The last thing you anticipate is finding that your credit card has been canceled without notice. If this happens, understanding why your account may have been closed and the impact it can have on your credit score is critical. The following blog explores what you should know about these uncertain matters, and when working with a California consumer lawyer may be in your best interest if you’ve been impacted.
Why Would a Credit Card Be Canceled Without Notice?
Unfortunately, there are quite a few reasons a card issuer would suddenly cancel your credit card account. It’s important to familiarize yourself with the most common reasons this occurs, as issuers are not required to provide notice before closing an account. While some may notify you before account closure, because they do not have to, many companies will not issue a notice beforehand.
One of the main reasons you’ll find that your credit card can be closed is due to inactivity. Unfortunately, there is no exact timeframe in which the card will remain unused before it is canceled, as it varies from issuer to issuer. Some companies will cancel after a few months of no use, while others will wait a year. If you are worried about having a seldom-used card, you may want to set up a recurring charge to be posted to this line of credit to avoid inactivity.
You’ll also find that consistently going over your credit limit can result in the closure of your account. While some companies may forgive exceeding the limit once or twice, continual surpassing of your line of credit can result in your account being closed.
Will This Impact My Credit Score?
The sudden closure of a credit card can have a serious impact on your credit score. First and foremost, the most notable impact will likely occur due to the drastic increase in your credit utilization. If you have two credit cards, you may be able to keep your utilization low between both cards. However, when one card is canceled, it can make it seem as though you’ve used much more of your credit limit than you actually have. For example, if you have a card with a $10,000 limit and $0 on it and another card with a $5,000 limit and $2,500, your utilization is low. However, if the card with the $10,000 limit is closed, your utilization would automatically increase to 50%, which is incredibly high.
You’ll also find that if the account that was closed was a long-standing one, it can cause your score to drop as the age of accounts is taken into consideration. As such, it can make it appear as though you have a shorter credit history. Additionally, if you need to open a new account to replace the old one, it will also bring the average age of your accounts down.
In some instances, the closure of accounts and the aftermath of this process could be breaches of the Truth in Lending Act or the Fair Credit Reporting Act. If this has impacted you, reaching out to an experienced attorney to explore your options is critical. At Los Angeles Legal Solutions, our dedicated team understands how difficult these matters can be. That is why we are dedicated to fighting for the best possible outcome for you and your circumstances. Contact us today to learn more.
