Question About Closed Account and Credit Score

[Anonymous]

Hello

This is my first question on this forum.

I have 3 Credit Cards . They carry Balances as follows.

1) Card 1: Balance / Limit  : $4174 /$5000 ( 1 month ago)

2) Card 2 : Balance / Limit : $3175 /$3700

3) Card 3: Balance/ Limit : $800/$1200

The Bank associated with card 1 sent me a notice that they would charge annual fee beginning next month. I decline to pay annual fee knowing that my account will be closed. I paid off $3000 on that card so far and current balance is $1174, I plan to pay remaining within a month.

Closing this account has brought my available credit limit down to $4900. Will This action affect my FICO score?

Thanks

[OptimalCS]

Welcome to the forums,

Unfortunately when you closed card 1 you lost a huge amount of available credit ($5000).

This will affect you score as long as you're still max out on your other two cards. 30 % of your FICO score considers the "amount owed" . This is measured by utilization. Utilization is the amount of your credits limits (individually & cumulatively) being used. Your FICO score takes into consideration your total available credit vs. the amount owed.  

Your total available credit was $9,900, your total balance was 8149, you were using about 80% of your available credit (huge score killer).

If you had kept card 1 open, after paying down $3000, you would have reduced your utilization by about 20%, which would have given you back some points. 

When you close a cc account you lose the available credit from that account.

But you need not worry, when you pay off the other two card, your utilization will decrease and you'll still get those points back  

[OptimalCS]

I forgot to add that closed account are tricky because even though you lose the available credit, you're still hurt by lingering balances. 

Balances on closed account are still factored into "amount owed".

This usually has the tendency to increase your utilization because you don't have enough available credit to offset the balance from a closed account.

So to recap when you have a closed account, you lose the available credit associated with that account, but the balance still affects your utilization.

[MarineVietVet]

---

@Anonymous wrote:

Hello

This is my first question on this forum.

I have 3 Credit Cards . They carry Balances as follows.

1) Card 1: Balance / Limit  : $4174 /$5000 ( 1 month ago)

2) Card 2 : Balance / Limit : $3175 /$3700

3) Card 3: Balance/ Limit : $800/$1200

The Bank associated with card 1 sent me a notice that they would charge annual fee beginning next month. I decline to pay annual fee knowing that my account will be closed. I paid off $3000 on that card so far and current balance is $1174, I plan to pay remaining within a month.

Closing this account has brought my available credit limit down to $4900. Will This action affect my FICO score?

Thanks

---

Hello and welcome to the forums.

Is this account already closed? If it is I think you made a mistake. If it's still open I would wait until I paid off those other cards before I closed it and I'll explain why.

If the card is closed since the balance and CL are still being reported then they are still used it in utilization calculation. Once that balance gets to zero then you will lose that CL and the overall CL will be $4,900.

After paying card #1 down to $1,174 your overall utilization right is 52% ($5,149/$9,900).

Once you lose that CL of $5,000 on card #1 then your overall utilization will be 81% ($3,975/$4,900). Since utilization is 30% of your total score then this will hurt your score in my opinion.

Here is an excellent thread discussing Closing Credit Cards.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

Thank You for your replies. I am projecting myself to be free from CC Debt by May by paying off the remaining balances on the remaining accounts.

[MarineVietVet]

---

@Aim720 wrote:

I forgot to add that closed account are tricky because even though you lose the available credit, you're still hurt by lingering balances. 

Balances on closed account are still factored into "amount owed".

This usually has the tendency to increase your utilization because you don't have enough available credit to offset the balance from a closed account.

So to recap when you have a closed account, you lose the available credit associated with that account, but the balance still affects your utilization.

---

It depends.

If a closed account with a balance continues to report the original CL, then both the balance and the CL of the closed account will be used in calculating utilization.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

Honestly bank did not leave any choice. Either Accept an annual fee and everything is good or Decline it, account will be closed and I can pay off the balance as per my schedule.

[Anonymous]

Yes I am going to take extra pinch to my financial life to pay remaining 1174 dollars in next 15 days so that there will not be any balance left anymore.

[MarineVietVet]

---

@Anonymous wrote:

Honestly bank did not leave any choice. Either Accept an annual fee and everything is good or Decline it, account will be closed and I can pay off the balance as per my schedule.

---

What happened to digitalborealis?

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

Thats still me I dont know why it is showing my  "myFICO" login id in the forums now.