By now you know your credit score will suffer if you close a credit card account, but what about those times when your account must be closed because your card was lost or stolen – or because of an incident such as the Heartland Payment System’s security breach?
Don’t worry – this action won’t affect your credit scores at all.
When an account is closed due to one of these causes, your credit card issuer will close your account and transfer all of your information to a new account, which is opened simultaneously. This includes your payment history, the date your account was opened, and your interest rate and credit limit.
The card issuer may report this to the credit bureaus as one closed account and one new account with identical information, or they may simply report a change in account numbers.
Either way, as long as your history remains with the new account, it won’t affect your credit score. Remember the length of time you’ve had a credit card does affect your scores. The other reason why this action has no effect is that it doesn’t trigger a hard inquiry.
A change that can affect your credit score is a user-generated upgrade to a currently held credit card. This generally results in the closing of one account and the opening of a completely new account. Since your history is then lost, this move may harm your scores.
With this in mind, it might be wise to research credit card offers and apply for a completely different card – while keeping the old card and retaining the history and the credit limit you have established.
Additionally, when you ask for an upgrade you are generally asking for a credit line increase, and this generates a hard inquiry into your credit report. As you know, the more hard inquiries are made, the lower your scores. The good news is, if you are granted the higher credit limit, the additional available unused credit will offset the damage done by the inquiry.
When the upgrade is credit card issuer generated, it is the result of their own soft inquiry, and won’t affect your scores.
Before asking for a credit card upgrade or making application for a new card, check your own credit scores. Then research the cards and programs available to make sure that your current scores will qualify you for the card you want.
If they won’t, then work at raising your scores before you make an application. That hard inquiry that’s turned down will set you back in your efforts to raise the score.
