My TransUnion score recently was 784. I closed out about a dozen of old credit cards that I haven't used in a long time. To my surprise, my score went down to 777. I called TransCredit (an affiliation of TransUnion) and was told that closing out the accounts resulted in the lower score but the score would rise a little later.This all doesn't make sense to me. I was simply trying to protect myself against ID theft and I got penalized for it. Can someone explain how and why the number of credit cards makes a difference in scoring?
Hi, rll, welcome to the forums! What Timothy was cryptically saying is that when you close credit cards, their credit limits are no longer available to you. So when FICO calculates your util (= utilization, total balances owed on all cards divided by total of credit limits on all cards), the same balances owed are now divided by a smaller figure, so your util goes up, and your score often drops.
If you have any balances reporting to the CRA's (credit bureaus), even if you pay them off as soon as you get your statements, then your util probably rose, and so you lost some points.
Unless CC's have fees, or they just offend you so much that you can't bear to even look at them again, or you have problems keeping on top of what's due when, there is generally no real point in closing them. Check fused's post called Closing Credit Cards:
And as Timothy said, please read Credit Scoring 101 (see his link.) None of this will make any sense at all until you do.
Boscoe wrote:rll - Your scores only dropped 7 points due to not having a big change in UTL......in 10 years when all these closed credit cards drop off your report, you will likely see a worse drop than 7 points.....This is a part of the FICO model that I totally disagree with. A closed account should stay on the report forever, or at least allow one or two to remain on the file for scoring purposes.Or better yet, use the "date file opened" for each CRA as your "oldest age" date. The way they do it now, closing accounts hurts a little now (i.e. lower avail. credit = higher UTL = lower score) and alot later when the oldest and avg. age of accounts drops some or maybe alot when the tradelines fall off the report.FICO should make this change for their next release. But I probably have a better chance of winning the lottery then seeing this in my lifetime.