The Credit Crunch has finally personally affected me and it makes me furious!
When I began house shopping months ago, I pulled my credit report. Happily, I saw I had great credit (no late payments, long credit history, etc) and a high FICO score. Since this affects my rate, loan terms, eligibility, etc., I continued to guard my credit history.
A couple weeks ago, I received a notice from a Credit Card Company (CCC) that one of my credit cards had been closed due to inactivity. This account was about three years old and had never carried-over a balance (I never paid any interest). Over the prior year, I never charged anything to it either… This, was my financial offense.
Since part of your credit score is based on the ratio of available credit to amount used, I realized immediately this would lower my FICO score. In addition, having a “lender/bank closed account” is viewed more negatively than “consumer closed account” because it implies that you were a poor borrower. I decided to call…
Me: I’ve received a notice that my credit card had been closed due to inactivity. My credit report will now say, “Lender closed account,” and this will affect my credit score negatively. Please change this to say “consumer closed account.”
CCC: Well, you were not using the card so we closed it.
Me: First, the Fair Credit Reporting Act requires you to notify me prior to taking any action that will negatively affect my credit score. When did you not notify me of your intent to close this account? Second, I understand the account is closed, but will you change the reason for its close?
CCC: No. You didn’t use the card often.
Me: So… to make sure I understand. You CAN change the reason, but choose NOT to because I didn’t use your card.
CCC: Yes.
Me: When did you notify me prior to closing the account, as required?
CCC: I can see we sent you a balance transfer offer a month before.
Me: Did the offer say, “If you don’t transfer a balance, we will close your account?”
CCC: No.
Me: That’s not a notification.
CCC: There is nothing we can do. We’ve closed the account. We do have several promotions if you’d like to open a new account?
LOL (angrily)!!! After looking into this (google: credit card close inactivity), I am not the only person this has happened to. I don’t see how it makes good business sense to cancel the credit you’ve extended to credit-worthy people.
Then again if they lower my credit score, next time I open an account they can offer me a higher interest rate and less favorable terms…. Maybe this does make good business sense… for them!
Last 3 posts by Eric B.
- Nassim Taleb on the Economy - June 25th, 2010
- Full Circle - May 3rd, 2010
- The Dark Side :) - April 5th, 2010
Let me guess… Was it Bank of America?
Sorry to hear that…so, if I have some cards that aren’t being used, would you suggest that I close the accounts? I find it a pain to have open accounts for cards that I never use.
Definitely not. Do not close accounts you are not using. You should have approx 2 to 3 credit card accounts open since your FICO is partially based on the amount of credit that others are willing to extend you. The key, I’ve learned, is to use each of them. So now, I’m just going to use each card once per month so the accounts won’t get closed for inactivity.
As a side note, I’ve read a lot of accounts where the CCC’s have also been lowering credit limits on people who use their cards once a month…so maybe we never can manage it completely.