I'm curious as to whether it is better for one's mortgage scores to (a) have a large number of zero balance
revolving accounts, so that the percentage of cards reporting balances is lower, or (b) to have a reduced number of cards.
In my case I have 29 non-hidden revolving accounts, 22 credit cards and 7 personal lines of credit. I am at a point where I could certainly depart with some of the credit cards without shedding a tear.
Utilization is not an issue, and I don't have any problem managing the accounts.
So for me it boils down to the question of whether having fewer accounts will help or hurt my scores.
It's a balance. Too many and too few accounts are considered more risky. I'd use Fico reason codes as a guide. The specific ones pertaining to this issue are pasted below. Fico does not provide specific numbers but, I believe 11 to 20 accounts total is a sweet spot. I have 7 open + two closed accounts and I know that is sub optimal based on reason codes I have received and my drop to very good from excellent on MyFico when my file went below 11 total accounts.
As far as accounts with balances, there might be two factors involved: the absolute QTY and % of total for revolvers. For best results with the older mortgage Ficos, particularly EQ Fico 04, I'd recommend keeping # revolvers reporting balances at 3 cards or less even if you have 10 to 20 revolvers. The TU and EX mortgage counterparts are more tolerant.
Side note: One poster with 30 cards did not report any negative impact on Fico score until going over 6 cards reporting ... but that was Fico 8.
@Thomas_Thumb wrote:It's a balance. Too many and too few accounts are considered more risky. I'd use Fico reason codes as a guide. The specific ones pertaining to this issue are pasted below. Fico does not provide specific numbers but, I believe 11 to 20 accounts total is a sweet spot. I have 7 open + two closed accounts and I know that is sub optimal based on reason codes I have received and my drop to very good from excellent on MyFico when my file went below 11 total accounts.
As far as accounts with balances, there might be two factors involved: the absolute QTY and % of total for revolvers. For best results with the older mortgage Ficos, particularly EQ Fico 04, I'd recommend keeping # revolvers reporting balances at 3 cards or less even if you have 10 to 20 revolvers. The TU and EX mortgage counterparts are more tolerant.
Side note: One poster with 30 cards did not report any negative impact on Fico score until going over 6 cards reporting ... but that was Fico 8.
Wow. Thank you for that.
@Anonymous wrote:I have received the negative reason statement that TT mentions...
Too many accounts with balances
... when I have a very low ratio of cards showing a balance to total number of open cards. For example, I have received it when I had 2 out of 13 cards showing a balance. On the other hand, the total number of accounts I had with balances was 4: two revolving and two loans.
This makes me consider two things as possible or even likely:
(1) That while the mortgage models may well consider ratios, they may also consider the integer number of accounts.
(2) That the wording of the reason code may be important -- FICO has no problem saying "revolving" or "bankcard" when it wants to. But the wording just refers to "accounts", which may include loans.
It's possible that the integer number of 4+ accounts may be important. And thus it is one more reason if preparing for a mortgage to have exactly one card reporting a balance, especially if you have two open loans.
I have gotten that reason statement when my scores were in the 780s with no derogs, good age, and ultralow utilization. So it must have been a significant penalty -- not just 1-2 points.
I'm focusing on zero balance accounts.
I think a good strategy might be to wait until "too many revolving accounts" starts popping up as a negative reason code, and then start slowly closing them down until it goes away.
@Thomas_Thumb wrote:Please note the "keep in mind" associated with reason code 04.
Based on that statement it appears that closed accounts are being considered in the attribure analysis.
Good point. So nothing would be gained by closing them (except maybe many years down the road).