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Does it hurt my credit when a company cancels my credit card for inactivity?

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It Depends...

Hi, malaki5677. 

When a company cancels a card (even for inactivity) the effect on your credit score will depend on a few factors.  Let's say someone has 3 credit cards with a $5,000 credit limit on each for a total credit line of $15,000.  That person carries a balance of $2,500 on 1 of those 3 cards, the others have a zero balance as the cardholder does not use them.  Whereas that person is utilizing 50% of their credit line on 1 card (the card with the balance), their total credit utilization across all cards is actually under 17% which is good.  If a card company closes 1 of their 3 cards due to inactivity then instead of having a total credit line of $15,000 ($5,000 on each card), their total credit line has been reduced to $10,000 which means that $2,500 balance now equals 25% of their available credit.  That has the potential for lessening someone's score. 

Another important factor is the age of the card.  Someone who has 30+ years of revolving credit in their file is not impacted as much by the closure as someone who only has 10 years of revolving credit history, particularly if the card that was closed was one of their oldest ones.  The closure can reduce the average age of credit and that also has the potential for dropping one's credit scores.

A common practice to ensure a card isn't closed due to inactivity is using the card from time to time (every 3-6 months, depending on who you ask) even if it is just to make a small purchase then paying off the balance.  Another tip to prevent such is to use one of the cards for a common monthly bill that does not fluctuate (i.e., Netflix subscription, gym membership). 

I really hope the closure of that one card does not impact you that greatly. If the credit utilization is a factor, however, options include asking for a credit line increase on one of the remaining cards that are still open.  Of course, you also have the option of applying for another card.  Also, it doesn't hurt to contact the institution that closed the card in question and requesting nicely that they reinstate that account (perhaps it is a long shot, but it doesn't hurt to put in a request even if it means cordially asking to speak to a supervisor).

Good luck, and I hope it all works out.

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Yes, your credit will take a hit, but it will rebound.  By having a card cancelled, you've reduced the credit available. If it's a card you no longer want, then it may be for the best. There are so many cards which can earn rewards. Make a recurring charge on your credit cards such as paying your cell phone, electricity, water etc. Then pay it off before the end of the billing cycle. 

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