Credit card closed. Effect on credit score (USA)
"There are two factors in your credit score that may be affected. The first is payment history. Lenders like to see that you pay your bills, which is the most straightforward part of credit scores IMO. If you've actually been paying your bills on time, though, then this should still be fine. The second factor is the average age of your open accounts. Longer is considered better here because it means you have a history of paying your bills, and you aren't applying for a bunch of credit recently (in which case you may be taking on too much and will have difficulties paying them). If this card is closed, then it will no longer count for this calculation. If you don't have any other open credit accounts, then that means as soon as you open another one, your average age will be one day, and it will take a long time to get it to ""good"" levels; if you have other matured accounts, then those will balance out any new accounts so you don't get hit as much. Incidentally, this is one of the reasons why it's good to get cards without yearly fees, because you can keep them open for a long time even if you switch to using a different card primarily." You need to find out if the credit card has been reporting these failed automated payments as late or missed payments to your credit report. To do this, go to annualcreditreport.com (the official site to get your free credit reports) and request your report from all three bureaus. If you see late or missing payments reported for the months where you made a payment but then they did an automatic payment anyway, you should call up the credit card company, explain the situation, and ask them to retract those negative reports. If they refuse, you should dispute the reports directly with the credit bureaus. If they have been reporting late payments even though you have been making the payments, that will impact your credit much more than the fact that they closed your account.  Unfortunately, they can turn off your credit account for any reason they like, and there isn't much you can do about that. Find yourself another job as soon as you can, get back on your feet, pay off your debt, and think very carefully before you open another credit card in the future. Don't start a new credit card unless you can ensure that you will pay it off in full every month. "As documented in MyFICO (http://www.myfico.com/credit-education/whats-in-your-credit-score/), there are several factors that affect credit scores. Payment history (35%) The first thing any lender wants to know is whether you've paid past   credit accounts on time. This is one of the most important factors in   a FICO® Score. As @Ben Miller mentioned, checking your credit report to determine whether or not late payments were reported to credit bureaus will give you a sense of whether or not this was effected. You mentioned several bounced payments, which certainly could have caused this. This would be my largest concern with a closed account, is to investigate why and what was reported to the bureaus, and in turn, other lenders. Also, since this has the highest impact on credit scores (35%), it's arguably, the most important. This is further detailed here, which details the public record and late payment effect on your score. Amounts owed (30%) Having credit accounts and owing money on them does not necessarily   mean you are a high-risk borrower with a low FICO® Score....However,   when a high percentage of a person's available credit is been used,   this can indicate that a person is overextended, and is more likely to   make late or missed payments. Given that this card was closed, whatever your credit limit was is now no longer added into your total credit limit. However, your utilization on that card is gone (assuming it gets paid off), depending on any other credit lines, and since you reported ""heavy use"" that could be a positive impact, though likely not. Length of credit history (15%) In general, a longer credit history will increase your FICO® Scores.   However, even people who haven't been using credit long may have high   FICO Scores, depending on how the rest of the credit report looks. Depending how old your card was, and particularly since this was your only credit card, it will likely impact your average age of credit lines, depending on other lines of credit (loans etc) you have open. This accounts for about 15% of your score, so not as large of an impact as the first two.  Credit mix in use (10%) FICO Scores will consider your mix of credit cards, retail accounts,   installment loans, finance company accounts and mortgage loans. Given that this was your only credit card, your loan mix has been reduced (possibly to none). New credit (10%) Research shows that opening several credit accounts in a short period   of time represents a greater risk - especially for people who don't   have a long credit history. This focuses on credit inquiries, which as you mentioned, you will likely have another either re-opening this credit card or opening another at some point in the future.  Regardless, paying off the rest of that card is a priority, as interest rates on average credit cards are over 13%, and often higher (source). This rate comes into play when not paying the balance in full every month, and also as @Ben Miller suggested, I would not utilize a credit card without being able to pay it in full. It can often be a dangerous cycle of debt." So My question is. Is my credit score going to be hit?  Yes it will affect your credit.  Not as much as missing payments on the debt, which remains even if the credit line is closed, and not as much as missing payments on other bills...   If so what can I do about it?  Not very much.  Nothing worth the time it would take.  Like you mentioned, reopening the account or opening another would likely require a credit check and the inquiry will add another negative factor.   In this situation, consider the impact on your credit as fact and the best way to correct it is to move forward and pay all your bills on time.  This is the number one key to improving credit score.   So, right now, the key task is finding a new job. This will enable you to make all payments on time.  If you pay on time and do not overspend, your credit score will be fine. Can I contact the creditors to appeal the decision and get them to not affect my score at the very least? I know they won't restore the account without another credit check). Is there anything that can be done directly with the credit score companies? Depending on how they characterize the closing of the account, it may be mostly a neutral event that has a negative impact than a negative event.  By negative events, I'm referring to bankruptcy, charge offs, and collections.  So the best way to recover is to keep credit utilization below 30% and pay all your bills and debt payments on time. (You seem to be asking how to replace this line of credit to help you through your unemployment.) As for the missing credit line and your current finances, you have to find a way forward.  Opening new credit account while you're not employed is going to be very difficult, if not impossible.  You might find yourself in a situation where you need to take whatever part time gig you can find in order to make ends meet until your job search is complete.  Grocery store, fast food, wait staff, delivery driver, etc. And once you get past this period of unemployment, you'll need to catch up on all bills, then you'll want to build your emergency fund.  You don't mention one, but eating, paying rent/mortgage, keeping current on bills, and paying debt payments are the reasons behind the emergency fund, and the reason you need it in a liquid account.   Source:  I'm a veteran of decades of bad choices when it comes to money, of being unemployed for periods of time, of overusing credit cards, and generally being irresponsible with my income and savings.  I've done all those things and am now paying the price.  In order to rebuild my credit, and provide for my retirement, I'm having to work very hard to save.  My focus being financial health, not credit score, I've brought my bottom line from approximately 25k in the red up to about 5k in the red.  The first step was getting my payments under control.   I have also been watching my credit score.  Two years of on time mortgage payments, gradual growth of score.  Paid off student loans, uptick in score.  Opened new credit card with 0% intro rate to consolidate a couple of store line of credit accounts.  Transferred those balances.  Big uptick.  Next month when utilization on that card hits 90%, downtick that took back a year's worth of gains.  However, financially, I'm not losing 50-100 a month to interest. TLDR; At certain times, you have to ignore the credit score and focus on the important things.  This is one of those times for you.  Find a job.  Get back on your feet.  Then look into living debt free, or working to achieve financial independence.
"I would not call this a ""good"" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1   credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card." The biggest risk is Credit Utilization rate.  If you have a total of $10,000 in revolving credit (ie: credit card line) and you ever have more than 50% (or 33% to be conservative) on the card at any time then your credit score will be negatively impacted. This will be a negative impact even if you charge it on day one and pay it off in full on day 2.  Doesn't make much sense but credit companies are playing the averages:  on average they find that people who get close to maxing their credit limit are in some sort of financial trouble. You're better off to make small purchases each month, under $100, and pay them off right away.  That will build a better credit history - and score. "Curious, why are you interested in building/improving your credit score? Is it better to use your card and pay off the bill completely every month? Yes. How is credit utiltization calculated?    Is it average utilization over the month, or total amount owed/credit_limit per month? It depends on how often your bank reports your balances to the reporting agencies. It can be daily, when your statement cycle closes, or some other interval. How does credit utilization affect your score?  Closest to zero without actually being zero is best. This translates to making some charges, even $1 so your statement shows a balance each statement that you pay off. This shows as active use. If you pay off your balance before the statement closes, then it can sometimes be reported as inactive/unused. Is too much a bad thing?  Yes. Is too little a bad thing? Depends. Being debt free has its advantages... but if your goal is to raise your credit score, then having a low utilization rate is a good metric. Less than 7% utilization seems to be the optimal level.  ""Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower,"" Watts said. Read more: http://www.bankrate.com/finance/credit-cards/how-to-bump-up-your-credit-score.aspx Remember that on-time payment is the most important factor. Second is how much you owe. Third is length of credit history. Maintain these factors in good standing and you will improve your score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" Please realize that your issuer can close the account for any number of reasons.  Inactivity is one, as having a credit line open costs them money and if you never charge anything, the company doesn't get any transaction fees from vendors nor does the company get to charge you any interest. An occasional charge is likely to keep your card from being closed automatically, but it is not a guarantee. Another reason they may close the account is that you have other bad marks show up on your credit score, or their criteria for offering you the card change so you no longer match their target demographic. I have a credit card issued by my credit union that I have not used for a couple of years. They will not close the card account because my other accounts are still very profitable for them. If I were not an otherwise profitable customer, I wouldn't be surprised if they closed my credit card account. If you are serious about keeping the account open, you should probably have more than a trivial amount of usage. If you don't carry a balance, there is no disadvantage. Merchants pay less for their in-house credit, so there are often incentives for you to use the store card. The perils of opening a credit card hurting your credit score are way overblown in general, if you have good to excellent credit. If you have excellent credit, there is no material effect on your ability to borrow. You'll get knocked down a few points when you open the card, but as long as you're not on a credit application frenzy there isn't an issue. Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that. Your credit score is definitely affected by the age of your credit accounts, so if you frequently close one card and open another new one, you're adversely affecting the overall average age of accounts.  This is something to consider and whether it is worth what you're trying to achieve. Sometimes, if you're a good customer and are insistent enough, you can simply call your credit card company and use the threat of closing your account in favor of another card that offers something attractive to get your current bank to sweeten its incentives to keep your business.  I know many people who've done this with real success, and they spare themselves the hassle of obtaining a new card and suffering the short term consequences on their credit report.  This might be an avenue worth trying before you just close the account and move on. I hope this helps. Good luck! In this example you are providing 4x more collateral than you are borrowing.  Credit score shouldn't matter, regardless of how risky a borrower you are.  Sure it costs time and money to go to auction, but this can be factored into your interest rate / fees. I don't see how the bank can lose.