What’s an “Open” Account and how are they scored?

Open, closed, usable, not usable…an Open account simply means it’s not “closed”, right?  Nope, it sure doesn’t. An Open account is a specifically designated account type rather than the status of a revolving credit card account.

An Open account is an account that has “pay in full” terms. That means there are no revolving options as far as payments go. Credit cards are “Revolving” account types, which means you can choose to make a payment less than the actual amount due. Mortgages are “Installment” account types, which means you are allowed to make a scheduled and predetermined payment amount for some period of time until the loan balance is exhausted.

Think of a collection account.  Think of your cell phone bill.  Think of a charge card, like an American Express Green card.  These are all examples of Open account types because they’re what’s referred to as pay in full products. The terms of your account require that you make a payment equal to the full amount owed.

Scoring

Open accounts are evaluated by credit scoring models (unless they’re in an active dispute process) just like any other account. However, Open plastic accounts, like charge cards, are not considered like credit cards by some scoring systems.

For example, FICO’s newest scoring models (FICO 8) do not count charge cards when calculating your debt to limit ratio. However, older versions of the FICO scoring models DO consider charge cards when calculating debt to limit ratios as long as the account includes a “Credit Limit” or “High Balance” figure.

In the VantageScore credit score charge cards are NOT considered when it is determining your debt to limit ratios.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.