UTIL Question

[Anonymous]

I made a bad decision to purchase a bike through Suzuki HSBC retail services. I paid the min for some time. I am now going to pay it off in full and close the account.  I am assuming the bike reports as a revolving line that is maxed out. I am assuming that paying off the balance will affect me positively.  However I am not sure if the line is usable for anything other than the bike that was purchased. for example.....Does the 13k factor into my UTIL as available credit that I am loosing or does it not even matter being that the card was maxed out? I hope that makes sense.

Your advice is GREATLY appreciated.

[Anonymous]

I believe your bike was financed as an installment loan. Therefore you do not have a revolving credit with HSBC. So no worries about maxing out your HSBC account and since this is an installemt account, if you were to pay it off.. you should be able to get a few points up.

[Anonymous]

Thanks! That was the information I was looking for.

[Anonymous]

What if you have a credit card that is being paid on time for 3 years and is maxed? If you were to close that card would not having a maxed card help the score or at least keep it the same seeing that a maxed card is never good? I have 6 credit cards and I don't want to keep them all open and charge a few things each month. That can be a pain. Thanks!

[oracles]

if you are closing a maxed out card without paying it off first you have worsen your credit report. Now, not only have you lost the credit limit but the balance is still being factored into your util%.

ie you have 5 cards - 10k credit limit on each card.

each card has 8k balance. So you have 40k balance. util% is  40k divide by 50k = 80% util (BTW this is really bad)

now you close one card without paying off the balance - you now have 40k balance with 40k limit = 100% util (I can't put into words what this will do to you) 

Of course this is an example but you need to pay off the balance first

also read this thread first before closing any accounts Closing Credit Cards

You should only close accounts if you have a card that has a fee (ie monthly or annual) and better cards in your mix.

You will lose the available credit which will mess with your util% and your average age of accounts.

In order for you to get your util% down and credit score up, you need to pay down that card asap.

hope this helps

[daveg38]

A curious question for the FICO pros out there:

Just went on a big paying spree to try and drop my utilization.  Was hovering around 61%.  After doing the math on my payments, should be down to around 5.5% - how big of a point jump should I see in scores/FICO?

Note: Just paid before statement day on each. 

Cap1=$750 limit, $743.00 available

Barclay=$350 limit, 325.08 available

*Fingerhut=$177 limit/$135.53 available

*Fingerhut was killing my utilization because it initially listed as $177 w/a high balance of $180 - dropped that down to HB of $40.00

Thanks.

[Anonymous]

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@Anonymous wrote:
What if you have a credit card that is being paid on time for 3 years and is maxed? If you were to close that card would not having a maxed card help the score or at least keep it the same seeing that a maxed card is never good? I have 6 credit cards and I don't want to keep them all open and charge a few things each month. That can be a pain. Thanks!

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I have over 10 credit cards right now and manage fine with them. Some I don't use for months or longer and then take advantage of a BT offer and not use the card for another year 

[Walt_K]

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@oracles wrote:

if you are closing a maxed out card without paying it off first you have worsen your credit report. Now, not only have you lost the credit limit but the balance is still being factored into your util%.

ie you have 5 cards - 10k credit limit on each card.

each card has 8k balance. So you have 40k balance. util% is  40k divide by 50k = 80% util (BTW this is really bad)

now you close one card without paying off the balance - you now have 40k balance with 40k limit = 100% util (I can't put into words what this will do to you) 

Of course this is an example but you need to pay off the balance first

also read this thread first before closing any accounts Closing Credit Cards

You should only close accounts if you have a card that has a fee (ie monthly or annual) and better cards in your mix.

You will lose the available credit which will mess with your util% and your average age of accounts.

In order for you to get your util% down and credit score up, you need to pay down that card asap.

hope this helps

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This is not accurate.  When you close the card, if it still reports a balance and reports its credit limit, it is treated exactly the same as an open account for utilization purposes.  Both the limit and the balance factor into your utilization.  You do not lose the limit for utilization purposes until the card reports a $0 balance, or if the limit stops reporting, the card isn't factored at all, and the balance is also ignored for utilization purposes. 

A bad thing that can happen with a closed account is if the lender decides to balance chase and report the CL as the balance for every payment you make.  In that scenario, the card would always report as maxed until it was paid completely off.  I don't know how common the last scenario is, but I had 5 closed accounts at one point with balances and I did not see balance chasing with any of the accounts. 

In any event, once you pay the card off, you are going to lose that extra CL for utilization purposes, and that can make your overall utilization jump, but you are not going to see any immediate change at all in utilization in the normal circumstance where the card continues to report its CL and balance. 

ETA: Closing cards does not affect average age of accounts.  The card continues to report and factor into age for 10 years.  After 10 years, when it falls off of your report, it may then affect your average age of accounts.