Inactive Account Activity - Negative Impact

[Anonymous]

I was surprised to get a score drop on EQ of 6 points for having an $84 charge show up on my Pottery Barn card that I haven't used in almost a year.  The reason it says is because a previously inactive account has new activity.  The account was open, but it was 11 months ago that I used it, and a few days later I received another 5 point drop for a balance change.  Also, TU dropped 5 points for the same balance increase, which seems a bit harsh to me.  Normal fluctuations for me either result in no points at all, or occasionally, a 1 point swing.  The CL is $4k and my overall utilization on all cards is <5%, so this seemed surprising to get a double punch for such a small charge.

Has anyone else had this happen to them, possibly on SD cards?  I can't imagine they are taking issue with the specific creditor?

[Thomas_Thumb]

I have read multiple posts here regarding score drops when an inactive account reports a balance. One poster inparticular studied that. I can't recall who it was at the moment. His findings were:

1) An account may be tagged as inactive after 3 months of no balance reporting.

2) An account with no activity for 6 or more months resulted in a temporary score drop the 1st reporting cycle after it showed activity. The drop was temporary.

3) An "inactive" account that showed activity in the 3 to 6 month time window did not cause a score drop when activity was reported.

Side notes:

All no annual fee "non store" credit cards (i.e. bank cards, AMEX cards, Discover cards) should be used at least once every 6 months to avoid potential adverse action (AA). Often you can go 12 months without a problem but... some have reported banks closing CC accounts due to inactivity in as few as 7 or 8 months.  

Typically cards having an annual fee are not at risk for closure if you pay the annual fees. However, you may suffer an AA resulting in a credit limit decrease (CLD). Store cards are more lenient relating AA due to non use. Why - because it costs them less to use their card than a 3rd party credit card in fees. I had over 4 years of non use on my Kohls card before they closed it due to inactivity. Typically store cards don't do AA CLDs due to inactivity.

[Powertripper]

So there is clear distinction between "no balance reporting" and "no activity"?

If one uses their cc's at least once every 6 months, this obviously shows activity to the creditor, but if the balance is PIF prior to the statement cutting how does that truly report to the CBR? Since a $0 balance is reported is this considered inactive? Surely a date of last activity reports when the creditor reports, right? 

2) An account with no activity for 6 or more months resulted in a temporary score drop the 1st reporting cycle after it showed activity. The drop was temporary

If these findings are correct, let say you have 12 c/c's and you keep them all in a 6 month rotation to show activity; whereas you make charges on 2 different c/c's each month for 6 months and then repeat-it seems you are basically constantly 'temporarily" lowering your score. 

If that is the case then:

3) An "inactive" account that showed activity in the 3 to 6 month time window did not cause a score drop when activity was reported.

One with many credit cards might have to change the rotation to a 5 month rotation?

Opinions/Insight? 

[Thomas_Thumb]

You make some good observations.

I suspect all scorecards do not behave the same regarding inactivity. Those with 12 open accounts may not see a score impact if a single inactive account reports whereas someone with 3 or 4 accounts might. 

Since I suffered a CLD a few years back I use all my cards at least once every 4 to 5 months. I always let full balance report on statements and then PIF a few days before due date. I can't confirm if, or how, Fico differentiates a card that is used and paid down to zero before statement cuts from an unused card. 

[JagerBombs89]

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@Powertripper wrote:

So there is clear distinction between "no balance reporting" and "no activity"?

Opinions/Insight? 

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I use all my cards at least once a month but generally only let 1 or 2 cards report a balance greater than $0.  However, if any of my other cards report a balance, I always got the "there has been recent activity on an inactive account."  So, FICO sees my cards reporting $0 per month, every month and thinks my accounts are inactive.  But in reality, I use them every month and pay them off before the statement cuts - thus, "inactive accounts."

[masscredit]

I usually let one card report each month and pay the rest in full before the statements close. I'll change the card that reports once in awhile.  And then there are months when I'll let 3-4 cards report. Even if it's just a small balance. I'll look ahead when I do that to make sure I have no chance of having to apply for credit so it doesn't matter if I lose a few points that month.

[CreditMagic7]

Good informative topic and discussion.

I suspect i'll realize that FICO rule pertaining to both inactivity and balance when i go to use my Home Depot card next week.

While Lowe's has seen far more activity by virtue of their higher line plus great promotions Home Depot for me has typically been reserved for usage during spring and summer seasons so is not seen activity since last summer.

Guess i'll also make use of that 10% 0ff coupon before it runs out this month.

I'll post back if i get the RULE penalty deduction or not but fully expect it now this is come to light.

[Revelate]

It's just a configurable alert on Equifax, check either in the web interface or the mobile app and it is configurable.

Duplicate alerts unfortunately produce double-score "drops" but generally if you look at prior score to current score it only dropped once.  It's an artifact in the old Scorewatch product, and that's where I'd look first.

5 points is a reasonable change with your high scores if you crossed a boundary on number of revolving tradelines w/balance potentially.

[RonM21]

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@CreditMagic7 wrote:

 Good informative topic and discussion.

I suspect i'll realize that FICO rule pertaining to both inactivity and balance when i go to use my Home Depot card next week.

While Lowe's has seen far more activity by virtue of their higher line plus great promotions Home Depot for me has typically been reserved for usage during spring and summer seasons so is not seen activity since last summer.

Guess i'll also make use of that 10% 0ff coupon before it runs out this month.

I'll post back if i get the RULE penalty deduction or not but fully expect it now this is come to light.

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I agree. This is something that I didn't realize happened. Eye opener when I read this.