@jdm12 wrote:Hello everyone, I wanted to know if a closed credit card with a balance affects my credit utilization? It seems like my credit score is being pulled down by high balances on credit cards but I know that I've paid off all my active credit cards. However, my FICO 4 and 2 scores still say high credit usage. Same for the FICO 8 for TransUnion and Experian, says "high credit usage". I didn't have this credit card on my radar when I was paying off my CC balances because on Credit Karma, it doesn't factor in the credit used by this particular CC with a status of closed (but not charged off). Could it be that FICO tracks the utlization of CCs that are closed but not charged off?
On another note, I just noticed that I have a high revolving balance. I do have a personal loan that was secured using my car. My understanding of a personal loan is that these should be installments, not revolving accounts. For example, this account has a predetermined fixed payback schedule, about $710 per month no matter my remaining balance. I also received a lump sum payment when I opened the account - All signs of an installment loan, right? However, I just figured out that this balance is being considered on my FICO scores as revolving credit. The creditor for this account is OneMain Financial. This shouldn't be revolving, should it?? I think it is tanking my credit score when it comes to revolving credit utilization. Thanks in advance for your help!
Yes a closed credit card with a balance does affect your aggregate revolving utilization. The debt counts, but the limit is now excluded from the equation.
Some lenders might even report the account as a 100% maxed out account, treating the debt as the limit.
The car loan sounds like an installment loan, and therefore wouldn't be considered in revolving utilization. However, there is such a thing as installment utilization.
@jdm12 wrote:Makes sense about the installment loan. I dug around more and it is not the installment loan that's being considered as a revolving account, but rather it seems that my charged off CCs plus the closed CC equal the amount I was seeing in my FICO report under "amount of debt" section when you first login to the site. The thing that confused me is that the numbers are only accurate if I don't count one of the charge offed CCs and I just noticed for that card the the reporting has stopped. All the other charge offs are still reporting as current utilization.
What would be the best way to lower the utilization caused by CCs that were charged off? Many of them don't have a collection agency assigned to them. If I need to lower the utilization for these, would I simply just call up these companies and pay the balance?
Yes.
Also, I do know that for one of these charge offs, there is a collection agency assigned to the debt. My understanding is that once I pay off the collection, the charge off remains, right?
Right although some folks have been lucky enough to have been able to negotiate a pay-for-delete.
Would I pay the original creditor and kind of pay twice to get the CO removed?
No you wouldn't pay twice.
That would seen a bit crazy to me but not sure how you would remove that.
@BlueMystic wrote:
@SouthJamaica wrote:
@jdm12 wrote:Hello everyone, I wanted to know if a closed credit card with a balance affects my credit utilization? It seems like my credit score is being pulled down by high balances on credit cards but I know that I've paid off all my active credit cards. However, my FICO 4 and 2 scores still say high credit usage. Same for the FICO 8 for TransUnion and Experian, says "high credit usage". I didn't have this credit card on my radar when I was paying off my CC balances because on Credit Karma, it doesn't factor in the credit used by this particular CC with a status of closed (but not charged off). Could it be that FICO tracks the utlization of CCs that are closed but not charged off?
On another note, I just noticed that I have a high revolving balance. I do have a personal loan that was secured using my car. My understanding of a personal loan is that these should be installments, not revolving accounts. For example, this account has a predetermined fixed payback schedule, about $710 per month no matter my remaining balance. I also received a lump sum payment when I opened the account - All signs of an installment loan, right? However, I just figured out that this balance is being considered on my FICO scores as revolving credit. The creditor for this account is OneMain Financial. This shouldn't be revolving, should it?? I think it is tanking my credit score when it comes to revolving credit utilization. Thanks in advance for your help!
Yes a closed credit card with a balance does affect your aggregate revolving utilization. The debt counts, but the limit is now excluded from the equation.
There seems to be a lot of disagreement in these forums about that. Several times you have said that the limit on closed accounts is no longer included in aggregate utilization calculations.
But my understanding (possibly incorrect, of course) is the opposite - that the limit, if reported, is included in the aggregate utilization equation. @K-in-Boston and others have also expressed that opinion several times recently, such as here and here.
If memory serves, most creditors continue to report the limit on closed accounts, unless there is some kind of derogatory indicator (e.g. charge-off, default, etc.) in which case it may be reported as zero, which would have the detrimental effect you noted.
I've studied it carefully, and I also was able to test what I learned in a memorable way. One day Bank of America closed all my cards. On one of them I had a large promo balance, with a zero percent interest rate. Although I knew this was bad, I wasn't going to cough up $10k, and lose my zero percent APR, so easily. So I just continued to pay the balance down gradually over about a 7 or 8 month period. Yes the original limit was being reported by BOA, and the individual account utilization was being reported accurately, but the aggregate utilization was based on my limits without that card's limit. So I don't really care what anyone else says, I know for a fact how it works.
It is an objective fact that FICO (VantageScore may be different, but most people and most lenders rightly ignore those) utilization metrics count closed cards with balances that are also reporting a limit greater than zero the same as if the card is open. We've been through this time and time again - credit monitoring front-ends have different ways of reporting balances, available credit, and utilization which do not necessarily correlate with the numbers used in underlying FICO scoring models. The same can be said about things like HELOC accounts where the threshold is above the amount excluded by FICO models - take a maximum withdrawal from something like a $200k HELOC and you'll see credit monitoring sites count it for utilization and show $200k more in revolving utilization than FICO is actually counting.
@K-in-Boston wrote:It is an objective fact that FICO (VantageScore may be different, but most people and most lenders rightly ignore those) utilization metrics count closed cards with balances that are also reporting a limit greater than zero the same as if the card is open. We've been through this time and time again - credit monitoring front-ends have different ways of reporting balances, available credit, and utilization which do not necessarily correlate with the numbers used in underlying FICO scoring models. ......
What evidence do you have that the no-longer-in-effect limit is not excluded from aggregate utilization? When repeatedly asked this question, both by you and by me, the FICO insiders declined to answer, saying only that the balance is included, but declined to answer the question as to whether the limit is included, in the calculation.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...