Now that Cap One is making it as easy as pie to merge one account into another, one question I have is what effect will the closing of the merged account have on my score?
In my case, e.g., I would be merging a 1 year old account into a 3 year old account. The 1 year old account would be closed.
How would this transaction be interpreted by the FICO algorithm monster?
@Anonymous wrote:Hello SJ! Always good to see you on here.
This looks like another one of your posts where I learn something new. I didn't know there was such a thing as "merging", though I am not surprised.
It's a new thing on the Capital One website
I can certainly answer the "FICO monster" question as long as I am sure I understand what merging in this case means for the credit bueaus.
If I understand you right, it means that Cap 1 will be transfering the balance from the 1-year account onto the 3-year account. And then they will update your 1- year account with the status "closed" (with a date closed as of the day that the merge occured).
I believe that's correct. Here's what Cap One says: "The account will be closed with a $0 balance and will be reported to the credit bureaus as closed within
30 days. This account will also be reported as paid in full after the first statement balance with a $0
balance and no pending transactions."
But the act of merging doesn't result in your 1-year account being deleted from the three CRAs -- just closed. Your 3-year account will have the same credit limit as it did before the merge.
No, the surviving account will pick up the credit limit from the closed account.
Is that all correct?
If I got all that right (there were several assumptions) then it's easy to figure out what FICO will do. You will have a new total credit limit -- whatever your previous limit was minus the CL of the closed card.
No, the total credit limit will be the same; will just be under one card instead of two.
That will have a small effect on your total U, easy for you to figure that out. Your AAoA will not change in any way, since the closed account is still on your reports and will continue to age. 10 years from now the closed account will fall off your reports, having a small effect on your AAoA.
As you can see, the key question is not What Will FICO Do (there should be a tshirt for that), but what will the CRA do? The key questions are (1) whether the 1-year account is deleted from the report or simply closed and (2) whether the 3-year account still has the same CL as it did before. I don't know how Cap 1 works with that. But once you know the answers to the CRA question, then you can answer the FICO question.
If you gain a new limit of $10,000 or more, that will be a positive for FICO score purposes.
