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Accounts Closed by Grantor Don’t Hurt Credit Score More

Posted By Jim On 03/01/2010 @ 12:10 pm In Personal Finance | 11 Comments

Over the last year, since the CARD Act [3] 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 [4]). 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 [5] 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 [6])


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/accounts-closed-by-grantor-dont-hurt-credit-score-more.html

[3] CARD Act: http://www.bargaineering.com/articles/credit-card-act-of-2009-guide.html

[4] saddled them with fees: http://www.bargaineering.com/articles/credit-cards-requiring-minimum-annual-purchases.html

[5] credit utilization: http://www.bargaineering.com/articles/credit-utilization.html

[6] 434pics: http://www.flickr.com/photos/434pics/3494630853/sizes/m/

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