Bank Closing Credit Cards

[Anonymous]

I belonged to one of those banks that got closed up and taken over. Since that time they have closed up the credit cards associated with that bank plus one associated with the bank that took it over for non use.

You see Im one of those types that only use them for emergencies and right now am using the ones with the lowest apr. I finally got my credit going in a nice upward swing.  Can anyone tell me what the bank's closure of these accounts do to my Credit Score.

Thank you

[score_building]

if the closed accounts have a zero balance, the score impact should be limited to a hit from an increase in uti (from the loss of the two credit lines) and a hit from decrease in aaoa.  you may be able to make up the uti loss by requesting cli's on some of your other accounts if they are eligible.  if so, overall, any damage may be rather minimal and temporary with your scores rebounding as you build. 

consider flipping your script.  using cc's as a first line of defense for emergencies is typically inadvisable.  if possible, consider building a small emergency fund instead.  start as small as you want and try to grow it gradually to around 3 mos. expenses over time.  if you want to keep the cc accounts open and actively reporting (which is necessary to continue to build history) you must use each one at least for a single purchase every few months.  every three months is probably a good target but i go for once a month minimum even if it is for a pack of gum. it is essential to show activity on your cc's to prevent closure by issuer.

when you use your cc's for things you would buy anyway and pif and use emergency savings for emergencies, you can significantly reduce the likelihood of finding yourself faced with account closures by issuer during those (hopefully) long stretches where you don't have a balance from an emergency on your card.

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kinthenorthwest wrote:

I belonged to one of those banks that got closed up and taken over. Since that time they have closed up the credit cards associated with that bank plus one associated with the bank that took it over for non use.

You see Im one of those types that only use them for emergencies and right now am using the ones with the lowest apr. I finally got my credit going in a nice upward swing.  Can anyone tell me what the bank's closure of these accounts do to my Credit Score.

Thank you

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Message Edited by score_building on 12-31-2008 07:45 PM

[Anonymous]

I would have to agree with the first reply. Now is not the time to keep a card for emergencies. With banks reducing credit lines and closing accounts, its time to make use of what you have to keep it from going away. Just remember not to overdue it, and everything should be good even in these dark times.

[score_building]

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USCP111 wrote:
I would have to agree with the first reply. Now is not the time to keep a card for emergencies. With banks reducing credit lines and closing accounts, its time to make use of what you have to keep it from going away. Just remember not to overdue it, and everything should be good even in these dark times.

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yes, now is not the time to pull a 360 on spending patterns.  gradual changes and moderation can generally keep you under the radar.  if you know in advance that you are going to have a significant out of pattern charge, for example, you may want to let your creditor know in advance. 

again, your creditors make money off of every single transaction placed on your credit card account even if you pif but if you don't use them regularly the issuer doesn't get paid those transaction fees.  it is fine to use cc's sparingly for expenses you can pay in full.  it can really help bolster relations with a creditor to use their products.  you may not be using cards wisely by not using them at all (or only for emergencies).  closure is king on unused account, now even more so than in the recent past.