topic Re: CC Utilization in General Credit Topics

CC Utilization

hubbryan — Tue, 29 Aug 2023 11:45:19 GMT

I am considering closing a few of my small credit limit CC's that I don't use anymore. I was wondering, if I close the accounts with a $0 balance, will the credit limit still be factored in my utilization if the account is closed?

Re: CC Utilization

SouthJamaica — Tue, 29 Aug 2023 12:13:41 GMT

@hubbryan wrote:
I am considering closing a few of my small credit limit CC's that I don't use anymore. I was wondering, if I close the accounts with a $0 balance, will the credit limit still be factored in my utilization if the account is closed?

No, the limit on a closed card is not counted in your utilization.

Re: CC Utilization

JoeRockhead — Tue, 29 Aug 2023 12:15:43 GMT

No, the limit is no longer factored into your score, you keep the history of the account, not the CL

Re: CC Utilization

CLabuser — Tue, 29 Aug 2023 18:03:11 GMT

don't ever close cards, just keep them open and age them out.

Re: CC Utilization

Horseshoez — Tue, 29 Aug 2023 18:43:30 GMT

@CLabuser wrote:
don't ever close cards, just keep them open and age them out.

While I might agree with this sentiment, I would argue such an absolute is absolutely incorrect. If one has cards which are no longer useful, and have an annual fee, close those suckers.

Re: CC Utilization

FireMedic1 — Tue, 29 Aug 2023 19:15:47 GMT

I just closed 8 cards and always have been AZEO. Didnt drop 1 pt.

Re: CC Utilization

Thomas_Thumb — Thu, 31 Aug 2023 12:43:05 GMT

@hubbryan wrote:
I am considering closing a few of my small credit limit CC's that I don't use anymore. I was wondering, if I close the accounts with a $0 balance, will the credit limit still be factored in my utilization if the account is closed?

If one of the cards on your close list is your oldest card, consider keeping it open. You can call and request a CLI on the card. As mentioned above, cards not used that incur annual fees are best closed. A closed card will still contribute to credit history for up to 10 years. However, since the account is closed, it has no available credit and therefore can no longer contribute to total credit.

Re: CC Utilization

Iusedtolurk — Sun, 03 Sep 2023 20:00:26 GMT

@hubbryan wrote:
I am considering closing a few of my small credit limit CC's that I don't use anymore. I was wondering, if I close the accounts with a $0 balance, will the credit limit still be factored in my utilization if the account is closed?

@hubbryan I wish it was like that (Keep history and credit limit) Overstock credit card just closed down and I lost 11000 in my credit line. My utilization took a serious hit and caused me to lose a lot of points.

Re: CC Utilization

Horseshoez — Sun, 03 Sep 2023 20:05:25 GMT

@Iusedtolurk wrote:
@hubbryan wrote:
I am considering closing a few of my small credit limit CC's that I don't use anymore. I was wondering, if I close the accounts with a $0 balance, will the credit limit still be factored in my utilization if the account is closed?
@hubbryan I wish it was like that (Keep history and credit limit) Overstock credit card just closed down and I lost 11000 in my credit line. My utilization took a serious hit and caused me to lose a lot of points.

And this is an example of pretty much the only time closing a card will hurt scores; for folks who keep their balances at zero (or near zero), closing a card will not hurt at all.

Re: CC Utilization

markbeiser — Mon, 04 Sep 2023 01:03:40 GMT

Some scoring models, admittedly ones i don't think anyone really uses anymore, are affected by average credit limits on your open cards.
The FICO "resilience index", a score where a lower number is better, is also affected by what percentage of your open credit accounts are credit cards, though I've no idea if any lenders actually look at the resilience index.
For people who have extremely low utilization, closing low limit cards won't hurt their FICO8, 9, or mortgage scores, and will improve some of the less talked about/used scores.

I closed 5 cards with low limits, and one with a $4.7k limit with no real chance of growing, 6 total cards last month.
Only 2 have reported as closed so far, and already my FICO 3 score has gone up 23 points, and my "resilience index" has dropped 4 points(lower is better on it).
Basically just closed crappy rebuilder cards, and my Apple card since the $600 limit on it wasn't going to grow any time in the forseable future

Re: CC Utilization

mgood — Mon, 04 Sep 2023 03:11:04 GMT

@markbeiser wrote:

The FICO "resilience index", a score where a lower number is better, is also affected by what percentage of your open credit accounts are credit cards, though I've no idea if any lenders actually look at the resilience index.

I don't know if any lenders use that resilience index, but I think of it as indicative of what some lenders may be doing themselves, in-house with their proprietary systems. So to me, it's something to keep an eye on the ups and downs and what it lists as negatives, but not so much something that I pay attention to the exact number.

Re: CC Utilization

SouthJamaica — Mon, 04 Sep 2023 11:15:57 GMT

@markbeiser wrote:
Some scoring models, admittedly ones i don't think anyone really uses anymore, are affected by average credit limits on your open cards.
The FICO "resilience index", a score where a lower number is better, is also affected by what percentage of your open credit accounts are credit cards, though I've no idea if any lenders actually look at the resilience index.
For people who have extremely low utilization, closing low limit cards won't hurt their FICO8, 9, or mortgage scores, and will improve some of the less talked about/used scores.

I closed 5 cards with low limits, and one with a $4.7k limit with no real chance of growing, 6 total cards last month.
Only 2 have reported as closed so far, and already my FICO 3 score has gone up 23 points, and my "resilience index" has dropped 4 points(lower is better on it).
Basically just closed crappy rebuilder cards, and my Apple card since the $600 limit on it wasn't going to grow any time in the forseable future

@markbeiser Your theory and experiment deserve a post of their own. If you are correct, it stands some of our conventional wisdom on its head.

Re: CC Utilization

markbeiser — Mon, 04 Sep 2023 14:18:06 GMT

@SouthJamaica wrote:

@markbeiser Your theory and experiment deserve a post of their own. If you are correct, it stands some of our conventional wisdom on its head.

I don't think it goes against the conventional wisdom too much. Experian FICO 3 is an old bank card scoring model that, to my understanding, is known to be sensitive to average limits on cards.
Having a high percentage of open credit accounts be credit cards is one of the "red flag" reason codes on the FICO Resilience Index.
It stands to reason that closing low limit card accounts would improve both.

I'm not sure any lenders use them though, so does it even matter?🤣

Re: CC Utilization

mgood — Mon, 04 Sep 2023 15:23:33 GMT

@markbeiser wrote:

Experian FICO 3 is an old bank card scoring model that, to my understanding, is known to be sensitive to average limits on cards.
Having a high percentage of open credit accounts be credit cards is one of the "red flag" reason codes on the FICO Resilience Index.
It stands to reason that closing low limit card accounts would improve both.

I'm not sure any lenders use them though, so does it even matter?🤣

I'm not sure what it is or isn't sensitive to, but I think Capital One uses FICO 3, among other things.

Re: CC Utilization

Thomas_Thumb — Mon, 04 Sep 2023 16:00:39 GMT

@mgood wrote:
@markbeiser wrote:

Experian FICO 3 is an old bank card scoring model that, to my understanding, is known to be sensitive to average limits on cards.
Having a high percentage of open credit accounts be credit cards is one of the "red flag" reason codes on the FICO Resilience Index.
It stands to reason that closing low limit card accounts would improve both.

I'm not sure any lenders use them though, so does it even matter?🤣
I'm not sure what it is or isn't sensitive to, but I think Capital One uses FICO 3, among other things.

Just to be clear EX Fico score 3 is a Classic score with a range of 300 - 850. It is not an "old bankcard" scoring version. Unfortunately, Fico 3B reports have closen to lump it in with bankcard scores. Bankcard industry options have a nominal score range of 250- 900.

EQ score 5, TU score 4 and EX score 3 are all based on the Classic Fico 04 scoring model. EX score 2 is actually based on an even older Classic Fico 98 model.

Industry option scores will include the adjective Auto or Bankcard. The base Fico scores are Classic versions but, the term Classic has been dropped from daily use.

Re: CC Utilization

markbeiser — Mon, 04 Sep 2023 18:19:53 GMT

@Thomas_Thumb wrote:
Just to be clear EX Fico score 3 is a Classic score with a range of 300 - 850. It is not an "old bankcard" scoring version. Unfortunately, Fico 3B reports have closen to lump it in with bankcard scores. Bankcard industry options have a nominal score range of 250- 900.

EQ score 5, TU score 4 and EX score 3 are all based on the Classic Fico 04 scoring model. EX score 2 is actually based on an even older Classic Fico 98 model.

Industry option scores will include the adjective Auto or Bankcard. The base Fico scores are Classic versions but, the term Classic has been dropped from daily use.

Thanks, I was going off of where it shows up on my reports, on both the MyFico 3B and Experian paid service.
I've read that it was sensitive to credit card limits a couple of different places, which correlated with the bump in it I got when AmEx raised my limit from 9k to 27k on my BCE, and the big jump when 2 of my low limit cards reported as closed.
Nothing else has really changed, other than paying down a chunk of my HELOC, but I got the FICO 3 bump before the HELOC payment was made.

I won't be passing any credit age related thresholds, changes in utilization, inquiries, new accounts, etc. this month, so the other 4 cards reporting as closed should be as close to the only scoring factors that change as it is possible to have, so I'm interested to see what happens.
Fortunately I have a paid service with Experian, so get to see the updates to FICO 3 without buying new reports.