Closed account with balance

[julia18330]

Does a closed credit card with a balance (in good standing) count in utilization for scoring? My CU just said they're closing my accounts, including credit card for "suspicious activity". Thanks 

[Spotsy]

Unfortunately yes, there will probably be an impact to your scores when it reports.  It will  impact your individual card utilization ratios and may impact your overall UTI depending on the credit limit removed and remaining balance.

A card that is closed but with a balance will probably have the bigger impact.  I would try to get that balance either paid to zero before it reports (usually on your next statement date unless they mid-cycle report it due to it being closed) or BT it to another card with a sufficient limit to bring the closed card to zero, but not skyrocket the UTI on another card (keep the UTI to less than 30% individually and overall, in a perfect world keep them under 10%). Also having any card closed but with a remaining balance, even a small one, has a score impact.

Overall UTI might not be a bad hit depending the limits and balances of all other cards.

[Tdatb64]

When a card gets closed with a balance the financial institution usually reports it to the credit bureaus as having a limit the same as the balance, giving you 100% utilization on that card. If you pay half that balance the card will have its limit reduced by half, and so on, keeping you at 100% until it's paid-off. Yes, it will hurt your scores. Pay it off as soon as possible or transfer the balance, if you can.

[Thomas_Thumb]

A closed card with a balance has the balance count toward aggregate balance. However, the credit limit is not available so, it is not included in aggregate CL. So, it hurts aggregate utilization.

As far as I know, the closed card is either ignored in the individual card utilization metric - or its utilization is considered based on balance to last reported credit limit.

P.S. often accounts with fraud are suspended, not closed. They subsequently are reactivated using a different CC number with CL and open since date intact.

[Seven8idee]

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@Thomas_Thumb wrote:

A closed card with a balance has the balance count toward aggregate balance. However, the credit limit is not available so, it is not included in aggregate CL. So, it hurts aggregate utilization.

As far as I know, the closed card is either ignored in the individual card utilization metric - or its utilization is considered based on balance to last reported credit limit.

P.S. often accounts with fraud are suspended, not closed. They subsequently are reactivated using a different CC number with CL and open since date intact.

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Thanks for this information, but what about a card that is open, and the balance gets paid to zero??  I am showing a positive alert from Experian after paying a small balance down on one card and then -12 points.   Account still open. No other information that would trigger the point loss.

[Thomas_Thumb]

Closed accounts with balances are ignored when looking at recent revolving activity. Only open accounts are considered in that metric.

In order to avoid the Fico "no recent revolving activity" penalty one or more open revolvers must report a positive, non zero, balance. If the card you paid to zero resulted in all cards reporting a zero balance, a no activity penalty is assessed.

An event reported by a monitoring system may trigger a score pull but that event is often not associated with a score change. A prior unreported non-trigger event may be the root cause of a score drop. 

[SouthJamaica]

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@julia18330 wrote:

Does a closed credit card with a balance (in good standing) count in utilization for scoring? My CU just said they're closing my accounts, including credit card for "suspicious activity". Thanks 

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Yes it does count in utilization, and in a bad way. The balance owed counts. But the available credit does not.

[FicoMike0]

You don't have to hold back with us, we're on your side. Tell us, what kind of "suspicious activity" you were up to? We might want to avoid it. Maybe we can all help you make up a good story for the cu.

[RedKhaos]

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@Seven8idee wrote:

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@Thomas_Thumb wrote:

A closed card with a balance has the balance count toward aggregate balance. However, the credit limit is not available so, it is not included in aggregate CL. So, it hurts aggregate utilization.

As far as I know, the closed card is either ignored in the individual card utilization metric - or its utilization is considered based on balance to last reported credit limit.

P.S. often accounts with fraud are suspended, not closed. They subsequently are reactivated using a different CC number with CL and open since date intact.

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Thanks for this information, but what about a card that is open, and the balance gets paid to zero??  I am showing a positive alert from Experian after paying a small balance down on one card and then -12 points.   Account still open. No other information that would trigger the point loss.

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Was this a (Chase) account you paid down to zero after the statement closed? Are all your other accounts listing a zero balance? 

If so, the -12 might be partly or wholely due to the "all zero balance" penalty. Basically if the FICO model sees you have no activity (zero balance) on all of your credit card accounts, it thinks you're not using your credit at all. This is considered marginally worse than "using your credit responsibly" so you get a small penalty. It'll go away if you let a balance show next month.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Score-Decreased-Because-of-All-Zeros/td-...