Will replacement card hurt my score?
By Leslie McFadden • Bankrate.com
Q: Dear Credit Card Adviser,
My credit card company recently closed my CC account and issued me a new one
because of Heartland Payment Systems' security breach. No personal data is
known to be compromised. The move is purely precautionary. How does (this)
affect my credit score?
Good news! This is one of those instances where an account closure likely won't
affect your score at all. With lost or stolen cards or data breach situations,
an issuer will usually close the old account and specify a reason, such as
reported lost or stolen, and open a new account for you. As long as the new
account keeps the original open date and doesn't trigger a hard inquiry, the
conversion shouldn't harm your score.
Typically, issuers will transfer the account history to the new
trade line, says Barry Paperno, the consumer operations manager at FICO, the
creator of the FICO scoring formula. The new account should have the old open
date, so you should retain your payment history, he says. The credit limit
and balance should also stay the same.
Normally when an account closes, it can ding the score because the
credit limit loss can increase your credit card use. But in this case, you get
the credit limit right back on the new account. "The net difference is
zero, really," says Paperno.
Representatives for the major credit reporting agencies told me
that issuers can instead send an account-number change for the existing
account. Paperno says such a move would not affect the score.
In other replacement card situations, such as an account upgrade
to a different product, the effect on the score can vary depending on how the
bank reports the new account and whether the credit limit changed.
For example, American Express says that account upgrades typically
result in a closed account and a new account opened. Whether a hard
inquiry is triggered depends on who initiated the upgrade.
Issuer-initiated upgrades don't generally generate hard inquiries, while
customer requests might, according to spokeswoman Lisa Gonzalez.
If the new credit limit is higher, it can offset any points lost
from a hard inquiry.
A simple transfer of all the existing account information to the
new account -- assuming the credit limit or open date doesn't change and
no hard inquiry posts -- shouldn't harm the score.
I would recommend checking your credit report to make sure all is
well. Head to www.annualcreditreport.com
and request a free copy. Federal law entitles you to a free credit report from
each nationwide credit-reporting agency -- Equifax, Experian and TransUnion --
once every 12 months.
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