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Unused Credit Cards Could Lower Your Credit Score

PITTSBURGH (KDKA) -- A standard practice by banks to cancel inactive accounts could cost consumers a lower credit score.

When Wells Fargo unexpectedly closed Kevin Hicks' credit card, his credit score dropped by 60 points.

"My credit history with them was 12 years," said Hicks. "Once they canceled my card, the system looks at your next card that you have opened and that's only four years."

Not only did closing his oldest card decrease his credit history, but with its $37,000 limit, closing it significantly impacted his debt to credit ratio.

So, he called Wells Fargo and was told the account was closed due to inactivity. He hadn't used it in months.

"In the wake of the financial crisis over the last couple of years… they've been cutting credit cards across the board," said Jacob Gibson, with the financial website NerdWallet.

Gibson says prior to the Credit Card Accountability Responsibility and Disclosure Act of 2009 or CARD Act, banks were allowed to charge customers for the privilege of carrying unused credit cards, but since they can no longer charge, they're reluctant to keep those inactive accounts open.

"They are definitely in the business of penalizing inactivity," said Gibson. "They don't want you to have one of their cards that you're not going to use because they don't make any money."

His advice, if you have a card with a high limit or long history, use it for small purchases from time to time. Also, look at the standard 45 day notice banks should send before closing the account.

"If you get this notice, all you need is one charge to keep your account open," said Gibson.

However, Hicks says he never received that notice from Wells Fargo.

"The fact that you're actually being responsible and trying to build your credit and not use your old cards, and that they'll come along and systematically terminate these cards, that's pretty devastating," said Hicks.

While Wells Fargo wouldn't discuss its policy on canceling long-standing, non-delinquent accounts without notice to the customer or consideration of their credit score, they said "it's standard for the banking industry and nothing new."

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