Account Closed: If a lender decides to close my account, will it hurt my FICO scores?

John,
I heard if a lender closes an account that it will hurt my credit score. But, if I closed it then it would not. Is that true? That seems unfair.
Vanessa
Ft Myers, Florida

Hello Vanessa — Great question. What you have here is a current myth based on a past truth. A very long time ago if a lender closed an account it could hurt your FICO® credit score. The logic was that a lender would only close an account if you were doing something bad, like missing payments. Now let me reiterate, this was a very long time ago. Today, FICO scores handle account closings much differently.

When an account is closed it will be reported in one of three ways:

• Account closed by creditor
• Account closed by consumer
• Account closed

None of these designations have any impact on your scores.

Having said that, you're not out of the woods just yet. I'm making the assumption the account you're asking about is a credit card account. I feel confident about the assumption because a lot of credit card issuers are proactively closing some of their customer's accounts. What's more important here is that the account has been closed, not who closed it.

If you carry credit card debt on any other card or cards then closing an unused credit card will likely lower your credit scores. It's complicated but the unused credit limit actually helps keep your credit card usage percentage lower. If the card that was closed had a very low credit limit, like the ones issued by retailers, then you're probably in the clear but it's still worth the extra effort to double check your scores to be sure. If, however, the card that was closed had a very high credit limit, $5,000 or even more, then I'd be concerned about the damage that was done.

You can simulate what kind of impact this will have on your credit score by using our free Credit Score Estimator. By adjusting the total credit limit before and after the account closing, you'll be able to see exactly how closing an account might impact your score.

As always, if you have any questions or comments please feel free to drop me a line at AskJohn@credit.com

Return to Top