Line of credit and utilization

[Anonymous]

I have a line of credit for $15,000 with HSBC bank which was automatically opened in 2005 as part of my checking account with them. They told me it was for overdraft protection. I am interested in switching banks because:

 1) I don't live near a branch anymore,

 2) from reading these boards I found out their ACH transfer times are long (I had assumed all banks took the same time), and

 3) there's a $1,500 minimum to keep in the checking account to avoid fees.

My question is, would closing those accounts change my FICO score? Are lines of credit counted in utilization or just credit card limits? Would it decrease my AAoA?

[RobertEG]

In scoring utilization, FICO has two broad categories: revolving credit, and installment credit. CCs are just one form or revolving credit, albiet the most common. Any account which extends to you a line of credit upon which you can draw at your discretion is a revolving line of credit. That is contrasted with installment accounts, which are a preset amount of credit which is provided to you, normally in $$s, at the onset, and you pay it back in installments over a set period. Lines of credit (LOCs) can be unsecured, or secured by equity in property, such as a HELOC. Either way, they set an approved limit of credit upon which you can draw, at your discretion. LOCs are scored into revolving % util, with one hitch. LOCs above a certain limit (I believe it is approx. $35K) are not included in util. Closing an LOC that has been reported to a CRA has mixed FICO implications. You wont immediately lose its age of account. That wont happen until approx. ten years after it is closed. Both open and closed trade lines are scored in your average age of accounts. What you lose is its CL when calculating your % util (provided it has otherwise been included in FICO scoring). That could increase your % util. So. if an LOC is closed, no, it wont reduce your AAoA. But if it is unutilized, and thus has a low % util, it could affect your FICO scoring of % util of revolving credit. FICO-wise, you have to calculate the impact on your % util, considering your util of all other revolving lines of credit. That must then be weighed against the financial aspects of fees associated with maintaining the account.

[Anonymous]

Thank you so much for the helpful reply. I will have to do some calculations. I don't use the line of credit and it's a larger amount than any of my current credit card limits, so it probably is helping my utilization %.

When HSBC first gave me the LOC, I told them I didn't want it, but they said I should really have it for overdraft protection. Until this past month I had no idea such things can affect my credit score. It might be worth it to keep the account and have enough money parked in the checking account to avoid fees.