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im scared

Moderator Emerita

Re: im scared

I just checked around and had it confirmed: this is true. As long as there is a balance on a closed CC, the balance AND the CL count in your overall revolving util.

What you have to worry about, of course, is if the lender then cuts the CL to your current balance, or worse, to $0. But if they leave it where it is, it will act the same toward util as if it were still open.



eta: found out I was wrong about if they drop the CL to $0. If they do this, the card and balance will be ignored entirely for util calculations. It won't look very pretty though. See new post farther down.
Message Edited by haulingthescoreup on 10-23-2009 04:35 AM
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 11 of 21
Regular Contributor

Re: im scared

Sorry, I assumed the card was closed,  I'm curious, how are they reporting the account status to the CRB's? 

 

 

 

 

 

Message 12 of 21
AJ
New Member

Re: im scared

Last I checked my EQ CR, it does show under the closed account section but they still report my credit limit from the time it was open and the current outstanding balance.
Message Edited by AJ on 10-22-2009 03:26 PM
Message 13 of 21
Moderator Emerita

Re: im scared

And this is correct: closed cards will count in your revolving util, both balance and CL, just as if they were open. Strange, but true.

Otherwise, anyone with high util wanting an artificial score boost could just close their cards with high util, and only the open cards (presumably with low util) would be counted.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 14 of 21
Moderator Emerita

Re: im scared

OK, to clarify, I found out what happens if the lender cuts the reported CL on a closed card to $0 (I was wrong up above):

If a closed card with a balance reports a $0 CL, it will be ignored entirely for util calculations. It will look ugly as heck to other lenders, I assume, so I'd hate to have that on my reports, but it won't hurt your FICO score.

What would still be bad is if they started chasing the balance, lowering the reported CL every time you made a payment, so that you were perennially maxed out.

So, to summarize:

Closed card, has balance, has original CL: will factor into your util as if it were still open. You'll have one less open tradeline, which might hurt you elsewhere, though.

Closed card, has balance, CL now reported as $0: will NOT factor into your util, since it has a $0 CL. It will look ugly, though.

Closed card, has balance, CL is dropped to a little above the current balance and keeps dropping as you pay (chasing the balance): ouch. It will report as a maxed-out card until you have it paid off.

Sorry for any confusion I might have created with the $0 CL thing. This is definitely one of the odder twists of FICO scoring.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 15 of 21
AJ
New Member

Re: im scared

THANK YOU for a very clear summarization !

 

As I said, there is a lot of misinformation out there.  I guess the general advice not to close a card assumes no balance on it, but when you have a card with a high balance and the company raises the rate to an unacceptable level, at least the opt out may not be a bad move all other things considered.

Message Edited by AJ on 10-23-2009 07:10 AM
Message 16 of 21
Member

Re: im scared

I would rather close a card than take a huge APR hit, imagine how much interest would need to be paid on $16,000 @ 29 %.

 

Some people have successfully managed to stop the APR increase by a call to the CC company. I would imagine a lot depends on your personal credit situation, if they will work with you or not.

 

BOA closed my 2 accounts with them. They still report the CL and current balance, so it has not really been that detrimental to me. I don't know how ugly this looks to other lenders, but I don't really care. I don't really need anymore credit ATM, and probably won't be applying for anything until after these cards are paid off.

 

Message 17 of 21
New Member

Re: im scared

Smiley Very Happy JUST TO LET EVERYONE KNOW I WAS ABLE TO GET THE 15,000 BALANCE ON MY CARD TO A 10.99 INTREST RATE WITH CITI CARD.
Message 18 of 21
Frequent Contributor

Re: im scared


hellokitty wrote:
Smiley Very Happy JUST TO LET EVERYONE KNOW I WAS ABLE TO GET THE 15,000 BALANCE ON MY CARD TO A 10.99 INTREST RATE WITH CITI CARD.

Congrats! 

Message 19 of 21
Frequent Contributor

Re: im scared


haulingthescoreup wrote:
OK, to clarify, I found out what happens if the lender cuts the reported CL on a closed card to $0 (I was wrong up above):

If a closed card with a balance reports a $0 CL, it will be ignored entirely for util calculations. It will look ugly as heck to other lenders, I assume, so I'd hate to have that on my reports, but it won't hurt your FICO score.

What would still be bad is if they started chasing the balance, lowering the reported CL every time you made a payment, so that you were perennially maxed out.

So, to summarize:

Closed card, has balance, has original CL: will factor into your util as if it were still open. You'll have one less open tradeline, which might hurt you elsewhere, though.

Closed card, has balance, CL now reported as $0: will NOT factor into your util, since it has a $0 CL. It will look ugly, though.

Closed card, has balance, CL is dropped to a little above the current balance and keeps dropping as you pay (chasing the balance): ouch. It will report as a maxed-out card until you have it paid off.

Sorry for any confusion I might have created with the $0 CL thing. This is definitely one of the odder twists of FICO scoring.

HTSU, that's the best I've seen it explained on any credit board or blog.  Marcus over at the (now inactive) Credit Matters Blog interviewed someone from Fair Isaac and discussed utilization about a year ago, and he stated the same thing...that a closed CC with a balance does not affect utilization.  But he never went into the specific scenarios and didn't break it down like you did.  Very, very well done.  This will make a great reference for future questions on this subject.

Message 20 of 21