Effect on FICO score due to "account closure due to extended period of non-use".

[Anonymous]

I recently received 2 letters from credit card companies notifying me of the closing of my accounts due to non-use. What effect will this have on my FICO score and future credit goals?

[Lel]

This reason for your accounts being closed is not going to have any impact on your FICO score.  Your credit reports will just indicate that your accounts have been closed; it's not going to include the comment about the extended non-use.

What may impact your credit score is the loss of available credit.  If the loss of these credit limits results in your percentage utilization of available credit to go up by significant amount, then this can have a negative effect on your score.  For example, if your utilization goes from 5% to over 10%, then your score will probably take a hit.  If it goes much higher than that, then the effect will be greater.

[Jazzzy]

Hi Art Teacher...and welcome.

This is happening commonly when accounts don't get used. The closed account will continue to report, so it will still be counted in your average of accounts. The history will still be positive for you and will report for approx. 10 years after it closes. Apparently EQ sometimes drops them early.

A negative impact could come if you owe amounts on other credit cards or revolving lines of credit. The credit limits on those cards that are now closed were calculated into your total credit lines for the purposes of calculating your utilization percentage. Those two credit limits are now gone and will no longer be counted. So....if you owe balances on your other cards, you now will have a higher utilization, and that could negatively affect your FICO scores.

Let us know some of the details of what the rest of your credit picture looks like, and you'll get some opinions on what, if any, damage there will be.

Those weren't your only credit cards, were they?

ETA: Lel types MUCH faster than I do!

Message Edited by LynetteM on 12-01-2009 12:47 PM

[RobertEG]

Closure of the accounts removes their CL from your active accounts,  and will most definately impact FICO scoring.

Your % util no longer includes the CL of those acounts in your credit scoring.

[Anonymous]

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@RobertEG wrote:

Closure of the accounts removes their CL from your active accounts,  and will most definately impact FICO scoring.

Your % util no longer includes the CL of those acounts in your credit scoring.

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Closing an account or two will not "definitely" impact one's FICO as long as they do not result in an increase of one's credit utilization. 

If there is a negative impact, it can be solved by paying down balances. 

[haulingthescoreup]

One other possible negative effect: if you have open installment and mortgage loans, which by definition always show a balance, and now you have two fewer accounts with $0 balances, you might get a tiny ding for "too many accounts with balances." If this happens, you'll want to pay some of your remaining cards before the statement dates, so that they report $0.

Otherwise, it doesn't matter a bit to FICO scoring whether you closed an account or whether the lender did. Some people worry about future creditors questioning a "closed by lender" notation, but after the wreckage of the last 18 months, there are a lot of those notations bouncing around. If you're ever asked, just tell them that it was closed for low usage back when everyone was tightening up credit. I doubt that any lender will blink.

I have a "closed by lender" note on a store card from eons ago, and no one has ever once referred to it.

I think you'll be all right, as long as you don't have balances on all your cards (something you should never do anyway), and/or get the "too many accounts with balances" notation. If so, paying off some cards will fix that.