topic Re: Closed Credit Cards & Utilization in Understanding FICO® Scoring

Closed Credit Cards & Utilization

Grim87 — Sun, 09 Aug 2020 01:45:14 GMT

Hi all - I've been asking a few folks on this, but wanted to give it its own thread due to varying opinions.

Comenity is ending it's Wayfair card in September. I happen to have a very high credit line with a decently high balance. When they close the card and I continue to pay my balance, how will that impact my utilization?

Will the balance continue to count against my revolving with no limit to offset? Or will it not impact my overall utilization?

My dilemma is that I paid off EVERY card but Wayfair, planning to get a mortgage in September. If this does impact my utilization I'll get a much worse rate than I would now. My other option is to get a personal loan to pay off Wayfair, but I don't want to burn a hard inquiry unless I know 100% it will impact my utilization.

Thank you all, this site is the best!

Re: Closed Credit Cards & Utilization

Anonymous — Sun, 09 Aug 2020 17:12:41 GMT

Well, it depends whom you asked. According to this post:

https://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/td-p/347190

as long as the balance and the credit limit of the closed account are both non-zero on your credit report, the card will be treated just as on open account. Unfortunately, the author does not provide any proof. I spend a couple of hours over the last few days trying to find some data points which support this claim, but did not find anything. I found many people claiming that account will be treated just as an open account and just as many who claimed that the balance of the closed account will be included in the utilization calculation but the limit will not. But I did not find anyone who provided any real evidence for their claims.

There is one thread:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Utilization-vs-DTI-closed-accounts/td-p/5402816

which provides some strong evidence that Fico does not treat a closed account with a balance as maxed out (as long as the credit limit is still reported)

But as I said, I have not found any data points how closed accounts effect the aggegrate utilization. I tend to believe the theory that it is treated just as an open account, but I really don't know.

Re: Closed Credit Cards & Utilization

Grim87 — Sun, 09 Aug 2020 03:46:39 GMT

Thank you for ALL the detail. I tend to agree that it won't negatively impact me.

Re: Closed Credit Cards & Utilization

SouthJamaica — Sun, 09 Aug 2020 13:08:56 GMT

@Grim87 wrote:
Hi all - I've been asking a few folks on this, but wanted to give it its own thread due to varying opinions.

Comenity is ending it's Wayfair card in September. I happen to have a very high credit line with a decently high balance. When they close the card and I continue to pay my balance, how will that impact my utilization?

Will the balance continue to count against my revolving with no limit to offset? Or will it not impact my overall utilization?

My dilemma is that I paid off EVERY card but Wayfair, planning to get a mortgage in September. If this does impact my utilization I'll get a much worse rate than I would now. My other option is to get a personal loan to pay off Wayfair, but I don't want to burn a hard inquiry unless I know 100% it will impact my utilization.

Thank you all, this site is the best!

My experience has been that "the balance continue[s] to count against my revolving with no limit to offset".

This is consistent with this thought by @Thomas_Thumb : "My thought has been closed accounts count toward aggregate utilization. I tend to agree that a closed account has zero credit limit so influence on aggregate is the debt obligation."

It is also consistent with this article, which says: "When you close a credit card, particularly one that has a balance, the credit limit is no longer factored into your credit score, so your credit utilization ratio can shoot up immediately. Your credit utilization ratio measures how much of your total available credit you’re using. If you lose some available credit but carry the same amount of debt, your ratio will go up."

My experience was that approximately 7 months ago Bank of America closed 2 of my accounts. Both had balances. Because both balances are subject to a promotional 0% interest rate, I have not paid them off entirely, so I have had 7 months to observe their treatment for aggregate utilization purposes, in both MyFICO.com and Experian.com. The limits immediately disappeared from my available credit, but the balances remained in my indebtedness.

(Nevertheless, I would not recommend applying for a personal loan in the runup to a mortgage; I would just pay the card down as best I could)

Re: Closed Credit Cards & Utilization

Grim87 — Sun, 09 Aug 2020 15:45:11 GMT

I researched on my own file last night. The old Comenity Serta account that was closed due to the program ending is still reporting the $4,000 limit to my file. I then cross referenced my Credit Karma utilization number and it appears to be counting still. Who knows! LOL

Re: Closed Credit Cards & Utilization

newmomnewme — Sun, 09 Aug 2020 15:58:56 GMT

Maybe it depends on the creditor? NFCU suspended/closed my CashRewarss Visa in 2017....the card was maxed (20/20k).

My credit line disappeared but the balance remained....however, I'm not sure if it impacts UTIL on FICO 8.

As of 8/2/2020 the closed NFCU balance is still 15k. Meanwhile my total credit lines are 63k/58k (109% UTIL in reality and FAKO) but overall UTIL on FICO8 reports as 77% on EQ and 83% on TU and EX.

I agree with trying to pay it down as much as you can in preparation for the mortgage loan. Also, could you ask a different creditor for a soft pull CLI to help with UTIL?

Re: Closed Credit Cards & Utilization

SouthJamaica — Sun, 09 Aug 2020 17:49:58 GMT

@Grim87 wrote:
I researched on my own file last night. The old Comenity Serta account that was closed due to the program ending is still reporting the $4,000 limit to my file. I then cross referenced my Credit Karma utilization number and it appears to be counting still. Who knows! LOL

My limits continue to report.

But they are no longer included in my available limits for purposes of calculating aggregate revolving utilization.

Re: Closed Credit Cards & Utilization

SouthJamaica — Sun, 09 Aug 2020 17:54:01 GMT

@newmomnewme wrote:
Maybe it depends on the creditor? NFCU suspended/closed my CashRewarss Visa in 2017....the card was maxed (20/20k).

My credit line disappeared but the balance remained....however, I'm not sure if it impacts UTIL on FICO 8.

As of 8/2/2020 the closed NFCU balance is still 15k. Meanwhile my total credit lines are 63k/58k (109% UTIL in reality and FAKO) but overall UTIL on FICO8 reports as 77% on EQ and 83% on TU and EX.

I agree with trying to pay it down as much as you can in preparation for the mortgage loan. Also, could you ask a different creditor for a soft pull CLI to help with UTIL?

I believe it does depend on the creditor, as I have seen reports in this forum of some strange things happening when accounts are closed with a balance.

What happened in my case, though, is probably typical. The limit on each card continues to be reported, but is no longer counted as available credit for purposes of calculating aggregate revolving utilization.

Re: Closed Credit Cards & Utilization

newmomnewme — Sun, 09 Aug 2020 17:57:03 GMT

Exactly @SouthJamaica. I just paid 10k into my black hole so I'll see how it reports in 2 weeks.

Re: Closed Credit Cards & Utilization

Grim87 — Sun, 09 Aug 2020 20:22:49 GMT

Sounds like I am likely going to take a utilization hit, depends how Comenity reports it?

Re: Closed Credit Cards & Utilization

SouthJamaica — Mon, 10 Aug 2020 04:55:44 GMT

@Grim87 wrote:
Sounds like I am likely going to take a utilization hit, depends how Comenity reports it?

Most likely yes you will take a utilization hit.

I have no specific knowledge of how Comenity reports it, but I don't see any possible way of reporting it so that it would not increase your aggregate revolving utilization.

Re: Closed Credit Cards & Utilization

Anonymous — Mon, 10 Aug 2020 03:24:52 GMT

I just did some googling trying to figure out what credit limit Comenity reports after they close an account. I found this post:

https://ficoforums.myfico.com/t5/General-Credit-Topics/Comenity-not-updating-balance/td-p/5975964

In that case Comenity seemingly reported a 0 credit limit, causing the scores to drop by 70 points.

Although I'm not 100% sure that the scores are Fico scores. I'm also not 100% sure whether the poster actually looked at their credit report or just assumed that Comenity reported a 0 limit.

Re: Closed Credit Cards & Utilization

Grim87 — Mon, 10 Aug 2020 14:22:57 GMT

Thank you for the research. My old Comenity Serta cars still shows its old limit, so it's wait and see.

Re: Closed Credit Cards & Utilization

Grim87 — Mon, 10 Aug 2020 14:29:23 GMT

Although the link you sent in the first response makes the most sense and jives on what I've seen:

https://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/td-p/347190

- If a closed CC account with a balance continues to report the original credit limit, then both the balance and the CL of the closed account will be used in the utilization calculations.

- If a closed CC account is reporting a zero CL, even if there is a balance on the CC, the card will not be included in the calculations.

- If a closed CC account is reporting a non-zero CL but has a zero balance, the card will not be included in the calculations.

- If a closed account reports a CL that is equal to the balance (balance chasing), then this will be included in the calculations. This is the worst-case scenario with regard to utilization.

Re: Closed Credit Cards & Utilization

SouthJamaica — Mon, 10 Aug 2020 18:43:09 GMT

@Grim87 wrote:
Although the link you sent in the first response makes the most sense and jives on what I've seen:

https://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/td-p/347190

- If a closed CC account with a balance continues to report the original credit limit, then both the balance and the CL of the closed account will be used in the utilization calculations.

- If a closed CC account is reporting a zero CL, even if there is a balance on the CC, the card will not be included in the calculations.

- If a closed CC account is reporting a non-zero CL but has a zero balance, the card will not be included in the calculations.

- If a closed account reports a CL that is equal to the balance (balance chasing), then this will be included in the calculations. This is the worst-case scenario with regard to utilization.

And this is based on what? An anonymous 2008 post with no supporting evidence or references?

The first example is inconsistent with my experience.

The second example seems highly doubtful.

The third and fourth examples seem obvious.

Re: Closed Credit Cards & Utilization

Anonymous — Mon, 10 Aug 2020 19:27:46 GMT

@SouthJamaica wrote:
And this is based on what? An anonymous 2008 post with no supporting evidence or references?

I prefer calling it a post by a Moderator Emeritus listed under the Helpful Threads in the ""credit card" subforum

Re: Closed Credit Cards & Utilization

SouthJamaica — Tue, 11 Aug 2020 21:54:41 GMT

@Anonymous wrote:
@SouthJamaica wrote:
And this is based on what? An anonymous 2008 post with no supporting evidence or references?

I prefer calling it a post by a Moderator Emeritus listed under the Helpful Threads in the ""credit card" subforum

Well I prefer calling it a navel orange.

But that doesn't change the facts, and doesn't make its incorrect statements correct.

Re: Closed Credit Cards & Utilization

newmomnewme — Wed, 12 Aug 2020 10:50:00 GMT

I just paid off my black hole (closed NFCU), so I should see next week what changes if any it makes....Ill keep you all posted.

Re: Closed Credit Cards & Utilization

SouthJamaica — Wed, 12 Aug 2020 11:54:16 GMT

@newmomnewme wrote:
I just paid off my black hole (closed NFCU), so I should see next week what changes if any it makes....Ill keep you all posted.

Congratulations on getting rid of that monster.

Re: Closed Credit Cards & Utilization

Anonymous — Tue, 01 Sep 2020 15:03:39 GMT

Hello,

You will take a hit because the balance will go against for UTIL but not the limit. I'm currently in the same boat. I'm paying down my closed cards to make my UTIL go down. I didn't even know this was a thing until recently. Now