topic Too many accounts with balances in Understanding FICO® Scoring

Too many accounts with balances

CoffeeLover — Sat, 04 Jan 2025 01:42:58 GMT

Hi friends,

Would anyone be able to tell me why this is happening and what I can do?

I've always had 2~3 credit cards for a couple of decades. No auto loans, no mortgage, no debts. Credit cards are always paid off, never paid late on any bills. Never had too high balance toward the limit, under 10% always. I don't frequently open/close accounts. That had maintained my FICO score 800 or above for years, and it was 828 last January with 2 credit cards (both BofA).

And that suddenly changed when I opened up Amex Gold in March 2024, the third credit card, which brought it down sharply to 782. Understood, creating a new credit card would decrease the score for the moment. But I was expecting that would gradually rise back as long as I maintain the good activities like above. However, for last 8 months, the score never moved from 782 at all, no change, no up or down.

Since I got the third card, their notes explains the factors that affecting the score: "Too many accounts with balances".

I used to have 3 credit cards in past, and I've never seen such warnings and didn't affect to my score either. 3 credit cards are too many to have?? Do I need to keep my cards up to 2? That sounds a bit unreasonable.

What would you say/advice to take the score back to above 800 on FICO?

Btw it seems TransUnion gives me score 801, EquiFax 809. Just FICO is 782 and never recovered.

Re: Too many accounts with balances

Patient957 — Sat, 04 Jan 2025 02:08:32 GMT

You lost ~20 or so points for having a new revolving account. You will get them all back in one lump when the new account turns 12 months old. Here is a good thread on that:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Dropping-off-AoYRA-gt-12-month-scorecard/td-p/6796390

Also, if you practice AZEO, you will maximize your score with respect to number of cards with a balance. There are many threads on this if you do a search. Others can give better details than I, but to maximize your score you essentially want to have 50% or greater cards reporting a zero balance and the rest under 9% utilization. You never want 100% reporting a zero balance due to the all zeros penalty. I think I got that right -- someone can correct me if I got the details wrong here.

In your case, you want 2 cards reporting zero and one at less than 9% for maximum points.

I think those two factors fully explain your score drop. At 12 months and with AZEO, you should get all your points back.

Re: Too many accounts with balances

FicoMike0 — Sat, 04 Jan 2025 02:14:19 GMT

The too many accounts nonzero means more than 50%. In your case that's more than one. I'm not sure how the gold card is treated, since it's a charge card.

Re: Too many accounts with balances

Patient957 — Sat, 04 Jan 2025 02:35:36 GMT

@FicoMike0 wrote:
The too many accounts nonzero means more than 50%. In your case that's more than one. I'm not sure how the gold card is treated, since it's a charge card.

Oh, right, the new account is a charge card, so that may complicate things. I'm not sure on that either. Will need one of the big guns to explain.

But I am sure regarding the AoYRA < 12 months penalty. You'll get that all back in 4 months if you don't open any new revolvers in the meantime.

Re: Too many accounts with balances

CoffeeLover — Sat, 04 Jan 2025 03:18:29 GMT

Thank you guys, very helpful.

I will try the AZEO and wait for the 12th and will see!

But still sort of not making sense regarding the 50% thing.. I've had only 2 credit cards for a few years, and was using both.. So according to your explanation, I was using 100%. But I've never seen the "Too many accounts with balances" warning.

Anyway, thank you for the very prompt response and the information

Re: Too many accounts with balances

NoHardLimits — Sat, 04 Jan 2025 03:21:53 GMT

@Patient957 wrote:
@FicoMike0 wrote:
The too many accounts nonzero means more than 50%. In your case that's more than one. I'm not sure how the gold card is treated, since it's a charge card.
Oh, right, the new account is a charge card, so that may complicate things. I'm not sure on that either. Will need one of the big guns to explain.

But I am sure regarding the AoYRA < 12 months penalty. You'll get that all back in 4 months if you don't open any new revolvers in the meantime.

Amex charge cards are not considered to be revolving accounts in FICO8 scoring. Charge account balances are not included in total revolving balances or utilization percentages. However, charge cards do factor into the "number of accounts with balances". So with 2 revolvers and 1 charge, you want 1 account to report with a balance. Not zero (all zero penalty), not two, and not 3.

Re: Too many accounts with balances

NoHardLimits — Sat, 04 Jan 2025 03:24:42 GMT

@CoffeeLover wrote:
Thank you guys, very helpful.

I will try the AZEO and wait for the 12th and will see!

But still sort of not making sense regarding the 50% thing.. I've had only 2 credit cards for a few years, and was using both.. So according to your explanation, I was using 100%. But I've never seen the "Too many accounts with balances" warning.

Anyway, thank you for the very prompt response and the information

With only 2 revolvers, it's possible that you were considered to be a "thin file" which could affect the priority of scoring factors compared to a thicker file.

Re: Too many accounts with balances

FicoMike0 — Sat, 04 Jan 2025 04:28:41 GMT

Also, keep in mind, it's accounts reporting a balance. What's reported is usually the statement balance. You can charge to the account, then pif the day before the statement and it reports zero. On the other hand, if you charge it to 50% and pif the day after it posts (long before due date) your utilization is still 50%.I

Try letting one card (not the gold) report <9%, with the others reporting zero. This should max your score as far as utilization.

Re: Too many accounts with balances

GZG — Sat, 04 Jan 2025 05:03:31 GMT

when you were over an 800 score, you probably didn't even see negative reason factors

but yeah, you don't have 3 cards (with credit limits), so having balances on cards always technically breaks the rule of having a larger percentage of cards with a $0 balance compared to cards that do have a balance. hence the reason code you're seeing now for too many accounts with balances.

and if all of your cards (with credit limits) have $0 balance, that's a credit score penalty in and of itself.

tldr: don't worry about it, you're good, because your score dropped below 800, you're seeing nitpicky reasons your score isn't above 800 anymore, they're not saying anything is wrong, they're just telling you why it's not above 800 anymore

the reason code you're seeing cares specifically about the percentage of cards with a balance, not the number of cards

so 10/30 cards with a balance = 30% = good

2/2 cards with a balance = 100% = bad

1/10 cards with a balance = 10% = ideal

Re: Too many accounts with balances

Thomas_Thumb — Sat, 04 Jan 2025 06:17:42 GMT

@CoffeeLover wrote:
Thank you guys, very helpful.

I will try the AZEO and wait for the 12th and will see!

But still sort of not making sense regarding the 50% thing.. I've had only 2 credit cards for a few years, and was using both.. So according to your explanation, I was using 100%. But I've never seen the "Too many accounts with balances" warning.

Anyway, thank you for the very prompt response and the information

Yes, you were hit with the new account penalty. That typically costs 15-25 points and remains in effect until your youngest credit card reaches 12 months. This is the reason for your point drop.

As mentioned elsewhere your profile has always had multiple negative reason codes. Some score providers will only display negative statements when score is more than 50 points below Fico model max. Other score providers will list negatives if score is 1 point or more below max.

AMEX gold is a npsl charge card with 1 month terms classified as an "open" account. It is a credit card account. It is not a revolving account. If the AMEX is the only card reporting a balance, score is penalized 15-20 points for "no recent revolving activity" because all revolving accounts reported a $0 balance.

The AMEX card is obviously an account and is included in # of accounts, % of cards with balances. Some guidelines:

1) for those with 1 revolving account it is far better for the card to report a small balance than $0 balance. The % of cards reporting is essentially an ignored meaningless metric in this case.

2) for those with 2 revolving cards best case is 1 of 2 reporting small balances followed by 2 of 2 and then 0 of 2. For Fico 8: 2 of 2 may drop score 3-6 points vs 1 of 2. However, 0 of 2 typically drops score 15-20 points vs 1 of 2.

3) for a 3 card profile with 2 revolving and 1 open (charge) account best case is 1 of 3 with the reporting card being a revolver. Next best is 2 of 3 (say 2-5 point loss), then 3 of 3 (say 4-9 point loss) Worst is 0 of 3 and 1 of 3 with the reporting card being the charge card.

A small balance reporting is anything under 9% of the revolving account CL but atleast $5. NPSL charge card balance amount does not factor into revolving utilization. However, it is part of total balance and total balance is a minor scoring factor.

I'd recommend always having 1 revolver reporting a small balance. No need to micromanage to 1 card only reporting. Allowing 2 of 3 cards to report small balances should drop Fico 8/9 score 5 points or less vs AZE1. The 2nd card reporting could be another revolver or the charge card.

Re: Too many accounts with balances

Patient957 — Sat, 04 Jan 2025 06:43:51 GMT

@Thomas_Thumb wrote:
3) for a 3 card profile with 2 revolving and 1 open (charge) account best case is 1 of 3 with the reporting card being a revolver. Next best is 2 of 3 (say 2-5 point loss), then 3 of 3 (say 4-9 point loss) Worst is 0 of 3 and 1 of 3 with the reporting card being the charge card.

Welcome to the complexities of the 2 revolver + 1 charge card setup. Luckily we have @Thomas_Thumb to break it all down for us.

Life is certainly much simpler FICO-wise with a handful of sock drawered cards reporting zero balances.

Re: Too many accounts with balances

CoffeeLover — Sat, 04 Jan 2025 08:24:47 GMT

Wow, thank you soooo much to all of you for helping me putting this mystery pieces together!

I didn’t realize the expectation around no-balance revolving accounts. I’ve always used my cards for specific purposes, like maximizing rewards. For example, one card for travel, another for groceries, and so on.

From what I understand now, it sounds like I should have “dummy” revolving accounts with zero balances if I want to keep using my current cards and maximize my credit score. It feels a bit odd to do that (I’d prefer not to have more cards than I actually use), but it seems like that’s just how the system works.

Re: Too many accounts with balances

Varsity_Lu — Sat, 04 Jan 2025 10:10:23 GMT

@CoffeeLover wrote:
Wow, thank you soooo much to all of you for helping me putting this mystery pieces together!

I didn’t realize the expectation around no-balance revolving accounts. I’ve always used my cards for specific purposes, like maximizing rewards. For example, one card for travel, another for groceries, and so on.

From what I understand now, it sounds like I should have “dummy” revolving accounts with zero balances if I want to keep using my current cards and maximize my credit score. It feels a bit odd to do that (I’d prefer not to have more cards than I actually use), but it seems like that’s just how the system works.

Crazy, isn't it? Pay off all cards and have 0% utilization? Score goes down. Pay off your car or home loan? Score goes down. Close a card that you no longer use? Score goes down. It's like they punish you for good behavior. Sigh...

You sound very responsible and wise in how you manage your finances. Your score will rebound. Everything I've read says as long as you are above 750 or so, you are getting the best rates and benefits. My guess is you'll bounce back to 810s+ by March.

Re: Too many accounts with balances

GZG — Sat, 04 Jan 2025 19:36:40 GMT

@CoffeeLover wrote:
Wow, thank you soooo much to all of you for helping me putting this mystery pieces together!

I didn’t realize the expectation around no-balance revolving accounts. I’ve always used my cards for specific purposes, like maximizing rewards. For example, one card for travel, another for groceries, and so on.

From what I understand now, it sounds like I should have “dummy” revolving accounts with zero balances if I want to keep using my current cards and maximize my credit score. It feels a bit odd to do that (I’d prefer not to have more cards than I actually use), but it seems like that’s just how the system works.

there's also something else to consider

not all credit scores of the same credit score are equal when it comes to underwriting, a strong credit profile can be important too

compare these two profiles:

3 credit cards

10 years age of credit history

average limit of cards $500

no loans

15 credit cards

3 paid off car loans in the $40-75k range

active 500k mortgage, paid down 75%

average limit of cards $10,000

10 years of credit history

both profiles have the same score, who would you like to lend to?

it may or may not matter for interest rates on a mortgage or a car loan, but having a stronger profile can definitely help for new credit cards

there's nothing wrong with only having a couple of credit cards and never building out a robust credit profile with a ton of products, just a thought to consider that an "820" credit score isn't the same as other "820" credit scores

Re: Too many accounts with balances

Varsity_Lu — Sat, 04 Jan 2025 20:08:12 GMT

@GZG wrote:
3 paid off car loans in the $40-75k range
active 500k mortgage, paid down 75%
10 years of credit history

Wow! Bought 3 cars and paid off $375k of a half mil loan in 10 years! That's a heck of a job straight out of college!

Re: Too many accounts with balances

GZG — Sat, 04 Jan 2025 20:09:27 GMT

@Varsity_Lu wrote:
@GZG wrote:
3 paid off car loans in the $40-75k range
active 500k mortgage, paid down 75%
10 years of credit history
Wow! Bought 3 cars and paid off $375k of a half mil loan in 10 years! That's a heck of a job straight out of college!

seems the example was a tad too illustrative or magical

Re: Too many accounts with balances

NoHardLimits — Sat, 04 Jan 2025 20:23:47 GMT

@GZG wrote:
@Varsity_Lu wrote:
@GZG wrote:
3 paid off car loans in the $40-75k range
active 500k mortgage, paid down 75%
10 years of credit history
Wow! Bought 3 cars and paid off $375k of a half mil loan in 10 years! That's a heck of a job straight out of college!
seems the example was a tad too illustrative or magical

Actually, it could be quite feasible with the right career (e.g. investment banker) or an inheritance. Even college athletes are getting NIL deals these days.

Re: Too many accounts with balances

Thomas_Thumb — Sat, 04 Jan 2025 23:23:12 GMT

@GZG wrote:
@CoffeeLover wrote:
Wow, thank you soooo much to all of you for helping me putting this mystery pieces together!

From what I understand now, it sounds like I should have “dummy” revolving accounts with zero balances if I want to keep using my current cards and maximize my credit score. It feels a bit odd to do that (I’d prefer not to have more cards than I actually use), but it seems like that’s just how the system works.
there's also something else to consider. Not all credit scores of the same credit score are equal when it comes to underwriting, compare these two profiles:

3 credit cards
10 years age of credit history
average limit of cards $500
no loans

15 credit cards
3 paid off car loans in the $40-75k range
active 500k mortgage, paid down 75%
average limit of cards $10,000
10 years of credit history

both profiles have the same score, who would you like to lend to?

it may or may not matter for interest rates on a mortgage or a car loan, but having a stronger profile can definitely help for new credit cards

there's nothing wrong with never building out a robust credit profile with a ton of products, just a thought to consider that an "820" credit score isn't the same as other "820" credit scores

I prefer the profile with 3 credit cards. He pays cash for cars and keeps each 7 years on average before replacing. Last year he requested a cut on his card CLs due to concern over fraud. (Otherwise card CLs are not going to be $500 with 10 years history). His $250k annual base salary is solid and $500k after tax savings is impressive. $750k mortgage loan on a $1M home with 25% down approved!

Profile #2 with the same base pay looks promising but has minimal after tax savings. Cash poor due to purchasing/selling cars every 3 years and loan payments on cars and home. New home purchase will be contingent on sale of existing home for $250k downpayment.

Regarding new credit card SLs profile # 2 would likely receive 5x that of profile #1