will be closing two credit cards upon expiry due to inactivity. I asked twice that they change their decision. Not happening. In advance of expiry, I desire to do whatever is best relative to maintaining my score in the aftermath. The two cards equal about 20k in availability and represents about 30 percent of my total available revolving credit. I only maintain a few hundred dollars each month on a different revolver which gets paid in full. Does anybody know whether or not it makes a difference if I voluntarily call in and have them close the account (beat them to the punch)? If that's not a good move, is there some kind of credit reporting terminology that I should ask that the bank use? If it would be of any benefit, I could always put on a couple of modest size charges before expiry and then slowly pay them off. I understand the accrual of interest under this scenario (it won't be material). I'm just not sure how an open balance is treated in such a situation. I do know there's no concern about acceleration. I'm not really looking for speculations. If you have been through this or you are actually aware of the intricacies, I welcome your comments. Current score is 800. Just trying to avoid falling out of the exceptional level upon this event.

Message 1 of 5
4 REPLIES 4
takeshi74
Senior Contributor

Re: Notice by Bank of Closure Due to Inactivity


@Anonymous wrote:

Does anybody know whether or not it makes a difference if I voluntarily call in and have them close the account (beat them to the punch)?


It does not matter.  For scoring impact considerations see the Closing Credit Cards thread linked in the Helpful Threads sticky in the Credit Cards subforum.  If they're going to close no matter what all you can do is reallocate the limits if you have other cards with them that will remain open.

 


@Anonymous wrote:

If that's not a good move, is there some kind of credit reporting terminology that I should ask that the bank use?


No terminology is going to change anything for this.

 


@Anonymous wrote:

If it would be of any benefit, I could always put on a couple of modest size charges before expiry and then slowly pay them off. I understand the accrual of interest under this scenario (it won't be material). I'm just not sure how an open balance is treated in such a situation.


There would be no benefit. You want to avoid closing revolving accounts with balances as they can report as maxed. In future, ensure that you're aware of each of your creditors' policies regarding closure due to inactivity and ensure that you meet the minimum activity requirement for accounts that you want to keep open.

 


@Anonymous wrote:

Current score is 800. Just trying to avoid falling out of the exceptional level upon this event.


What model?  Keep in mind that you don't have just one score.  There are many models used by creditors in credit decisions.  For most models you have a score with each of the 3 major CRA's.  If that's a FICO 8 then keep in mind that best terms are generally offered in the 740-760 range so you have some margin if you're at 800 with a FICO 8.

 

You can do the math to determine what your Revolving Utilization is before and after the accounts are closed.  Consider how much your Revolving Utilization would be impacted.  Even if you lose a substantial amount of available credit and would see an increase to Revolving Utilization you can always reduce Revolving Utilization by paying down balances prior to their report dates.  Remember that Revolvling Utilization is Balance(s) / Limit(s).  To lower it you can lower balances and/or increase limits.

 

Crunch the numbers before you fret too much over it.  How much of a difference are you talking about?  1%?  10%?  30%?  More?

Message 2 of 5
Thomas_Thumb
Senior Contributor

Re: Notice by Bank of Closure Due to Inactivity


@Anonymous wrote:

I received a letter advising me that my bank will be closing two credit cards upon expiry due to inactivity. I asked twice that they change their decision. Not happening. In advance of expiry, I desire to do whatever is best relative to maintaining my score in the aftermath. The two cards equal about 20k in availability and represents about 30 percent of my total available revolving credit. I only maintain a few hundred dollars each month on a different revolver which gets paid in full. Does anybody know whether or not it makes a difference if I voluntarily call in and have them close the account (beat them to the punch)? If that's not a good move, is there some kind of credit reporting terminology that I should ask that the bank use? If it would be of any benefit, I could always put on a couple of modest size charges before expiry and then slowly pay them off. I understand the accrual of interest under this scenario (it won't be material). I'm just not sure how an open balance is treated in such a situation. I do know there's no concern about acceleration. I'm not really looking for speculations. If you have been through this or you are actually aware of the intricacies, I welcome your comments. Current score is 800. Just trying to avoid falling out of the exceptional level upon this event.


As mentioned above, make sure the accounts close with no balance. The key is for the account(s) to be closed in good standing. Closed by customer or closed due to inactivity - either is fine and carries no negative implication. I have an account closed due to inactivity on file. Let the cards close 9with no balance) and move on.

 

Your closed account(s) will still factor into your AAoA - so no change in credit history short term resulting from closure.

 

A reduction in total credit will not cause score to drop by itself The key potential impact is the reduction in total available credit impacting your aggregate revolving credit utilization. You want to maintain aggregate utilization under 9% - if the drop in total credit causes you to go over that limit, prepay a greater portion of expenses before statements close to bring down utilization.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 3 of 5
Anonymous
Not applicable

Re: Notice by Bank of Closure Due to Inactivity

Thank you so much for your comments and information. My key concern was the possibility that this event might in fact cost me some points and thereby prevent me from accessing the best possible rate on a mortgage loan that I will soon be applying for. Upon further research, I ran across several references stating "borrowers need a 740 to secure the best home loan rates." With respect to various other types of credit, the top-tier rates appear to be in play anywhere from 720-750. Assuming that to be accurate, the scoring portion of a credit decision is not influenced by any number above that top-tier threshold (i.e., an 841 adds nothing more beyond what a 751 would).  If that is indeed factual, then it does seem I have a bit of cushion and shouldn't be overly concerned given that my revolving credit utilization is (and is expected to remain leading up to a mortgage) less than 1 percent. The event will take place at the end of this month. I have accessed current scores from the big three and will compare those scores to the first update available in August. Accordingly, I will be able to isolate and observe the exact amount of impact this event has...just as a curiosity.

Message 4 of 5
Anonymous
Not applicable

Re: Notice by Bank of Closure Due to Inactivity

Thank you so much for the 411. What process did you use to obtain all of the different scores listed in your post? Cost? I mentioned in another reply, I am documenting and will be able to confirm shortly whether or not the closure has any impact (it's the only thing that will change credit-wise over the next 30 days).

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