Closing one of several installment accounts?

[spunsugar]

I have five accounts with balances, which the scoring system says is "too many."

Two of them are revolving lines (Citibank and AmEx). Easy to just pay one to zero just before the statement close date. (My utilization is ~1%.)

The other two are installment loans (a car and a motorcycle). If I pay one of them off, will this have a negative impact on my score? I will still have one open installment account, so that should be OK for credit mix, I hope?

The final one... no clue what that is.

[Anonymous]

It depends on which one you pay off. Say, for example, one has a low remaning balance as a percentage of the original loan amount, and the other a high remaining balance. If you paid off the one with the low balance, it would likely hurt your score. If you paid off the one with the high balance, it would likely help your score.

[Anonymous]

Captool is (as usual) right.  :-)

One additional consideration would be how much life each loan has left.  Suppose the car has 3 months left and the boat has 40 months left.  If you pay off the boat then then you will find that (four months from now) you have no open installment loans of any kind.

A final consideration and possibly the most important one of all is how much interest are you paying on the two loans.  Interest rate does not influence FICO but it is really important when you are thinking about saving yourself money. 

Here's a few closing thoughts:

(1)  You mention that you have five accounts with balances,   You name four and then say that you have no idea what the fifth account might be.  This is probably the most important thing I took away from your post.  It's really important to know every single account that you have.  If a scoring message says you have five accounts but you don't know what one of them is, boom!  Definitely your first step needs to be getting a complete and accurate picture of what all of your accounts are. 

The way you do that is to pull your credit reports.  These are different from your credit scores.  There's a lot of ways to see your credit reports for free.  Let us know if you need help doing that.

(2)  The scoring message was alluding to one factor of many that FICO looks at.  This factor is where FICO looks at your accounts at sees how many have a zero balance.  FICO likes seeing multiple zeroes, especially amongst open accounts.  (As long as you have one positive open credit card balance and one positive open installment.) 

Trying to close open installment loans is not the best way to address this factor. The better way to solve this is to carefully look for one or two more credit cards you think you would really like.  And gradually expand the number of cards you have.  Going from two to four over time would be great for you.  And then, any time you wanted to get some extra points, you could easily create three open accounts with zeroes (by as you say paying to $0 three of your four cards).

(3)  Although FICO does like it when it sees more than one account with a zero balance, it's not the most important scoring factor.  CC utilization and payment history (for example) are vastly more important.

[spunsugar]

Thanks to both of you for very helpful responses. Let me address CreditGuyInDixie's big question....

I could easily pay off any/all of the installment loans tomorrow if it was advantageous (but it seems like leaving one installment loan open is best). My revolving utilization varies but is generally in the 1-7% range. (I pay my bills in full every month before the statement date, but sometimes a late charge comes in and trips things up.)

I log into myFico, go to Scores, pick "Amount of Debt" on the left and EQ at the top. I get a breakdown of reported utilization, # of accounts with balances, and the total amount carried. In this case, the number of accounts with balances is 5. Now I go to Equifax's dispute page (because something is screwed up) and identify myself. I go to "Revolving Accounts." There I see three open credit card accounts (correct), two of which have very small balances (correct), and one old AU account. The third open account reports a balance of $0 and the old AU reports "n/a". Now I check "Installment Accounts." There I see two open installment accounts, one with about 10% utilization and less than a year to run, and one with 60% utilization and three years to run.

So where's the fifth account with a balance? Literally... I do not know. It is not reflected in the credit reporting data available to me. Am I missing something? Is it possible that the "n/a" balance (an AU account for which I am no longer an AU) is considered as "reporting a balance," and I should dispute that inaccuracy?

Thanks again for the help.

[Anonymous]

You sound like you are approaching all of this in a really thoughtful and methodical way, SpunSugar.  Good for you.

Focusing just on the issue of the mystery account, here's an approach that may work.  First step is to make sure that we have a really clear list of accounts and see if there is any illumination that cross checking between the three bureaus may give us.  And after that, use some different reporting tools and see if they tell us anything different.

My advice at first is not to rely 100% on the "meta data" tools that are being supplied by a third party product, whether it is myFICO or Credit Karma or whatever.  These are the tools that go through your report and summarize it for you.  Here is your utilization, here is your AAoA, here are the accounts showing balances.  Those are fine for what they are worth, but they are not infallible.  Occasionally there can be a weird glitch (or one third party tool may think of things differently, as for example Karma thinks of AAoA differently from say myFICO).

So my advice is to go through all your reports and make a list of your accounts and put it into a spreadsheet.  This is going to have a real advantage for you later (for example you'll be able to use that spreadsheet to easily calculate your AAoA any time you want).

As you are doing this, take careful note of any account that appears in one report but not in another.  If that happens you may have to copy the main data of your spreadsheet onto three tabs and then highlight in red any account that does not appear in all three.  If you are lucky, all the bureaus will reports the same accounts. Also useful might be to highlight in a different color any account that is an AU account. 

I would add as a column the date each account was opened (and mentally check to make sure the date indicated sounds correct -- yeah that sounds like when I remember opening that account).  And add as a column the current balance.

Doing all this will enable you to easily put your accounts into groups so you can investigate the question you originally posed.  Using your myFICO reports but NOT relying on the metadata tools that MF supplies:

What are your accounts?

Which are the revolving accounts?

      Of those which are the ones that show a balance?

Which are the installment accounts?

      Of those which are the ones that show a balance?  (This should in theory be the same as the open installment accounts.  Is it?)

Carefully cross check all three bureaus and see whether all three reports are listing the exact same accounts and of those are showing the exact same ones that show a balance.  (Again, based on your own careful line-by-line investigation, not based on what the summarizing metadata tools tell you.)

In your posts thus far it sounds like you are basing this only on the Equifax data.  It may be illuminating to consider all three bureas and (as I say) to also not rely on MF's metadata tools to tell you the answer.

If you cannot find the answer to your question that way, I suggest you try to answer your question a different way.  This would be to use a different credit monitoring service to pull your data.  Start with Credit Karma.  Pull your reports there (it's free) and see whether Karma's reports (EQ and TU) illuminate where the strange mystery account is coming from.  You can also true the true full-blown reports from AnnualCreditReport.com.

Happy to chat further once you have done this, especially if you can make a complete list of your accounts for us.  (You don't  have to tell us the true credit card names if you don't want, just as long you give them clear names for the purpose of the post.  E.g. Card A, card B, card C, Loan W, Loan X, Loan Y, etc.)  I bet yoou will be able to find your own answer if you do all this homewok, however.

BTW, the whole spreadsheet thing will be a huge help down the  road in other ways.  It's a good time investment to do this regardless.

[Anonymous]

A few more thoughts:

Part of the issue is that you are discovering that there is an account on your reports which you do not believe should be there.  This is the AU account.  Your perception is that you are no longer an AU for that account.  (Good job, btw, at developing your own accounts.  AU's are best when a person really needs one at help in the earliest stages of building or rebuilding credit.  They are best seen as a ladder that you toss away once you have climbed to the next level.)

I would not try to "dispute" it (at least not at first).  I would talk to the person who's account it belongs to and ask them to talk to the credit card issuer.  The actual credit card company should be able to remove you as an AU.  Try doing that, and then use a free tool like Karma to keep pulling your reports every couple weeks to find out when the AU has been removed (at both TU and EQ). 

As you say, the AU account may be the whole thing that is causing the weird glitch in the "five accounts" issue.