Number of Bank or National Revolving Accounts with Balances |
By Kenneth Long on July 30, 2010
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| "Number of Bank or National Revolving Accounts with Balances" |
Credit Score Risk Factor Codes |
| Equifax |
23 |
| Experian |
23 |
| TransUnion |
Not Factored |
| NextGen |
M6 |
If you have ever been told that you have too many bank or national revolving accounts with balances, then you might be predisposed to future delinquencies. While your current lenders may not like the higher risk, you can bank on new lenders to deny your credit application.
Each account that you maintain a balance on must receive a payment monthly. The payment must be at least as much as the minimum payment for that month, and it must be received on-time. A late payment can trigger a late fee, which increases the minimum payment owed on the account. A higher minimum payment can make it harder for indebted families to keep up.
The risk that an account might get overlooked is greater when there are multiple credit accounts with balances that must be paid. You may think that you paid 12 when you really only sent 11 payments. It is simply too much to keep up with when you have so many credit cards.
When times are tough, the chance that some accounts will go unpaid increases substantially. If you were already living on the edge before an emergency occurred, then you may have to choose which accounts get paid that month. The more accounts that you have, the more that likely will not stay current.
Credit card issuers like for you to maintain a high interest balance on your account. As long as you keep making monthly payments on the account, they make a lot of money at your expense.
The problem with that strategy is that the more overextended you become by debt payments, the more likely you will ultimately default on some of your accounts. This higher risk is what card issuers are wary of, since they don't want to take on more risk than the potential profits would justify.
A single default could negate profits on several other accounts. As some card issuers have seen default rates peak at nearly 10%, this can decimate profits and even threaten the solvency of the company. Advanta shut down it's credit card division after its default rate hit 15%.
If you are considering a new application for a credit card and you already have several card accounts with hefty balances, you might want to consider holding off until you can pay down some of your balances. You stand a fair chance of being denied a new credit account, which can result in a credit score penalty.
If the reason you want more credit is that you are maxing out your other accounts, then you should understand that new credit is the last thing you need. You are already overextended and need help to avoid defaulting on your current debt accounts.
Join the Discussion at the Credit Forum: How many credit cards can carry a balance before your scores begin to drop?
Number of bank or national revolving accounts with balances is credit bureau risk score reason 23 for Equifax and Experian consumer scoring products. This code is not a factor in TransUnion FICO scores. It is NextGen score code M6. For more information on credit scoring, see the complete list of credit score factors.
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