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Utilization? Balance on Closed Account

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Contributor

Utilization? Balance on Closed Account

So I had a Visa card with PenFed - everything was in good standing, all payments made on time.  They did a quarterly review of my credit and because my FICO9 score went down, they closed my Visa.  It's now showing up as "account closed by creditor".  The problem is, there's still a balance on that account.  Since it's a closed account, does that balance still count as part of my overall utilization?  How does having a balance on a closed account work with my overall credit report?

FICO8
April 2017 - Experian 601, Equifax 659, Transunion 568
May 1, 2017 - Experian 601, Equifax 659, Transunion 588
June 1, 2017 Experian 638, Equifax 661, Transunion 582
November 1, 2017 Experian 664, Equifax 667, Transunion 666
January 26, 2018 Experian 678, Equifax 655, Transunion 653
March 14, 2018 Experian 674, Equifax 654, Transunion 654
April 14, 2018 Experian 674, Equifax 676, Transunion 652

BK 13 discharged 4/4/17

Cards - Cap One Venture $5.5k, Discover IT Chrome $5,000, NFCU Sig Cash Rewards $5k, Wayfair $6900, Pottery Barn $750, Home Depot $3500, Amex BCE $500, Amex Delta $1600, Lowe's $5000, Amazon Prime Store $3500, Old Navy $1900 plus a couple other small retail cards.
13 REPLIES 13
Moderator

Re: Utilization? Balance on Closed Account

Sorry to hear about the closed card.  The short answer is that how the utilization counts will depend on how your balance and credit limit are reported to EQ/EX/TU.  For a better explanation of the various scenarios: http://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/m-p/347190?jump=true (Scroll down to "Tidbits.")


Message 2 of 14
Frequent Contributor

Re: Utilization? Balance on Closed Account


@K-in-Bostonwrote:

Sorry to hear about the closed card.  The short answer is that how the utilization counts will depend on how your balance and credit limit are reported to EQ/EX/TU.  For a better explanation of the various scenarios: http://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/m-p/347190?jump=true (Scroll down to "Tidbits.")


I wonder if what was said on that post still applies since it was from like 2008.

As of 11/28/2018
Message 3 of 14
Super Contributor

Re: Utilization? Balance on Closed Account

The utilization on the closed account (with a balance) is seen as 100% or maxed out.  This is because you have a balance against no limit [on that account].  It doesn't matter if the balance is $5 or $5000, as it's against a limit of $0, so it's at 100% utilization until it is completely paid off.

 

As for aggregate utilization, the balance is factored into the numerator of all your combined account balances, where the denominator is only the total of all other other accounts, as nothing can be added to the denominator from the closed account.

Message 4 of 14
Moderator

Re: Utilization? Balance on Closed Account

It’s true for the FICO 08 model developed back then, and that’s still used by an overwhelming majority of lenders.

Message 5 of 14
Moderator

Re: Utilization? Balance on Closed Account

BBS, please see the link above. The only way it would be calculated as 100% is if the lender balance chased you after it was closed.

Message 6 of 14
Frequent Contributor

Re: Utilization? Balance on Closed Account


@K-in-Bostonwrote:
BBS, please see the link above. The only way it would be calculated as 100% is if the lender balance chased you after it was closed.

So interesting point here I believe. I contacted Amex to see how they would report my account if closed and the lady directed me to the equifax bureau instead of answering me. I asked if they would report 2,800/11,000 or 2,800/0 and the lady just said she can't speak on that. The banks are the ones that report to the bureaus correct? Is her answer okay or should she have told me more?

As of 11/28/2018
Message 7 of 14
Contributor

Re: Utilization? Balance on Closed Account

They did not balance chase me.  It's being reported as balance/original credit limit.  Therefore, it's still calculated in overall utilization, correct?  Which also means that even though it's being reported as closed, because of the way they're reporting it, it's not harming me as far as utilization goes.  Would that be correct as well?

FICO8
April 2017 - Experian 601, Equifax 659, Transunion 568
May 1, 2017 - Experian 601, Equifax 659, Transunion 588
June 1, 2017 Experian 638, Equifax 661, Transunion 582
November 1, 2017 Experian 664, Equifax 667, Transunion 666
January 26, 2018 Experian 678, Equifax 655, Transunion 653
March 14, 2018 Experian 674, Equifax 654, Transunion 654
April 14, 2018 Experian 674, Equifax 676, Transunion 652

BK 13 discharged 4/4/17

Cards - Cap One Venture $5.5k, Discover IT Chrome $5,000, NFCU Sig Cash Rewards $5k, Wayfair $6900, Pottery Barn $750, Home Depot $3500, Amex BCE $500, Amex Delta $1600, Lowe's $5000, Amazon Prime Store $3500, Old Navy $1900 plus a couple other small retail cards.
Message 8 of 14
Moderator

Re: Utilization? Balance on Closed Account

If it’s being reported with a balance and the original credit limit, for scoring purposes it would be treated the same as an open account. As for whether it’s harming you that would depend on how much the credit line is being utilized, as well as the rest of your credit profile.

To answer an earlier question, yes the lender reports the balance and trade line. I have no experience with closed Amex accounts, but I am pretty sure they fall into the balance/original credit line camp.

Message 9 of 14
Super Contributor

Re: Utilization? Balance on Closed Account


@K-in-BostonBBS, please see the link above. The only way it would be calculated as 100% is if the lender balance chased you after it was closed.

KIB,

 

I don't agree with what's written in the thread linked above.  Maybe because it's a decade old?  I've read probably 50 times on this forum in posts from the last 1-2 years that any time a revolver is closed, be it by the account holder or the creditor, if it has a balance the account is scored as being maxed out because you have a balance against no limit.  If it's closed, the limit is gone, so it's debt against no limit which = maxed out.  This is the reason why people on this forum always recommend not closing out a credit card unless it is 100% paid off for example. 

Message 10 of 14
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