Cancellation of Unused Cards May Play Some Role in Credit Scores

Helen Galanoplos tried to cancel her American Express card last year because she no longer wanted to pay an annual fee. But, she said, the customer service representative told her that her credit score could go down as a result.

Then last week, she received a letter from Chase notifying her that her credit card was to be canceled because she had not used it in two years. The bank said it would forward that information to the companies that produce credit reports.

A retiree who does not believe in carrying a credit card balance, she has made it a habit to pay off her cards in full each month. (She also has a Capital One card.) So she didn't understand why her score would go down.

"I'd appreciate some clarity as to these baffling actions," wrote Galanoplos, a Foggy Bottom resident and former personal secretary to three members of Congress. "If I pay in full, whether $30 or $3,000, why is my credit rating threatened?"

It turns out that there are quite a few people out there who have had their credit cards canceled because of lack of use. I had it happen with one of my own credit cards recently. For those looking to buy homes or get loans, it can be a real problem because banks these days are loath to lend to people with credit scores below 700.

Unfortunately, it's not so easy to figure out how your credit score would be affected by a credit card company cutting you off.

Let's look first at the factors that can affect FICO credit scores, which are calculated by Fair Isaac Corp.

· Payment history, which shows if you've missed payments or have had any bankruptcies or any liens against you, counts for 35 percent.

· Amounts owed, which shows among other things the proportion of credit lines used (often referred to as your credit utilization ratio, essentially telling you how maxed out you are), counts for 30 percent.