100% Accounts w/Balances - Score Impact?

[Anonymous]

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@Revelate wrote:

CGID: where has it been shown under any FICO 04 and higher model that it's anything more than percentage?  Lots of data showing breakpoints on percent of revolvers.

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I received a negative reason statement on my pull of my FICO mortgage scores (specifically FICO 04 Equifax and FICO 98 Experian).  The text was:  "You have too many credit accounts with balances."  My EQ score was decent (782) but still quite a good bit away from the maximum.  My EX score was 775.

I had two cards reporting a balance out of twelve.  2/12 = 17%.  I don't think anyone imagines that there's a penalty for a percentage < 20%.  I went over the report several times and confirmed that the 2/12 figure was right.  (No charge cards, no AU cards, no cards with a huge CL, etc.)

My FICO 8 scores were above 800, so myFICO hid the negative reason statements.

I spoke with Thomas Thumb about it at the time and his guess (if I remember right) was that it was because my total number of accounts (revolving and installment together) was 4, and that there might be an integer BP at 3, for at least the mortgage models anyway.

It's worth noting that the reason statements don't say that a person has too many revolving accounts -- just too many accounts.

---- As far as the practical advice to our OP, you and I seem to be saying the same thing.

[Anonymous]

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@iced wrote:

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@SouthJamaica wrote:

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One could even set the accounts on total autopilot. E.g. take a small recurring charge and have that automatically debited each month, while setting autopay to pay the full balance each month.

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One problem is that I don't have any small recurring bills I can autopay with. In fact, I only have two autopay bills each month that can go on a card: cable ($75/month) and gym ($70/month). That's a bit much to divert to a card that's basically a black hole IMHO.

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We totally get that $70 per month ($840 a year) is more than you'd like to spend on a non-rewards card.  But we've also thrown out some strategies that involve spending much less than that (e.g. $4 a year on groceries) and you are opposed to those too.  (That's $4 on groceries with a loss in rewards of a dime or a bit more.) 

Paying even one penny extra of interest is too much on your loan, from your perspective.  (And your perspective is the one that counts.)

Totally not being critical, just pointing out that you are right that you probably should just allow accounts to close.

One thing that we may not be being 100% clear on is, as SouthJ says, no one can be sure what the score impact will be.  But once they are closed, you can't reopen them -- there's no turning back in that sense.  Furthermore, the issue is not AZEO alone, but there will be other scoring implications that won't materialize until some number of years have passed.  Your approach will eventually end you with 2-3 accounts, which is a thin profile.  That has scoring implications, since it will move you to another scorecrd.  (Now you have 6+ accounts, counting closed, it sounds like.)  Also down the road your Age of Oldest Account will drop by 6 years -- not soon but several years from now.  Finally if either of your two remaining cards ever gets closed (the issuer declares, bankruptcy, whatever) you will then only have one card.  For all of these reasons it is worth considering keeping accounts open, though you are right that it will cost a few pennies a year to do it.

PS.  One other issue that hasn't yet been brought up is that we don't know how future scoring models might work.  FICO 10 or its competitors might place an even greater emphasis on a person having shown that they can handle 3, 4, or even 5 different tradelines.  If that happens you'll either have to have a lower score, or open more cards (sharply lowering your AAoA).   Again, just a thought.

[iced]

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@Anonymous wrote:

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We totally get that $70 per month ($840 a year) is more than you'd like to spend on a non-rewards card.  But we've also thrown out some strategies that involve spending much less than that (e.g. $4 a year on groceries) and you are opposed to those too.  (That's $4 on groceries with a loss in rewards of a dime or a bit more.) 

Paying even one penny extra of interest is too much on your loan, from your perspective.  (And your perspective is the one that counts.)

Totally not being critical, just pointing out that you are right that you probably should just allow accounts to close.

One thing that we may not be being 100% clear on is, as SouthJ says, no one can be sure what the score impact will be.  But once they are closed, you can't reopen them -- there's no turning back in that sense.  Furthermore, the issue is not AZEO alone, but there will be other scoring implications that won't materialize until some number of years have passed.  Your approach will eventually end you with 2-3 accounts, which is a thin profile.  That has scoring implications, since it will move you to another scorecrd.  (Now you have 6+ accounts, counting closed, it sounds like.)  Also down the road your Age of Oldest Account will drop by 6 years -- not soon but several years from now.  Finally if either of your two remaining cards ever gets closed (the issuer declares, bankruptcy, whatever) you will then only have one card.  For all of these reasons it is worth considering keeping accounts open, though you are right that it will cost a few pennies a year to do it.

PS.  One other issue that hasn't yet been brought up is that we don't know how future scoring models might work.  FICO 10 or its competitors might place an even greater emphasis on a person having shown that they can handle 3, 4, or even 5 different tradelines.  If that happens you'll either have to have a lower score, or open more cards (sharply lowering your AAoA).   Again, just a thought.

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Appreciate the understanding. It's more principle to me (it feels wrong to keep cards on life support like that).

I am a bit worried about the scorecard situation, though truth be told I'm already doing alright with a derog scorecard so I figure a thin profile one can't be that much worse. If it helps assuage concerns, my report is showing around 20 total accounts right now. If it's on a 10 year cooldown, the hit back to a thin profile would happen around 2030 sometime, when my need for a high score will be negligible (I feel that the only account type that a high score really matters on is mortgage; even a score in the upper 600s seems sufficient for pretty much everything else). I might add a third card in the future when I find another useful one, but I don't really want to go get one just for the sake of padding a report, especially when I'm not wanting to keep existing ones that serve similar purposes.

The risk about bank failure is noted too, and in this case I would be putting all my eggs in one basket as both remaining open cards are Chase. However, I'm already effectively doing that today as neither of the other two cards have a significant CL.

This does prompt one more question. How are charge cards handled in the account/AZEO picture? If I added a third card that was a charge card, would it serve the same purpose or would FICO still see me as having 2 revolving credit cards?

[HeavenOhio]

FICO 8 wants to see revolvers. I believe that some of the older models pay some attention to charge cards.

If you end up with two Chase cards, you stand a chance of having the "all cards at zero" ding just as much as having the "all cards with positive balances" ding. I believe the "all cards at zero" ding is in the 25-point range.

But you can play it so one card reports a zero balance while the other one doesn't. Simply make sure one card is paid in full while not bringing the balance down to zero mid-cycle.

[trusty]

This thread is so depressing. It's not at all difficult to go online and charge 1 dollar to a credit card.

It's also not "impossible" to use two cards regularly, and to simultaneously send in early payments on one of them, prior to the statement cutting, so that only one of the cards reports a balance.

Further, giving up 6 years of credit aging, due to what appears to be nothing more than apathy and inaction, is so depressing.

Just go to the cable company's website and charge $1 to the card, every now and again, so that you can remain 6 years ahead of the curve.

If you have derogatory items on your credit profile, consider getting help disputing them for inaccuracies.

If the card with 6 years of aging has late pays showing, it makes sense to be depressed about it. But, try appealing to a higher authority, to get the late pays removed first, rather than just giving up and closing the card.

There are a number of ways to maximize credit scoring. Giving up or giving in to depression and subsequent inaction is not one of them.

[iced]

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@trusty wrote:
This thread is so depressing. It's not at all difficult to go online and charge 1 dollar to a credit card.

It's also not "impossible" to use two cards regularly, and to simultaneously send in early payments on one of them, prior to the statement cutting, so that only one of the cards reports a balance.

Further, giving up 6 years of credit aging, due to what appears to be nothing more than apathy and inaction, is so depressing.

Just go to the cable company's website and charge $1 to the card, every now and again, so that you can remain 6 years ahead of the curve.

If you have derogatory items on your credit profile, consider getting help disputing them for inaccuracies.

If the card with 6 years of aging has late pays showing, it makes sense to be depressed about it. But, try appealing to a higher authority, to get the late pays removed first, rather than just giving up and closing the card.

There are a number of ways to maximize credit scoring. Giving up or giving in to depression and subsequent inaction is not one of them.

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Hmm. Not sure where the idea of depression came from. I'm at the point I'm happy with my credit line-up (both cards). The other cards aren't being closed because of lates. The one is being closed because the bank has told me they are going to close it due to inactivity. The other card will likely follow suit at some point.

The derogs on my report have nothing to do with either card and are set to fall off in 2019. Clearing them has already been tried and failed. Not a biggie, though.

Please understand I'm not trying to maximize my credit score. I'm just making sure I'm not doing something that's going to significantly hurt my score is all. I'm at ~760 today, which is plenty to accomplish anything I need to.

[HeavenOhio]

We don't know the OP's scores, but there may be no need to further optimize. I believe that's why he's asking the question. He wants to know if he can close the cards, continue his current routine, and still have scores that he deems acceptable.

It's already been alluded to, but it should be kept in mind that creditors use more scores than just FICO 8. They could be using Bankcard scores or even mortgage scores. And Chase uses its own handy-dandy system.

[Revelate]

Well two thoughts:

2 revolvers and that's it qualifies as a thin file under the old definitions, and FICO might change your scorecard assignment as a result.

Personally I wouldn't take the risk, but I can't really much in the way of educated guesses even as to what your score would do.

Personally I just do a recurring $10 monthly donation, but I could probably do it as low as $1... I could certainly sign up for a GCE account, register a small disk for something like $0.02/GB per month and throw it on a credit card if wasn't willing to swipe it at a restaurant every six months or whatever.

Ultimately up to you bud.

ETA: a third thought - why not simply wait for a bit and kick the can six months down the road?  You can test 100% balances yourself on your current file first and maybe some other better datapoints than what we had in the past can be gained too?

[Revelate]

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@Anonymous wrote:

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@Revelate wrote:

CGID: where has it been shown under any FICO 04 and higher model that it's anything more than percentage?  Lots of data showing breakpoints on percent of revolvers.

---

I received a negative reason statement on my pull of my FICO mortgage scores (specifically FICO 04 Equifax and FICO 98 Experian).  The text was:  "You have too many credit accounts with balances."  My EQ score was decent (782) but still quite a good bit away from the maximum.  My EX score was 775.

I had two cards reporting a balance out of twelve.  2/12 = 17%.  I don't think anyone imagines that there's a penalty for a percentage < 20%.  I went over the report several times and confirmed that the 2/12 figure was right.  (No charge cards, no AU cards, no cards with a huge CL, etc.)

My FICO 8 scores were above 800, so myFICO hid the negative reason statements.

I spoke with Thomas Thumb about it at the time and his guess (if I remember right) was that it was because my total number of accounts (revolving and installment together) was 4, and that there might be an integer BP at 3, for at least the mortgage models anyway.

It's worth noting that the reason statements don't say that a person has too many revolving accounts -- just too many accounts.

---- As far as the practical advice to our OP, you and I seem to be saying the same thing.

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Interesting; I will admit I don't have fantastic reason code information for either FICO 04 or FICO 98; FICO 8 though I'm confident in the findings that it is percentage of revolvers only, 1/3 for EQ, 1/2 for EX/TU... that didn't appear to be scorecard dependent either since others confirmed it.

I'll have to look through some older reports, might be hard, EQ FICO 04 is complaining about "too many revolvers" now .  Sometimes I almost wish I were still dirty heh.

[Anonymous]

Not that my opinion matters at all here and the decision is certainly up to the OP, but I wouldn't close my oldest revolver if it had no AF and was a SD card.  I have no idea what the age of the OPs other accounts are relative to that SD revolver, but 10 years after closing the card there could be a more than minimal adverse impact to AoOA and AAoA that simply isn't necessary.  It also sounds like the OP has a pretty thin file, so the impact on losing your oldest account (or second oldest) 10 years from now could be quite significant.  But, that is 10 years from now, so whatever decision is made now won't matter for another decade.  I personally don't see the harm in doing a tiny swipe as others have already mentioned.  If you've been content not using the card for 2.5 years already and have been confortable with it in the SD during that time, that's really no different than giving it a few dollars of usage per year. 

Another interesting note that hasn't been made thus far is that I think it's pretty cool that the creditor reached out here and told the OP that he's got 30 days to use the card or it will be closed.  99 times out of 100 from what I've seen creditors don't give a heads up like this and would simply go ahead and close the account.