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Question about effect of credit card closure/discontinuation? (Marvel)

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mrsbrightside
New Visitor

Question about effect of credit card closure/discontinuation? (Marvel)

Hi! I was wondering if anyone had insight of how the closure of a credit card reflects on your score? For example, the Marvel card I've had for a while was discontinued a year or 2 ago, but I'm still paying off the balance. If I pay it off I'm assuming they will close the account? And should that lower my score considerably? 

Otherwise, if I keep the balance on it, they can't just close it because I took too long to pay it off and also affect my credit badly in turn too, right? Sorry for the potentially dumb questions as I'm pretty new to credit. Thank you so much! 

Message 1 of 4
3 REPLIES 3
SouthJamaica
Mega Contributor

Re: Question about effect of credit card closure/discontinuation? (Marvel)


@mrsbrightside wrote:

Hi! I was wondering if anyone had insight of how the closure of a credit card reflects on your score? For example, the Marvel card I've had for a while was discontinued a year or 2 ago, but I'm still paying off the balance. If I pay it off I'm assuming they will close the account? And should that lower my score considerably? 

Otherwise, if I keep the balance on it, they can't just close it because I took too long to pay it off and also affect my credit badly in turn too, right? Sorry for the potentially dumb questions as I'm pretty new to credit. Thank you so much! 


A closed account with a balance is a bad thing. It's damaging to your credit scores. Pay it off ASAP.

 

The limit is  no longer included in your utilization computation, but the balance is. 

 

In a worst case scenario, some lenders equate the current balance with the limit, so that you would be perpetually maxed out until it's paid off.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 708 TU 714 EX 715

Message 2 of 4
K-in-Boston
Credit Mentor

Re: Question about effect of credit card closure/discontinuation? (Marvel)


@mrsbrightside wrote:

Hi! I was wondering if anyone had insight of how the closure of a credit card reflects on your score? For example, the Marvel card I've had for a while was discontinued a year or 2 ago, but I'm still paying off the balance. If I pay it off I'm assuming they will close the account? And should that lower my score considerably? 

Otherwise, if I keep the balance on it, they can't just close it because I took too long to pay it off and also affect my credit badly in turn too, right? Sorry for the potentially dumb questions as I'm pretty new to credit. Thank you so much! 


Yes, if a card has been discontinued and is no longer serviced once paid, lenders will close the account as they did for those that had no balance due at the time that happened. Lenders can and do however close accounts with balances still owed (this does not appear to be the case for your account if it is still reporting as open).

 

To correct SouthJamaica, that scenario would only be the case if the reported credit limit changed, such as reporting a $250 limit when you owe $250, which is very rarely the case and would not happen with a Synchrony-issued card as they report the credit limit at the time of closure on closed accounts.  In the overwhelming majority of cases, a closed account with a balance will factor into scoring exactly as though it were still open.

 

Unless there are mitigating factors such as your overall utilization percentage drastically going up as a result (i.e. you have a $500 balance on this card with a $5000 limit and have two other $500 cards with $250 balances, once it is paid to zero and closed you go from $1000 of $6000 used (16.7%) to $500 of $1000 used (50%)) or if this is your only revolving credit account, you should not see any large changes in scoring, if at all.  And the card will still report and factor into average age of accounts for up to 10 years after closure.

 

If you are paying a large amount of interest on the card and can pay it off, it's probably much better to do so rather than paying it to prolong account closure.

Message 3 of 4
SouthJamaica
Mega Contributor

Re: Question about effect of credit card closure/discontinuation? (Marvel)


@K-in-Boston wrote:

@mrsbrightside wrote:

Hi! I was wondering if anyone had insight of how the closure of a credit card reflects on your score? For example, the Marvel card I've had for a while was discontinued a year or 2 ago, but I'm still paying off the balance. If I pay it off I'm assuming they will close the account? And should that lower my score considerably? 

Otherwise, if I keep the balance on it, they can't just close it because I took too long to pay it off and also affect my credit badly in turn too, right? Sorry for the potentially dumb questions as I'm pretty new to credit. Thank you so much! 


Yes, if a card has been discontinued and is no longer serviced once paid, lenders will close the account as they did for those that had no balance due at the time that happened. Lenders can and do however close accounts with balances still owed (this does not appear to be the case for your account if it is still reporting as open).

 

To correct SouthJamaica, that scenario would only be the case if the reported credit limit changed, such as reporting a $250 limit when you owe $250, which is very rarely the case and would not happen with a Synchrony-issued card as they report the credit limit at the time of closure on closed accounts.  In the overwhelming majority of cases, a closed account with a balance will factor into scoring exactly as though it were still open.

 

Unless there are mitigating factors such as your overall utilization percentage drastically going up as a result (i.e. you have a $500 balance on this card with a $5000 limit and have two other $500 cards with $250 balances, once it is paid to zero and closed you go from $1000 of $6000 used (16.7%) to $500 of $1000 used (50%)) or if this is your only revolving credit account, you should not see any large changes in scoring, if at all.  And the card will still report and factor into average age of accounts for up to 10 years after closure.

 

If you are paying a large amount of interest on the card and can pay it off, it's probably much better to do so rather than paying it to prolong account closure.


Unfortunately, what I said is correct. 

 

I had a BOA account which was closed with a large promo balance, and kept it open for 7 months.  So I got to monitor the FICO treatment of the account carefully. The limit continued to be reported correctly but was no longer factored into aggregate utilization.  The balance was.  I have read numerous articles which describe this phenomenon. When we had the Q&A session with FICO insiders, they neither admitted nor denied that this was the case.

 

I had a Santander account which was closed with a balance. There, the current balance was treated as the limit, and the account was therefore considered as maxed out. I had read reports of that happening to some folks in this forum, and noted that there was some skepticism among some readers as to whether this could happen.  But then when I experienced it myself, my own skepticism was at an end.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 708 TU 714 EX 715

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