credit utilization on closed accounts with balance

[Anonymous]

How is credit utilization determined on closed accounts with balances still owed?

Background: I closed several accounts to decrease interest rates in a 4 year plan to zero out all my credit card debt (best option to avoid bankruptcy).

The original credit lines are still reported on credit report as well as percent of utilization (balance owed), but it is also accurately reporting that these accounts are closed.

I'm just curious how closed accounts with balances still owed are factored into utilization rates when determining FICO credit score?

I'm interested in knowing that as these balances on closed accounts decrease over the next few years if they will most likely positively impact my credit score or not.

[Anonymous]

Typically an account closed with a balance shows as 100% utilization - being closed to any further activity other than a payoff plan that I assume you have in place with the lender means that your balance at any given time is treated as the limit for that account. In effect the account is maxed at 100% until it’s paid off, at which time the account is updated to $0 balance, zero UTI.

[Anonymous]

I'm in the same situation. I have some closed accounts that I'm paying off with very low interest. My Experian.com account gives me two percentages when it comes to utilization—100% (because the accounts are closed) and 80% (and going down each month) because the original credit limits of the closed accounts are still on the record.

I have no idea how this plays out and what it looks like to potential creditors, but I do know that my FICO scores are increasing each month and it does seem like the lower utilization is a factor. 

[RobertEG]

The CRAs permit creditors to report closing of revolving accounts that still remain active in order to contain risk by terminating ability to add additional charges, thus increasing the debt balance.  In other scoring ways, closure does not usually affect scoring

While I have seen posts asserting that closed accounts, and particularly those that have been reported as charged-off, are treated by FICO as being at 100% util for scoring purposes regardless of posted credit limit, I have never seen any official confirmation of that assertion.

In  posts from a few years ago, it was common wisdom on this site that accounts, open or closed, that show a credit limit and current balance are included in scoring with calculation of % util being the standard balance/CL.

I have not seen confirmation that closed accounts are all scored as if they were at 100%.

Do others have anecdotal posts that clearly demonstrate how closed accounts are scored in % util?

[Remedios]

I closed an account that had a balance, and it reported as such for 30 days (till payment updated). Both the limit and balance were reported. 

There was no scoring change during that month, so it was not scored as if it was at 100% utilization. It was business as usual. 

There was no AA involved, I simply did not use the card enough to justify babysitting it. 

[Remedios]

but good luck trying to dispel the myth that  every closed account is at 100% utilization.

I've stopped trying to make that point long time ago. 

[Anonymous]

Without a posted credit limit on a closed CC, how does the FICO model know to calculate your Util%?

For example, if you had a CC with a $1000 CL that was closed and after closing the creditor only reported a $900 balance but didn't report a CL. What is the FICO model doing to calculate your Util%? Is it guessing the CL must be equal to the balance owed for a 100% Util? Is it taking your previously reported CL for that CC for a 90% Util? Correct me if I'm wrong but with only a balance and no reported CL there's no way other way you can calculate the exact Util%. 

[BallBounces]

@Remedios and @RobertEG,

Thanks for your observations.

[Anonymous]

My cards all report the balance owed and the original CL. Yet, they also indicate they are closed. It is a curiosity for me It doesn't seem like many people know the exact answer on this, especially when I scour other forums on this topic as well. 🤷‍♀️

[Anonymous]

This is what my Experian.com report shows me. On the main page, it says I have 100% usage.

But then on an overview of my Experian Fico, it says I have 81% (this is calculating the two closed accounts that I'm paying off and my new open accounts). Also on the page which gives the utilization of each individual account, the percentage of the closed accounts goes down each month as I continue to pay them off.

I assume that the 81% utilization is the "real" one used for my score, but who knows?