The dangers of the Sock Drawer

[minski]

This happened to me as well when an inactive card became active again. The impact, as has been noted, is short-term.

[Anonymous]

Sounds like "Dangers of Using a Sock Drawer Card."

In other words, just leave them in the drawer!

[Anonymous]

Then the issuer closes the account. That has happened to me also.

[Anonymous]

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@AnonymousThe bottom line here is if you sock drawer a card, either leave it there until the issuer closes it out for non-usage or don't sock drawer it at all.

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I think you're going a bit too far with this above.  It's recommended that SD cards be taken out approximately once every 6 months for a single swipe just to keep them alive.  If an unmeaningful 3 point drop for 1 cycle is going to bother you that much, just use the SD card every 3 months.  I certainly don't think this "danger" that you speak of [potential of a 1 month 3-point drop that will then immediately rebound] constitutes saying that people should either not SD a card at all, or if you do, never touch it again.

[Anonymous]

And it is worth observing that the idea of a 1-month FICO 8 penalty levied against cards that have not been used for five months -- there is no consensus on this site whether this is even real.  A number of veterans (Revelate, iv, etc.) are very skeptical, for example.  And the evidence (such as it is) is mixed, with some people reporting zero change when they get this alert and others experiencing a scoring boost when it happens.

There's been no series of well-designed repeatable  tests for it, unlike say the well-confirmed proof that FICO 8 levies a penalty when all revolving accounts are at zero.  All we have some anecdotal reports (which prove the existence of a penalty, a bonus, and zero effect all at once).  And as far as anecdotal reports go, we should remember that there are also very sincere anecdotal reports of Bigfoot and Alien Abductions too.

Another reason to be a bit skeptical is that it is not entirely clear how the FICO 8 model (which was finalized in 2008, well  before the advent of trended data) would be able to look into the past, see that you hadn't used your card for five months, then penalize you for exactly one month, then remember a month later to remove the penalty.  In pretty much every other way FICO behaves based on a snapshot in time, without memory.  Odd that it would do this. 

I agree with BBS that even if the 1-month penalty of 4 points existed, that would be a dubious reason to abandon the SD practice if it had been useful.  I am just unclear that the penalty exists at all.

[Anonymous]

I agree with CGID above and I am also skeptical that such a penalty exists.  My post may have suggested that I do believe it exists, but I was speaking more from the angle that the OP was taking where they clearly do think that it exists.  My point is that even if it does exist, it's really not a valid reason to modify SD card behavior.

[stw715]

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@Anonymous wrote:

I agree with CGID above and I am also skeptical that such a penalty exists.  My post may have suggested that I do believe it exists, but I was speaking more from the angle that the OP was taking where they clearly do think that it exists.  My point is that even if it does exist, it's really not a valid reason to modify SD card behavior.

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It could be buried behind the reason code of “Too many revolving accounts with balance” when we used our SD cards, so we might not know or at least not well known to most, it can cause scoring drop on it’s own.

[Medic981]

I can offer my experience as well. My Synchrony Care Care account had been dormant for six months after I paid off my no interest charge. I got a nice FICO bump with this. I decided to fill up my car, $50, using the card it's CL $1000. My FICOs fell from 3 - 6 points across the board. As others have reported my FICOs rebounded, for the most part, the next month. 

[Anonymous]

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@Anonymous wrote:

Another reason to be a bit skeptical is that it is not entirely clear how the FICO 8 model (which was finalized in 2008, well  before the advent of trended data) would be able to look into the past, see that you hadn't used your card for five months, then penalize you for exactly one month, then remember a month later to remove the penalty.  In pretty much every other way FICO behaves based on a snapshot in time, without memory.  Odd that it would do this. 

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The only data needed is the previously reported date of last activity and the newly reported date of last activity.  Anytime a tradeline reports, both these dates are available to the FICO algorithm.  If more than X months/days/years/etc. elapses between the previous and the new dates, it adjusts the score accordingly.

It also wouldn't necessarily be "exactly one month", but recalculated anytime that tradeline reports.  So, for example if it's a Chase card and two weeks later you pay it to zero and it does a mid cycle report, it would then see a much smaller difference between the current "date of last activity" and the previously reported "date of last activity" and the score penalty (if any) would be reversed.

In any case it's only a few points and there's no need to sweat over it.  Now if you have borderline scores and are shopping for a mortgage or something where you want optimum scores, it might be a good idea to either keep that card unused until after closing, or use it for a small amount and PIF a couple months before applying, or put a small recurring charge on and have autopay set up to PIF so the account stays active.

Another possible factor with sock drawering... if a card sits in your drawer unused, with no charges and payments, does it report as an on-time payment on your reports, or would it skip those months entirely?  If you're building or rebuilding and trying to get a good payment history, it might be better to use the card, at least for a recurring charge, so the fact of actual, ontime payments are being reported, rather than non-use and no payments.

[Thomas_Thumb]

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@Anonymous wrote:

Every now and then we get the urge to take a credit card and stick it in the Sock Drawer (meaning not use it for an extended time). I recently took a card out of my sock drawer aftyer a 5 month hiatus and used it - and it cost me 3 points.

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The status change inactive => active triggers a pull of data which then results in a score calculation. Depending on other file activity score may go down, stay unchanged or go up. Many posters, such as our OP,  consider possible impact of changes in other factors before concluding the the score shift relates to the card becoming active.

Obviously the OP can see the statement: "your score may be affected by additional information in your credit report". Clearly score did not go down due to a change in utilization. However, an incremental increase in # of cards reporting can negatively impact score so that could be a factor.

We do know opening of new accounts can trigger a score penalty. It is in the Fico reason codes. Some people open a new account or two and don't experience a score drop while others do see one. Those that don't see a drop may conclude that such a penalty can't exist. The risk relates to new credit with no payment history. 

Number of accounts reporting a balance is known to be a scoring factor as well. Does that mean your score will drop if all cards are allowed to report balances - no. Most see a penalty, some don't. The impact is conditioned based on scorecard and profile specifics.

In my opinion an inactive account becoming active has similarities to opening a new account. There are no reason statements specific to inactive accounts so many will argue it can't be so. However, the full list of Fico reason codes is only a subset of attributes Fico looks at. Keep the inactive => active data coming - the better this factor can be isolated, the more valuable the data.

Ultimately, as BBS mentioned any impact associated with inactive => active would be trivial and short lived. There is no need to use all cards every month. The key point is to use each one at a frequency that avoids risk of adverse action.  For those with more than a handful of cards, using every card every month may not be practical. There is no real downside to idling cards for a few months or rotating among cards.