It’s possible to reopen a closed credit card, but success depends on the details. For instance, did you close the account and now regret it?
Or worse, were you caught off guard when the credit card issuer closed your account?
The steps you must take to reopen your closed credit card depend on why — and who — closed it. I’m going to help you through this process. There are no guarantees when it comes to credit, but you’ll know you made a valiant effort.
[Read: Best Cash Back Credit Cards.]
How to Reopen a Credit Card Account That You Closed
People close their credit cards for a variety of reasons, such as no longer wanting to pay a high annual fee or deciding that they no longer benefit from the rewards program.
If the account was in good standing when you closed it, call the issuer and ask to have it reopened. At this point, the next steps depend on the specific issuer. Some issuers might make it easy for you by reinstating your old credit card account with the same account number.
But others might require you to apply for a new card. Both of these possibilities usually require a hard inquiry on your credit report. This can ding your score a little bit, but it falls off your report in two years.
Why Your Credit Card Issuer Might Close Your Credit Card
If your credit card issuer closed your account, the first step is to find out why. It usually involves one of the following reasons:
— Inactive account. If you don’t use your credit card for a couple of months, the issuer could decide to close your account due to inactivity. You could lose rewards, so call the issuer to see if you can reopen the account.
— Drop in credit score. Credit card issuers often check your credit score to look for red flags. When your score goes down, they begin to wonder if you’re having money problems. This makes issuers worry that you’re becoming a high risk.
— Increase in your utilization ratio. This is often connected to a drop in your credit score. Your credit utilization ratio is the amount of credit you’ve used compared with the amount you have available. If your ratio goes up, the issuer might decide you’ve become too risky.
— Delinquent account. If you’ve had problems paying your bills, your account could be closed. That doesn’t mean your debt is forgiven; your delinquent account could be sold to a debt collector. You still owe the money, but you now have a different creditor.
— Change in terms. There might be a major change in your credit card terms, such as an increase in the minimum payment required or a higher interest rate. If you can’t meet the new obligations for your card, the issuer could close your account. If you’re in this situation, don’t miss payments. Call your issuer right away and discuss your situation.
If the culprit is inactivity, that’s easier to fix than a delinquent account or a shopping binge that created high balances and a lower credit score. When you call your issuer, be sure you can address the cause of the cancellation.
[Read: Best Balance Transfer Credit Cards.]
If you are truly entering a financial crisis, talk to the issuer about getting into a hardship program. Put away your credit cards until you are back to being debt-free.
How Closing a Credit Card Can Hurt Your Credit Score
Your credit utilization ratio should always be less than 30%, but keeping it less than 10% boosts your credit score the most.
Here’s an example: Let’s say you have two credit cards, Card A and Card B. They each have a $1,000 credit limit. In this case, your available credit is $2,000.
Now, let’s say you have a $400 balance on Card A and a zero balance on Card B. The amount of credit you’ve used is $400. Your ratio is 20% (400/2,000), which is good.
You decide to close Card B, and now you lose that available credit. Your ratio is now 40% (400/1,000), which is highly likely to make your credit score drop.
See how that works? If you must close a credit card, apply for a new card first. This way, you’re replacing the “lost” available credit.
[Read: Best Starter Credit Cards.]
When a card issuer closes your card for you, it can have this same effect on your score. If that does happen to you, get to the bottom of it as soon as you can to limit the damage.
Is a Closed Account Still On My Credit Report?
Your credit report will continue to show your closed accounts for up to 10 years. This is good news because that means the account will still count toward your credit history. As long as the account was in good standing, this is a positive thing for your credit score. But take note that the credit limit you had on a closed credit card account is no longer included in your credit score. This is why a closed account can hurt your score.
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Can You Reopen a Closed Credit Card? originally appeared on usnews.com
Update 10/25/23: This story was published at an earlier date and has been updated with new information.
