Personal Finance 

Accounts Closed by Grantor Don’t Hurt Credit Score More

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Diced up credit cardsOver the last year, since the CARD Act was passed, a lot of people have had their credit card limits lowered or their cards canceled. Credit card companies, faced with these new rules, are looking to reduce their risk and so they’ve cut a lot of inactive or low activity cards (or saddled them with fees). If you recently got the axe from your credit card company, you might be wondering if the loss will significantly hurt your credit score.

The short answer is that it will hurt it a little bit but not because the grantor closed it.

When you go to review your credit report, you may notice that the note on your recently closed account might say “closed by grantor” or “account closed at credit grantor’s request.” At first glance it looks pretty bad compared to the alternative (“closed at account holder’s request,” or something similar) but in reality it doesn’t matter. A closed account is a closed account, regardless of who initiated it. The FICO score formula doesn’t take into consideration who did the closing.

Your score will likely suffer a little bit as your credit utilization will go up but otherwise you should be fine. If you are concerned about how it “looks” or if you requested closure and it was miscoded, you can always dispute the record with the credit bureau. If you can prove you request closure, or if the creditor doesn’t respond, then it will be changed. It won’t, however, affect your score.

(Photo: 434pics)

{ 11 comments, please add your thoughts now! }

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11 Responses to “Accounts Closed by Grantor Don’t Hurt Credit Score More”

  1. jsbrendog says:

    weird. my CC just sent me a letter about a month ago saying they were raising my credit line.

  2. Wilma says:

    I have several cards and only use one. Got a letter from one I don’t use telling me I’ll be paying higher interest and $60 a year for the privilege to do so. Guess what I told them? =)

    • jsbrendog says:

      i hope it involved something along the lines of sticking and places where the sun rarely sees

  3. Cheap Bastard says:

    The way I understand it, the score drops because an account showing a long history of no defaults falls off the chart. After 7 or so years a good history on the one particular card is completely gone.

    My approach for dormant accounts is to lower the credit line to a very small amount (to lower the banks risk and avoid the too much credit is bad credit scenario), and periodically make a purchase to make the card appear active.

    Of course, if the company starts imposing a maintenance fee, the fee itself is going to be more damaging than the slightly lower credit score (we hope so anyway).

  4. govenar says:

    Often, even when they close it, they’ll still put “closed at account holder’s request”.

  5. While it may have no bearing on your FICO score, it can “matter” because some lenders express concern if they look closely at your credit reports and see several accounts closed by creditors.

    And the last thing you want is to draw attention from an underwriter to anything that needs an explanation these days. Often they’re like talking to a brick wall.

    • Shirley says:

      “Often they’re like talking to a brick wall.”
      And seem to have just about as much common sense as one.

  6. I had a credit card recently closed by the company. It took a little hit on my credit score, but not tremendous.

  7. thomas says:

    I lost 40k in available credit solely because of this act. However, I don’t have CC debt, and the available amount is just plenty to cover me until I dip into emergency cash.

  8. Soccer9040 says:

    I wonder how many points this could effect your score by?

  9. eric says:

    That’s a bit of trivia I didn’t know. Thanks for the clarification.

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