Definition of too many accounts and closing accounts

[Anonymous]

I don't have my credit report in front of me, but I have approximately 21 accounts, 7 of which have balances and a total of 11 open accounts (9 cc, 1 student loan that I am a co-signor on and 1 car loan). 

One negative mark on my report is a result of having too many accounts.  Does that refer to too many open accounts or too many accounts in general?

Also, one of my cards just increased my credit limit an additional $4,000.  I have 2 smaller cc with no balances that total $3,000.  If I closed those 2 accounts, spreading out the time that I close them (3 to 6 months in between each), then I will have less accounts and still have $1,000 more to go towards my credit utilization score.  By the time another 6 months comes along, I also will have paid off between $3,500 and $4,500.

Does this sound like a good plan?  Who knew paying off debt was such a tricky business? 

Thanks!

[haulingthescoreup]

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@Anonymous wrote:

I don't have my credit report in front of me, but I have approximately 21 accounts, 7 of which have balances and a total of 11 open accounts (9 cc, 1 student loan that I am a co-signor on and 1 car loan).

One negative mark on my report is a result of having too many accounts. Does that refer to too many open accounts or too many accounts in general?

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First of all, are these FICO score reports, pulled here? And does it say too many accounts with balances, or just plain too many accounts? If it's just "too many accounts", as best as we've been able to tell, this is a bogus flag. You don't have too many accounts for scoring purposes. (And if the scores aren't FICO's, the scores and advice are not worth paying attention to.)

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Also, one of my cards just increased my credit limit an additional $4,000. I have 2 smaller cc with no balances that total $3,000. If I closed those 2 accounts, spreading out the time that I close them (3 to 6 months in between each), then I will have less accounts and still have $1,000 more to go towards my credit utilization score. By the time another 6 months comes along, I also will have paid off between $3,500 and $4,500.

Does this sound like a good plan? Who knew paying off debt was such a tricky business?

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No, no, no, don't close the accounts. You want to keep the overall increased total credit limit to lower your total util (amount owed divided by credit limit). Also, closing them would increase the proportion of accounts with balances, leaving you worse off than before.

The goal for number of accounts reporting balances is half or fewer of all accounts with balances, AND less than half of CC (revolving) accounts with balances. So eleven total accounts: 5 with balances; 9 CC's, 4 with balances.

Your car loan and SL will always report balances as long as they are open, so if you only allow 3 CC's max to report, you won't get that "too many accounts with balances" ding.

I would recommend keeping all the open accounts open, and sticking with your plan for major pay-downs. Also, in case you aren't aware, even if you PIF (pay in full) your cards every month, the balance on your statement is what is reported to credit bureaus in most cases, which is why some of us pay our balances off before the statement drops. That way, we use our cards a lot, but they report $0. This is pretty tedious, but if you are working on your scores for a specific reason, it's helpful, plus it really gets you into a mindset of never carrying debt on CC's.

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Thanks!

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You're welcome, and welcome to the forums!

[Anonymous]

Good answer above. Too many accounts means that too many of your open account are showing balances in relation to total accounts. If you close accounts you only make that situation worst. Just pay off balances to $0 and then they are not counted as a balance. Actually the more open accounts with $0 balances actually help this situation.

As far as closing the credit cards, bad move for credit scores. Not applying for them might be a good move but once you got them, closing them won't remove them from your CR. They are worth more points open than closed.

[Anonymous]

Far be it for me to contradict the super contributors, but there are clearly 2 counts. The first just says accounts and the second says accounts with balances. In the past I've seen both flagged, now I only have accounts flagged (not accounts with balances). Yes this is right here on MyFico. Are you saying that MyFico's website is messed up and that flag next to accounts is meaningless?

[haulingthescoreup]

No, we're saying that whatever penalty there is for simply "too many accounts" is nearly meaningless. It might be like the penalty for consumer finance loans --irritating, but negligible.

[Anonymous]

I love that I can learn something in unexpected places here. I was freaking out earlier because I had a ding for consumer finance account also because I had a car loan. American General can't just transfer to a different office, they have to pay off and reopen accounts. I know that may not look the best, but I can explain it and it's all paid off, but I was so happy to find out it doesn't hurt that much because that's negatively impacting my score too.