A credit card account closed because of delinquent payments is unlikely to be reopened. However, the card holder is free to apply for a new account. MSN Money reports that credit card companies typically close credit card accounts after payments fall six months behind. The account then is listed as charged off on credit reports and sold or assigned to a debt collector.
Card holders seeking to keep their accounts must bring the account current before it is charged off. After two or three missed payments card companies generally suspend charge privileges, with the card holder receiving multiple phone calls and letters from an in-house collections team. At this point the account can be salvaged and the suspension lifted by making the past-due payment.
Late payments to the account are reported to the major credit bureaus and could affect other credit card accounts that you own. Most credit card agreements give the card company the right to periodically review your credit, and some card companies may reduce your credit line if they see that you are falling far behind on other cards. The card companies see the late payments as a sign that you are starting to develop financial problems and may begin defaulting on credit accounts.
It's best to contact your credit card company if you are having financial problems. Some card companies offer special "hardship plans" that allow your payments to be reduced while you recover from a setback. Collections departments also can review your account and tell you when it is scheduled to be charged off. Making a payment or two before the six-month mark can prevent closure. It is important to note that technically you are in default of your credit card account after your first missed payment and the card company can close it anytime after that. But MSN Money reports that most lenders wait six months.
A charge off on your credit report is considered a negative event and likely will cause your credit score to drop. Contacting the credit card company soon after the charge off could allow you to negotiate a payment option called "pay-for-delete." The card company may agree to delete the negative credit information in exchange for full payment on the account. Not all companies will accept such an offer, however, and instead will list the account internally as written off for tax purposes. Even with the write off you are still liable for the full amount and will be contacted by a debt collector.
Opening New Account
Apply for a new account with the same card company if you wish after resolving the closed account and maintaining an excellent payment history on all other accounts for 12 to 24 months. Attach a letter of explanation with your application outlining the problems with your previous account and how you addressed them while boosting your overall credit score.
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