When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

[Anonymous]

Ignoring the obvious AAoA bumps I will get, I was wondering if experts knew when our CS increases after closing accounts? I was fully aware (and prepared to take) the CS hit for closing installment accounts; but we are planning to purchase our dream home in mid-2018 and needed to lower our back-end DTI. So unfortunately, I had to close some accounts. I did not change my credit mix by doing so, and using AZEO I maintain a utilization rate that fluctuates between 1% and 3%. No derogs ever and new credit will drop below 1 by Feb 2018 (an anticipated bump).

When I closed the accounts, I took between a 12 and 21-point drop. My CL was increased by a couple lenders, but that is irrelevant to my situation since I always remain below the magic 8.99%. My installment debt ratio remains roughly the same (slightly higher but only by 0.2% - 12.4% verses now 12.6%). So my question. Is it realistic for me to anticipate an increase (not associated with AAoA or new credit inquiry drop-off data) at some time in the near (2-3 months) future (assuming all else remains the same)?

Thanks

Y

PS I know I could lower the installment ratio for a bump, but I am stuck with the same monthly rate. If I reduce the amount too much (and there is little room) then I risk paying it off too early because there are not many payments left. This would open a whole can of worms by changing my credit mix – not going to happen. I contacted the lender and asked if they could lower the payments, charge me the same interest rate, but just extend the time. Not going to happen without a new loan (they didn’t really understand anyway). Instalment loans are time limited based upon the number of months on the loan. Pay a bunch early, all I do is shorten the number of months remaining and create another problem. Will my CS rise or should I just resign myself to getting a few bumps for AAoA and dropped inquiries?

Y

[Anonymous]

Were the accounts you closed credit cards?

How many credit cards do you have now?  (After the closures.)

Where are you seeing that score drop from?  Credit Karma?  Closing accounts should have no effect on your score, as long as it the closures are not affecting your revolving or installment utilization, and you say it isn't.  The exception would be if you ended up with only a small number of credit cards.

[Anonymous]

Were the accounts you closed credit cards?

No, the loans were installment loans (1 car and two personal). Still have a car loan that I purposely left open and a student loan as well so credit mix did not change nor did my utilization (% of those remaining) change from that value prior to closing the others (as stated).

How many credit cards do you have now?  (After the closures.)

I believe I have sufficient CCs (12) with AZEO utilization as stated; but I did not close CCs.

Where are you seeing that score drop from? 

FICO 3B+ Ultimate with monthly updates and alerts set to EQ values as offered.

Credit Karma? 

Don’t use them since I know their algorithms don't include closed accounts.

Closing accounts should have no effect on your score, as long as it the closures are not affecting your revolving or installment utilization, and you say it isn't.  The exception would be if you ended up with only a small number of credit cards.

I could not agree more, but the score did drop and none of those factors (and many others most of us are aware of) are the issue. Whether it should or should not have is irrelevant to me in that (as we all know) we can argue until we turn blue and nothing will change. I resigned myself to that fact and was wondering if it would come back (excluding the bump factors I mentioned).

Thanks

Y

[Anonymous]

Hey CG in Dixie and/or and other Comparable, Experienced Leaders/Moderators

Do you know of any “magic” threshold for installment accounts that are comparable to the revolving account edge of 8.99%? I fully understand that should be extraneous to my OP question, but as it is oft said. What should have, could have, would have is irrelevant to what is. My job is to rectify the situation to do what I want to be accomplished. Maybe finding that border, and crossing it, is a potential remedy.

I have searched the forums for the values, and know they exists somewhere; but for the life of me I can’t find them. I would appreciate any links you are aware of and any remedial “search techniques” for which you are familiar.

Thanks in advance,

Y

[Anonymous]

Would you mind giving us the balance and original loan amount of the loans you paid off?  (By balance I mean the balance just prior to payoff.)

Likewise, could you give us the balance and original loan amount of the loans that are open now?

I agree that the loans appear to be the culprit but it is hard to know what could be going on for sure without that hard information.

You're right that you have plenty of credit cards, and as you say there's been no change in the cards anyway.  Is the card that is reporting a balance a true credit card (and not a charge card)?  And is it a card in your name and not an AU card?

[Anonymous]

Thanks for the quick response. Let me open my reports, get the exact numbers, and let you verify my math:-) As for the CC, yes they are all mine. With my "kids" (25+ y.o.) dad has always been the cosigner (no issues there and I no longer have their accounts showing other than PIF/PAA/NL).

I'll get back with you in a bit.

Y

[Anonymous]

I had to go back to October since November already showed the reduction. Here is the data for the closed and remaining accounts. They are rounded up and down according to the 5-rule so the percentage is a little off, but it’s still less than a 1% error.

Closed:

1 Car Loan #1 Balance $3.7K Original $45K

2 PL #1 Balance $4.1K Original $25K

3 PL #2 Balance $1.6K Original $10K

Still Open:

4 Car #2 Balance $6.4K Original $16K

5 Student Loan Balance $10.9K Original $122K (I've been paying this off longer than most have paid their mortgage:-)

Utilization all five loans = $26.7K/$218K = 12.3%

Utilization two remaining = $17.3K/$138K = 12.5%

Thanks

Y

[Anonymous]

Some forum members such as SJ have reported big (15-20 point) gains from taking their aggregate installment loan utilization across the same 8.9% threshold that we talk about with respect to revolvers. 

I'd say if you can take that installment loan utilization down another 3.5% you'll see a nice score bump.

[Anonymous]

Thanks BBS. I can do that (I think) without causing other harm (paying off the loan too early). Cash is not an issue and since I have some flexibility with my SL (a few years ago I put a big chunck into it) that might just work (if your threshold is correct). It should not close too early. I'll exam your suggestion, and try it if it works before the reporting date. I'll post to the board my results; but it will probably take a couple months to go completely through to see the results.

Thanks again,

Y

[Anonymous]

Dad-Burn-It

Following BBS’ suggestion is going to be hard, if not impossible. My car loan payments are $472 a month and I only have 13 months left. My school loan payments are $678 a month and I only have 16 months remaining. Initially I thought this was okay since I was making my house purchase in 6-8 months; but alas; in order to get to 8.9% (as suggested) I need to lower my balances below $11K. If I lower those remaining accounts by half ($3.2K car and $5.5K SL) I am there, BUT, I now have the problem of having lowered my number of payments to a point where accounts will close – bad news. Car will close in 6 months and SL will close in 8 months (not adjusting for reduction in interest payments – maybe 5 and 6 months respectively). This is right around the time I will be closing on the houseL

For those who are going to argue that my math doesn’t add up, I know. I am fiscally conservative (albeit socially liberal) by nature; and it has served me well. When I had to make a minimum payment and it was say $100, I always sent in a buck and a quarter to be sure all was covered – NL, no derogatory for a lifetime. When BBS suggested 8.9% I saw 6.9% plus a little for mom, the kids, and grandchildren = 6.4%. As an old physics professor told me as a grad student: “1+1 does not always equal 2; sometimes they are side by side (1+1=11).”

Y