Does a Suspended Credit Card Affect Your Credit Score?

A credit card suspension can raise concerns about personal credit standing. Understanding its impact on creditworthiness is important for financial health. This article explains what a suspended credit card means and its implications for your credit score.

Understanding Credit Card Suspension

A suspended credit card indicates a temporary state where the cardholder cannot make new purchases or cash advances. The account itself remains open, and any outstanding balance is still due for repayment. This status differs from a canceled or closed account, where the credit line is permanently terminated, or an inactive account, which merely signifies a lack of recent use.

Suspension serves as a cautionary measure by the issuer, often preceding permanent account closure if the issue remains unresolved. The issuer can reinstate the account once specific conditions are met. A suspended status requires immediate attention from the cardholder to prevent further negative consequences.

Direct Impact on Credit Score

A credit card suspension directly affects a credit score. Credit utilization, the amount of credit used compared to total available credit, is a significant factor. While a suspended card’s limit may still contribute to overall available credit, its unusable status reduces usable credit, potentially increasing utilization on other active accounts. For example, if a card with a $5,000 limit and a $2,000 balance is suspended, and its limit is reduced to $2,500, utilization on that card jumps from 40% to 80%. This ratio accounts for approximately 30% of FICO score calculation.

Payment history is important, as any outstanding balance requires continued payments. Missed or late payments on a suspended account are reported to credit bureaus and can severely damage a credit score, as payment history constitutes about 35% of a FICO score. The credit report will reflect the account’s status as “suspended” or “account closed by creditor,” a negative indicator to potential lenders. While the account remains open, contributing to the length of credit history (15% of a FICO score), the negative status diminishes this benefit. If the suspended card was a primary credit line, its negative status can affect the credit mix, which accounts for 10% of a FICO score.

Underlying Causes and Their Score Implications

The reasons for a credit card suspension often have more severe implications for a credit score than the suspension itself. Missed or late payments are a common cause, reported to credit bureaus, significantly damaging payment history. A single payment 30 days late can notably drop a credit score and remain on a credit report for up to seven years.

High credit utilization, where card balances are near their limits, can also trigger a suspension. Maxing out cards or exceeding limits negatively impacts the credit utilization ratio, signaling increased risk to lenders.

Suspected fraudulent activity can also lead to suspension, rendering the card unusable during an investigation.

Breaches of the cardholder agreement, such as filing for bankruptcy, lead to severe credit score penalties. A Chapter 7 bankruptcy can remain on a credit report for up to 10 years, while a Chapter 13 bankruptcy stays for seven years.

Inactivity can also lead to suspension or closure, which can shorten the average age of accounts if an older card is closed, affecting credit history length.

Actions to Take After Suspension

Upon learning of a credit card suspension, the first step is contacting the issuer immediately. This allows the cardholder to understand the specific reason for the suspension, which is essential for determining the appropriate course of action. Issuers can explain if the suspension is due to missed payments, high balances, or other issues.

Addressing the underlying cause is important for mitigating further credit damage.

• If the suspension resulted from missed payments, making those payments promptly is necessary, as late payments can incur fees ranging from $25 to $41 and negatively affect payment history.
• For suspensions due to high credit utilization, paying down the outstanding balance is advisable, aiming to bring the utilization ratio below 30% to improve the credit score.
• Regardless of the reason for suspension, any outstanding balances on the card must continue to be paid as agreed to prevent further negative reporting.
• Regularly monitoring credit reports for accuracy and to track changes is important, as this allows individuals to identify and dispute any incorrect information.
• Re-establishing good credit habits, such as consistently paying bills on time and maintaining low utilization on other credit lines, helps in rebuilding a positive credit profile over time.