A couple months ago I received a notice from a credit card which was previously eradicated from my modified debt snowball. I had dual thoughts, “hahahaha, it doesn’t matter if you jack up my interest rate, I paid all my credit cards off already, tough guy” and “You better not be trying to get a way with annual fee, because I am not having that.”
When I opened the Letter, it informed me that my account was closed due to inactivity. Of course there is no activity, I am attempting to get rid of all CC activity for now. Regardless of how much sense I thought I was making, they weren’t hearing it, and so, my 5 year old credit card with $5,000 limit was now gone.
Why Did I care about a Credit Card Being Canceled If I wasn’t Using it? How is your Credit Score Calculated?
In his Article, “Everything you Need to Know about your FICO Score, staff about.com writer, Jeremey Vohwinkle (who also runs a great blog, Generation X Finance) highlights which variables and to what extent those variables go into making up your FICO score:
- Payment History – 35%
- Total Amounts Owed – 30%
- Length of Credit History – 15%
- New Credit – 10%
- Type of Credit in Use – 10%
So a 5 year card, which was on the longer side in my credit history dings variable #3. Also, since “total amounts owed” is basically a credit utilization ratio, and while I am credit card free, I am not debt free (mortgage, auto, and education debts). A such, you should care if a credit card company cancels your credit card!
How to Avoid a Credit Card Company from Cancelling your Outstanding Credit Cards
Being annoyed about the situation, I decided to come up with an idea. While I am sure I am not first with this idea, I think it is particularly bad ass for those of us that are done using credit cards. I bought a business card holder…yup an ordinary business card holder from Staples.
Then I put all my credit cards into it and made a note of the last purchase, if I didn’t have a last purchase within 30 days, I created one, by simply paying some amount certain on my Cell phone (similar to what I do with semi-used gift cards)
Then I paid off the Credit Card 2 days later.
Anyone have a different system? Or Use this system?