When a credit card company closes your account, it can have a negative impact on your credit score. Fortunately, the decrease in your credit score may not be significant and, in most cases, is only temporary, according to Experian.com.
Credit Utilization
When a company closes a credit card due to inactivity, you will lose an account carrying a good "utilization ratio," which is your available credit versus the amount that you are using, explains Consumerist.com. Unfortunately, credit card companies may cancel your unused account.
Old Credit
Another factor used to calculate your credit score is the age of your accounts. MyFICO.com states that length of credit history accounts for 15 percent of your credit score. When credit card companies close old accounts, you lose a credit card carrying a long history.
Tips
If a card is canceled, compensate for the loss of credit by paying down the remaining credit cards. To prevent your credit card from being canceled, keep the account active by making small purchases. If the interest rate is high, pay the balance in full each month.
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