That sinking feeling you get when you lose your credit card only gets worse if you don't know what can happen to your credit score as a result. The actual loss of your credit card does not affect your credit score -- forgetfulness does not get factored into your credit score. However, how you respond to losing your credit card may impact your credit score.
While your credit score doesn't automatically change if you lose your credit card, it can suffer if someone makes unauthorized charges or if you have to close out the card.
Charges on Your Lost Card
By federal law, your credit card company can only hold you liable for the first $50 in charges after your credit card is stolen, which means you won't have a giant bill to pay or a large amount owed showing up on your credit report. If you tell your credit card company the card is lost or stolen before any charges are made, you're not liable for any of them. As long as you continue to pay your bill on time, your credit score won't be affected. However, if you don't pay the bill resulting from the lost card, such as if $50 were spent before you alerted the credit card company, your credit score could suffer because your payment history gets worse.
Replacing Your Credit Card
Usually, when you report your card as lost or stolen, your credit card company will close the old account and transfer the account information to a new account number. This preserves all of the history – good or bad – that you have accumulated on your credit card to date. If you have a lengthy history of paying on time, you won't lose it. If you've had some late payments, or worse, losing your card isn't a get-out-of-jail-free card to erase that history.
Canceling Your Credit Card
If you elect to cancel your account completely rather than just closing it and transferring the information to another account that you keep open, the closure could have a detrimental effect on your credit. Canceling your credit card as a result of having it lost or stolen is treated the same way as canceling a card at any other time. Closing a credit card can hurt your credit score because your amount of available credit decreases, thereby increasing your amounts owed relative to your available credit, which is a factor used in determining your credit score.
Upgrading Your Card
When you transfer your lost credit card account information to a new credit card, you may decide that now is a great time to upgrade your card. Unfortunately for you, most credit card companies will pull your credit score to make sure you qualify. This results in an inquiry on your credit report, which dings your credit score slightly.
However, if the company offers to upgrade you, don't fear. If the credit card company initiates the upgrade, then it does not result in an inquiry on your credit report and doesn't hurt your credit score.