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What happens to my credit card or credit line if the bank goes bust?

I'm not concerned about the BALANCE on them, I'm concerned about losing an older credit line and its effect on my credit history and adjusted credit utilization.

for example: The credit line I have with the institution eclipses all of my other credit lines in terms of dollar limit. It is also older than my other credit lines. If that credit line was no longer accessible or existing because of a failure of the institution, then I would lose valuable parts of my credit score. I would have LESS overall credit limits, and therefore marginal uses of those credit lines would contribute much greater to my credit utilization percentage, thereby having a greater effect on my credit score.

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In the US, banks get taken over by the FDIC long before they go bust. The FDIC will facilitate your accounts being sold to another financial institution.

You will probably just get lots of letters explaining about the change and the new address to mail your payments too.

As for how that gets reported on your credit report, I do not know. Even in the worst case scenario, where the line starts over, the amount of credit will not go down, so that only leaves the age of the account. Since account age is only 15% of your score, it won't have a significant impact.

EDIT FOR COMPLETION

littleadv explains that banks will often sell the accounts as whole units and your credit report will not reflect a new start date and will keep the longevity.

Please vote that answer up to acknowledge it!

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    If the Bank has been accquired, it would maintain the older details. I work for a Bank Technology & have been part of cases of merger or FDIC directed take over. In both the cases all the details of the original account are maintained. Hence I think even the reporting on account age should be correct and should not impact. – Dheer Oct 1 '11 at 17:48
  • well, I'm really thinking about Bank of America and their questionable solvency. The FDIC would have a PROBLEM facilitating a takeover of that bank (the fdic's credit line to the treasury is only 60 billion........) anyway, different debate of course, but I would like to think of the worst case – CQM Oct 1 '11 at 17:52
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    @CQM - Oh, don't worry about BofA. The US has (foolishly, I think) claimed they are too big to fail. We the taxpayers will bail them out in the near future as well. – MrChrister Oct 1 '11 at 17:56
  • If BoA were to be allowed to "fail" I am certian that theh government would facilitate the breakup and sale of its assets. Your account would probably be aquired by a new bank and assuming good credit then i would guess you would continue on with a new name on the card. – user4127 Oct 5 '11 at 15:33
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    Sorry that would be too clean and it is much harder to skim money in a clean exchange that is nicely audited. When it goes out in a blaze of glory that must be rescued it creates opportunities for those in power to send graft their friends. I mean how can we let a distinguished institution like BoA be broken up. We must do what we can to keep them from falling for they will take everyone else with them. – user4127 Oct 5 '11 at 18:48
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To fill the gaps in McChrister's answer:

As said, in the US the banks are being taken over by the FDIC, they don't just disappear. FDIC will then sell them to others, and they'll assume new identity.

From my experience with Washington Mutual - the effect on your credit report is nil. At some point the account became being reported by Chase instead of Washington Mutual, that's it. They didn't change the account number (although that happens sometimes), they didn't make any additional hard pulls, nothing. Completely transparent to me as a customer.

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  • Good info. I updated my answer with a citation to yours. – MrChrister Oct 5 '11 at 15:51
  • Chase went through wamu accounts and terminated any that were not profitable. I paid my account off regularly and had a no fee low interest card never had a late payment. Chase closed my account and offered me one of their premium high fee high interest accounts if i was interested... – user4127 Oct 5 '11 at 16:57
  • @Chad - that was not my experience. I'm not using my WaMu card much (in fact, during the WaMu failure, I was abroad for a long period, and wasn't using it at all for months), and there was no problem. – littleadv Oct 5 '11 at 17:49
  • Obviously your account was profitable. Honestly I really only used the WaMu card for the Bump in my credit rating. I charged a small amount every 3 or 4 months then paid it off just to keep it active. When Chase took it over I planned to cancel anyway they just beat me to it. – user4127 Oct 5 '11 at 18:08

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