Utilization

[strive4credit]

When enrolling in a Balance Liquidation Program does the original limit and the balance have an effect on your scores?

For example, when you enroll in a BLP, the account shows up as closed by consumer....thats better than closed by creditor.......the limit lets say was 9k and slowly paying it down to 3k, how does that effect your score?

Basically do closed accounts and their respective limit/balance ratio affect your score?

[30daylate]

I would never close a credit account because it affects the average length of your tradelines which is a factor that goes into your credit score. Also it only affects the utilization if the limit goes down more proportionately than the debt amount.

[Lian]

Both open and closed accounts factor into your % utilization.
FICO continues to include closed accounts in your % utilization calculation until the balance reaches $0. After that, the account drops from your % util calculation.

Closing a credit card does not immediately harm your average age of accounts. Both open and closed accounts are included in your AAoA calculation. Unless the credtor reports a deletion of the account, it wont be delted from your CR until approximately 10 years after the date it is closed, and will thus retain its age in your AAoA determination.

[30daylate]

Lian,

I assumed that a closed account meant that the balance was paid off. Would a closed off account with a balance be a charged off account and not closed?

Sorry I am asking so many questions I just had no idea that a closed account factored into a credit utilization ratio. I mean if the account is closed and charged off then they wrote of the balance and sold it to a collection agency so technically they can't collect that debt anymore.

[Lian]

A charge-off is only an accunting procedure that permits the OC to reduce their tax liablitly. By doing a charge-off, that does not excuse the debt, or prevent the OC from continuing to collect it. They can do a CO and retain the debt without selling it to a debt collector.
They can continue to collect on their own, they can retain ownership of the debt and just hire a debt collector to conduct collection activities for them, or they can sell it to a debt collector. Doing a CO is unrelated to either referring the debt for collection, or selling the debt.
Close account can, and often are, closed with a balance still owed, The creditor usually wants to prevent the consumer from accumulating any more debt. Whether they then do a charge-off of the debt is at their discretion.