Are you hoping to reopen a credit card account that was closed without notice? Did you purposefully close your account only to find yourself regretting that decision? Is it even possible to reinstate a credit card once it's closed?
Reopening a closed credit card account depends on three factors: the issuer, the length of time the account has been closed, and the reason it was closed. However, before you attempt to reopen your account, you should know what steps to take and how this action will affect your credit score.
While it's impossible to guarantee success since every person's situation is different, stick around as we explain the nuts and bolts of credit card account closures and what to do about it if you want to restore your account.
To kick things off, let's address the most basic question:
Can I Reopen A Credit Card That Was Closed?
While some credit card issuers like Chase and American Express have reopened closed credit cards in the past, other financial intuitions like Citi, Bank of America, and Discover won't even entertain the possibility at all. Instead, you'll need to reapply for a new card. Whether you're approved or not will depend on the reason your account was closed in the first place.
If you didn't request that your credit card be closed, it's likely that your credit card issuer did. Card providers will commonly do this for the following reasons:
- Your Credit Score Dropped: Cards are issued based on your risk factor. As a result, credit card companies will monitor your credit score to ensure you remain in good standing. If your score drastically drops, your issuer might believe you're unable to service your debt obligation and close your account.
- Your Account Was Inactive: When you don't use your account for an extended period, your card issuer may choose to close your line of credit because you're no longer contributing to their bottom line. After all, they make their money by charging interest on your purchases. The length of time that passes before they'll close your account depends on the credit card provider. However, to avoid account closure due to inactivity, you should periodically use your card to make a small purchase and then pay off your account balance when your statement arrives.
- Your Account Was Delinquent: Missing credit card payments will put your account into default. This violates your agreement—the consequence of which is account closure. Besides taking this action, your issuer may also charge off your account and sell your debt to a collections agency. This can have a long-lasting negative influence on your credit report and score.
- You Broke The Terms Of Your Credit Card Agreement: Breaching your credit card contract in any way can give your card issuer justification to close your account. This includes things like repeated late payments, failing to pay your annual fees, and regularly not paying the minimum amount.
- You Exceeded Your Card Limit: Repeatedly spending more than your limit is a red flag to your card issuer that you might be struggling to meet your financial obligations. Unfortunately, this may trigger an account closure to help mitigate the risk to your creditor.
- You Increased Your Credit Utilization Ratio (Cur): Typically, this is related to a decrease in your credit score. If your CUR (i.e., the amount you're borrowing versus your total credit limit across all lines of credit) becomes too high, it may cause a drop in your score. As already mentioned, an undesirable change in your credit score can lead to your credit card account closing.
- Your Credit Card Was Discontinued: When a card company decides to discontinue a specific card offering, they will often offer a replacement card with similar terms. Alternatively, they'll allow you to keep using your card but won't issue any more. Unfortunately, they can also choose to close your account altogether.
- You Enrolled In A Debt Management Program: Card issuers will generally close your account if you enter into a debt management plan with a credit counseling agency. In some cases, this may simply involve an account freeze rather than a closure, so it's important to check whether your account is closed temporarily or for good.
Ultimately, you need to know why your account was closed before proceeding. While some circumstances like delinquency will result in a hard "no" when asking for your account to be reopened, credit card companies may be more lenient and willing to consent to reopen your account if the culprit was something like inactivity.
What Happens When A Credit Card Is Closed?
We've all seen movie scenes where a waitress or retail clerk whips out their shiny pair of scissors to cut a card in half with no remorse. Annoyingly, credit card issuers won't always tell you when they plan to close your account. You may simply discover that your card is suddenly declined everywhere you attempt to use it.
Whether a creditor unexpectedly closed your account or you intentionally closed the card yourself, several things can happen:
- You won't be able to use your card anywhere
- An entry will be made on your credit report to indicate the account was closed
- Your available credit will decrease, adversely impacting your CRU since your card's limit is no longer calculated as part of your total credit limit available.
- Your credit score will take a hit.
The actual impact on your credit score depends on who closed the account and the reason for closing. If you closed your account in good standing, your score would likely dip slightly as your scoring factors adjust to account for the change. However, it will likely bounce back as you continue to build credit. This kind of entry can remain on your credit report for up to 10 years.
If your credit card issuer closed your account, your credit score might take a bigger hit if credit card debt forgiveness, a charge off, or other negative actions are involved. This kind of derogatory entry can stay on your credit report for up to seven years.
How Can I Reopen A Closed Credit Card?
Although every company will have its own process for reopening a credit card and may require additional information from you, below are some basic steps you can follow to ensure you're as prepared as possible. Keep in mind that it's unlikely a card issuer will consider reinstating your account if it has been closed for more than six months.
Step 1: Find Out Why Your Account Was Closed
If your card issuer closed your account, review your credit history or contact them to find out the reason. You'll be in a better position to appeal the decision and provide relevant documentation to plead your case. You may even find the closure happened in error. In which case, it'll be easier to reinstate.
Step 2: Collect Relevant Documentation
Gather all paperwork concerning your card so that when you call to ask for your account to be reopened, you'll have all pertinent details on hand. This should—at the very least—include your name, address, social security number, credit card statements, and credit report information.
Depending on the reason the account was closed, be sure to have any supporting documentation that may work in your favor ready, as well. For example, if they claim your account was closed due to delinquency but you've been making payments, gather proof of your transfers. If an error on your report caused your score to drop, have proof that you're working with the credit bureau in question to get it fixed. Anything that can substantiate your claims or help you succeed should be collected beforehand.
Step 3: Call Your Credit Card Provider
Seems simple enough, right? However, you'll want to make sure customer service puts you through to someone who can make a decision about the status of your account. Most customer service reps won't be able to approve the reinstatement of your account, so don't waste time talking to the wrong people.
Step 4: Explain Your Situation And Ask For The Account To Be Reopened
If you closed the account, tell your provider that you've changed your mind and explain why you'd like the account reopened. If your card issuer closed it, address the reasons for the account's closure and ask them to reinstate it.
Whatever you do, don't get angry if you're denied. Simply ask what your options are so that you can determine how you want to proceed. This may entail opening a new account.
If your card provider agrees to reopen your account, ask whether the terms have changed and if you'll need to pay additional fees. You should also find out if you can retain any rewards possibly leftover from when your account was closed.
Step 5: Authorize a Pull on Your Credit Report (if Necessary)
There's a chance they'll ask you to consent to a hard credit inquiry to reassess your score. This will temporarily decrease your score by five points, but you'll regain it within months.
Does Reopening A Closed Credit Card Affect Credit Score?
Yes, it does. As stated, the hard inquiry will result in a small dip but not for long. The good news is that reopening your account will increase your total credit limit, thereby reducing your CRU and boosting your score in the long run.
If any negative information remains on your report, it's crucial to note that your score might take significantly longer to recover. When reopening your account, ask your provider how they handle reporting of this action to the credit bureaus so that you know what to expect.
The Bottom Line
While reopening a closed credit card account isn't the easiest task, it's not impossible. The biggest challenge you'll likely face is the reason your account was closed. If you simply didn't use your card, you'll have an easier time reinstating your account than if you fell into delinquency. If your provider simply doesn't reopen closed accounts, consider applying for a new card.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.