Some financial analysts are predicting the Credit Card Reform Act of 2009 could lower the credit scores of good payers, especially if customers, angered by increased interest rates or fees, close accounts abruptly.
“Read the terms of your card, first,” cautions Charles Hixon, director of Consumer Credit Counseling Services with the Partnership for Children, Families & Adults. “Generally speaking, if people begin closing a lot of credit cards, it does hurt your credit.”
In the days before the Card act, credit companies penalized those whose circumstances or bad habits made them more of a risk. Now, both analysts and bankers say, they will act on the one thing they know – you could be the next slider or layoff.
Jim Winsett, president of the Better Business Bureau of Chattanooga, said he doesn’t understand all the intricacies of determining credit scores, but he can see scenarios where closing credit card accounts could hurt.
“You read instances of that going both ways,” he said. “If a person has a good record and then cancels, one view is that these people are worried they will not be able to meet the conditions of the card. Or maybe they’re just saying they don’t want debt. It may be that the cancellation terms have to be incorporated into that (credit) report,” Mr. Winsett said.