Closed Cards, Increased Score

[Revelate]

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@Anonymous wrote:

Hello SouthJamaica!  Always nice to see you on here.  You write:

Wow, this is fascinating. The conventional wisdom, I thought, was that it's good to keep everything open to keep your utilization low and not shorten average age of accounts.  This kind of stands that wisdom on its head.

I agree that this story IS fascinating.  But I wouldn't want you to misunderstand the conventional wisdom either, which shouldn't really say that closing accounts will shorten your AAoA.  Some ill informed journalists will say that, but reputable ones (e.g. John Ulzheimer) are always reminding people that a closed account continues to age and counts just as much toward your AAoA as an open one does.

Even as far as keeping your utilization low, that's more of a trope of bad journalists.  Sure, always be conscious of what closing a card will do to your total credit limit.  Make sure, in other words, that when you close it you are making an informed decision.  But honestly, the best way to control your utilization is by controlling your spending and paying the cards you use down, not by trying to keep boatloads of credit lines going.

CEM13's approach is for people who, in the course of adding many CCs over time, have likely started with "junk" cards and have gradually moved on to bigger high-end Visas and Amex's and Mastercards with high CLs.  Throwing away the junk cards may be like throwing away a ladder that you have used to climb to a new height with; you needed it before but not any more. 

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Even those of us who didn't use retail cards to build may get some benefit: I picked up a Wally account for the free score and limit chasing (which never happened) and I'm currently tagged on many of my scores for having a Consumer Finance Account and it's the only thing remotely suspect.

The account irritates the hell out of me anyway (I really hate the artist formerly known as GECRB's reporting practices) and the only reason I'd keep it around now is for some testing purposes on number of tradelines with balance, but I can solve that by stuffing $250 into a SDFCU account for a secured card when talking tradeline count, and that strikes me as a small price to pay to dump Wally.  

Or I could just go bigger on my spree haha.  Either way, I think the point made here is it might well have merit... I do want to get my reports stable again before I go closing Wally for any sort of analysis on this though, and since it's $0 and no AF not a problem right now hanging onto it for some period of time before reporting a balance on it, next month $0, following month closed to see if there's a difference as over 3 months my scores are typically way flat otherwise until my derogs start coming off mid next year.

[cem13]

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@Anonymous wrote:

CEM13's approach is for people who, in the course of adding many CCs over time, have likely started with "junk" cards and have gradually moved on to bigger high-end Visas and Amex's and Mastercards with high CLs.  Throwing away the junk cards may be like throwing away a ladder that you have used to climb to a new height with; you needed it before but not any more. 

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My original cards after BK7 (JUN2011) was Orchard Bank (Now Cap 1) for $1K SL, Barclay Apple for $1.5K SL and Cap 1 QS $2K SL for a total CL of $4.5K.  I followed Soul Master's novel "BK7 to 700 in 2 years".  I kept my uitilzation low and used these cards every month.

@Anonymous DEC2013, I app'd NFCU and picked up the cashRewards @ $5K which became my primary card.  In AUG 2014, I followed Credit Addicts's "Official NFCU Guide" and hit the luv button for $25K.  I had the Barclay used for some autopay accounts and SD the 2 Cap 1 cards.

In APR15, I closed on my mortgage and went on the "Mother of All App Sprees" and picked up about $75K in additional credit with some very nice SL.  I read the thread "Ask a Back Room Analyst Anything" where the OP suggested many banks use their own internal scoring along with FICO scores.  He/she said that most banks will look at the Average CL per Card as a factor in determining the SL of a new card.  He/she suggested to close out any "junk" store cards or any low CL cards.

I asked Cap 1 for a CLI and they denied because of the low usage so I asked them to close both accounts.  I did a SCT for the Good Sam Visa for the laughable limit of $1.8K.  I called Barclays to cancel because of my new lowest CL was $5K and I am closing all accounts with less than $5K.  They SP me and agreed to bump my CL from $2K up to $5K if I did not close the account.  I agreed.

So I closed 3 cards and a CLI on the other.  When the closed cards hit my CR, I saw a score increase albeit small.  So I SUSPECT (but cannot prove) there is a scoring factor for Average CL per Card.  I have about 20 INQ over 3 CRs with 9 new cards plus several CU membership HP.  My score initially dropped because the INQ hit within 24 hours.  But after each of the 9 cards reported, my AAOA dropped slightly but not enough to trigger a score drop.  

Then when the low CL cards closed, I gained back all the INQ points that I lost plus a few more.  So my score is slightly higher after app spree.  I did not have any store cards during my rebuild but the OP in the "Ask the back Room" thread suggests to close them ASAP because his/her bank internal scoring looks negativly on low limit store cards.  

[Anonymous]

This is just one of the most interesting discussions I have seen on here.  Really fascinating.

As you say, "so I SUSPECT (but cannot prove) that...." -- so of course we cannot know for sure.  Still I feel fortunate to be able to listen in on your ideas.

Here are the takeaway ideas I am hearing:

1. Closing a "junk" card might have some advantage irrespective of its effect on your average credit limit (the average across all CCs).  The idea here is that a credit scoring system might view certain kinds of cards differently than (say) a possibly low limit Visa or MC issued by Chase, Citibank, etc.
2. But additionally, even if a card isn't a junk card, there might be an advantage in closing if by doing so you could cause your average CL to rise significantly.  (Another and better strategy being to get them to increase the CL.)  Here you'd be targeting not "junk" cards but even major cards if the CL is very low.
3. That #1 and #2 may apply not only to a creditor's internal system, but conceivably even FICO itself.  FICO itself may score a 1k "junk" card differently than a 1k Chase Visa (#1 above) and FICO itself may give you some extra points for having a higher average CL (#2).

Obviously this discussion falls into the area of speulative/advanced tips.  Beginners obviously should focus on the proven basics.  But I find it fascinating nonetheless, and practically useful too.  I added a Citibank Doubelcash card in late March -- and they wanted to give me an 8k CL.  I pushed them to give me one that was higher and they made it 16k.  So maybe it will be a help long term for me to make sure that my average CL stays fairly high (mine is about 12.5k right now).

Thanks again!

[Revelate]

If we really can get a score rebound from simply closing store cards (again this needs a bunch more analysis) then I consider it something easily fixable in which case the people fattening their file via store cards, while not the best idea in my opinion, from a score perspective it's an instant in time problem much like revolving utilization.

If we're stuck with it score wise for 10 years then not so much.  UW of course may have their own opinions on retail cards.

That's if there's really a problem with them, I'm close to confident my Wally is marked as CFA for me and I'll double-check that later on today as my only other remotely plausible account is only on 2/3 reports even if it reports as pure clean installment goodness.

There's very few "facts" posted when we get into the margins of the algorithm as honestly we just don't have very precise data resolution.  Short of isolating a change via an instant-in-time data pull, or someone with a very stable report (mine often counts as such when I care to micromanage balances as my scores are flat for most time periods) it's just difficult to get something remotely close to accurate.

The monitoring solutions as they exist today really aren't good enough for this without stringent controls on one's file, and even then everyone's file is different.  Jamie and I get different results from number of balances on revolving tradelines for example, and we're probably both right, and it probably has to do with the number of tradelines we each have, but it's nearly impossible enough to state something with certainty with just an individual data point.

Most people don't care enough to test rigorously, I know I'm the one with the problem in that regard that I really geek out on this stuff.

[Anonymous]

Hi Revelate!  Hope you are having a good weekend.

You write: "it's nearly impossible enough to state something with certainty with just an individual data point."  Yup!  I agree.  That's why I qualified my comments with a lot of maybes, and why I emphasized the OP's original language of tentativeness.

But I do find the ideas themselves interesting -- and also that the OP was inspired by a person who claims with some apparent reason to know some behind-the-scenes trade secrets.  ("Pay no attention to that man behind the curtain!" -- the great and powerful OZ.)

Thanks again to all for any interesting discussion so far.