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Will replacement card hurt my score?

By Leslie McFadden • Bankrate.com

Leslie McFadden

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?
– Daniel

A:  Dear Daniel,
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.

Read more columns by the Credit Card Adviser.

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