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Do Lost or Stolen Credit Cards Hurt Your Credit Score?

Laura answers questions about how replacements for lost or stolen credit cards affect your credit. Find out how to protect your credit and the best places to get your reports and credit scores for free.

By
Laura Adams, MBA,
Episode #428

Does a Lost or Stolen Credit Card Hurt Your Credit Score?

How the card issuer reports your lost or stolen card to the nationwide credit bureaus (Experian, Equifax, and TransUnion) determines how it will appear on your credit report. Each card company handles replacement cards a little differently, but has two basic options:

  • Change your account to a new number so the original tradeline stays in your credit report. This preserves the open date of the account and all your payment history under one account.  
  • Cancel your account and open a new a new one so your original account shows “lost or stolen” with a zero balance, but retains all your payment history. Then a new account is created using the same open date and outstanding balance as your original account. You end up with two tradelines in your credit report, one for the old card that’s closed, and one for the new card that’s open with new payment history beginning on month one.

The good news is that as long as the new account keeps the original account’s open date and credit limit, the replacement should be a wash that doesn’t hurt your credit.

The good news is that as long as the new account keeps the original account’s open date and credit limit, the replacement should be a wash that doesn’t hurt your credit.

An account’s open date is important because the longer you’ve had credit in your name, the better. While closed accounts do remain in your credit files for up to ten years, they eventually fall off and cause your average account age to drop.

Even more important for maintaining good credit is your credit utilization ratio, which is calculated by dividing your outstanding balance by your total available credit.

See Also: Best Tips to Improve Your Credit Score

Credit Utilization Ratio Example

For example, let’s say you have two credit cards that each have $5,000 credit limits and you owe $2,500 on one of them. Your credit utilization is calculated by dividing your outstanding balance by your total credit limit, or $2,500 divided by $10,000, which equals 25%.

If you decided to close the second card because you paid off the balance, your credit utilization would skyrocket. It would be $2,500 divided by $5,000, or 50%. To maintain good credit, you should never use more than 20% to 25% of your available credit.

To learn more about how to build excellent credit, download my free Credit Score Suvival Kit. It's a multimedia tutorial with smart, legitimate strategies to build credit from scratch or rebuild after hitting a financial rough patch.

I received a more specific question about credit utilization from Peter, who says:

“My wife and I have several credit cards but only use the one with the best rewards for most of our charges. The utilization on that card can go as high as 75%, while the rest of our cards have no utilization. Does having a high utilization rate on just one card negatively affect my credit, or is it calculated on the combined information on all of your cards?”

Your credit utilization is calculated for both your individual cards and for all of your cards. So the answer is that having a high utilization rate on just one card can hurt your credit, even if you pay it off in full each month.

However, one strategy to avoid having a high balance reported is to pay off some or all of it before the data goes to the credit bureaus. Check your credit report to find out when the information is typically received. It's typically not the same date as your statement due date.

For instance, if the last reporting date on your favorite credit card was November 8, the next one is likely to be December 8. So paying your bill before then gives you the chance to cut your utilization. 

If staying ahead of the reporting date is too difficult to remember each month and you’d rather just pay your credit card bill on the statement due date, then spread out your charges on multiple cards so the utilization on each one never exceeds 20% to 25%.

Another strategy to keep the balance on your favorite credit card from getting too high is to make multiple payments throughout the month, such as every Friday or on the first and the 15th of the month.

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