AMEX OPEN Card Cancellation Affect Personal FICO Score?

[Anonymous]

Hi folks! I have an AMEX OPEN Plum card account for my LLC, opened last summer. The fee was waived in year 1, but I am not using it at all (my business expenses are all being put on another card). Given this, I am thinking I will cancel the card so I am not paying $250/year needlessly.

But, I do want to be sure that it won't affect my personal credit (specifically, the Avg Age of Accounts, and Utilization Ratio on my personal credit). As I understand it, with AMEX OPEN cards, the only action that affects personal credit is the initial credit report, and then delinquency in the case that bills aren't paid.

Any insights would be greatly appreciated!

[Anonymous]

The card is not reported to your personal credit, so closing it will have no impact. Even if it was reported, closing it would have no impact.

[Anonymous]

Thanks @CAPTOOL! To be sure, you're saying AMEX OPEN cards do not affect personal credit? 

Separately, if this card were reported against personal credit, wouldn't cancelling affect average age of accounts and utilization ratio?

[Kenny]

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@Anonymous wrote:

@Anonymous @Anonymous! To be sure, you're saying AMEX OPEN cards do not affect personal credit? 

Separately, if this card were reported against personal credit, wouldn't cancelling affect average age of accounts and utilization ratio?

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The only thing immediately affected is debt to credit limit ratio, yes ---  So there is some affect, but that's only if it reports to your CBs. In this case, the OPEN card doesn't report so it will not have an effect whatsoever. Close it, if you deem it unnecessary.

[Anonymous]

Thanks for the clarification Kenny! I'll likely be closing the card.

[Anonymous]

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@Anonymous wrote:

@Anonymous @Anonymous! To be sure, you're saying AMEX OPEN cards do not affect personal credit? 

Separately, if this card were reported against personal credit, wouldn't cancelling affect average age of accounts and utilization ratio?

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Hi jd445.  Sounds like you may be under the impression that one of the following is the case:

     (a)  AAoA only includes open accounts

or  (b)  After an account is closed, then it stops aging. 

But actually neither of those is true (as far as FICO's models go).  FICO considers both open and closed accounts equally in computing AAoA and even after an account is closed it continues to age.  This is why closing an account has no effect on any of the age factors in FICO's models.  (Of course, ten years later the account will fall off, and then there may be an impact.)

I realize you got your question answered about your Amex, but this more general point is worth making as it applies to all the accounts that ARE part of your personal profile.

[Anonymous]

That's tremendously helpful insight! So closing an account does not impact your AAoA, until 10 years later when it falls off, when it could in theory.

I suppose my lingering question is now around whether/how much closing an account would in theory affect your FICO score from a debt to credit/utilization ratio- if spending were equal. Probably a difficult question to provide a clear answer on.

[Anonymous]

Glad that was a help, JD!

Note that there are two ways that an account falling off your report (far down the road) could affect your score.  If the account that falls off has an age that is greater than your current AAoA (whatever that is in ten years), then it wlll lower your AAoA -- which in turn could have a small impact on your score.  More significantly, if an account falls off and it is your oldest account, then this affects a factor different from AAoA.  That factor is Age of Oldest Account and may be just as important as AAoA.  So any time a person is thinking about closing an account, if all of the following are true it's worth reconsidering and keeping it open:

*  The account is your oldest account

*  It is at least a few years older than all the other open accounts.

*  There is no annual fee or other cost to keep it open

As far as your question abouut how closing a card affects one's total CC utilization, you are right that there is no general answer.  The only way to answer it is to crunch the very specific numbers involved.  I.e. you have to look at your total credit limit before and your total CL after, keeping in mind whatever specific number your current CC debt is.

In my opinion it is almost always a bad idea to keep a card with an annual fee because it has a big CL and a person feels it will help him with CC utilization.  Remember that anybody can have a 1-3% utilization, even if his total credit limit is $300.  The technique involved is called paying down your damn debt.  :-)

Hope you have a great 2016!

[Anonymous]

Fantastic insight- this is very helpful! Appreciate it, and have a happy new year as well!