07-29-2009 04:39 PM
I not only heard this, but it's also been posted many times before.
Myths are like that. They get a lot of mileage.
07-29-2009 04:57 PM
2% for 5 years is a good deal. And if you will default otherwise, what real choice do you have. Late pays or full default is going to kill your credit and scores more than a theoretical difference in "by consumer" or "by grantor."
What you really want is "pays as agreed" and "never late" this is the prize and targe. Don't let mythical FICO questions distract the real issue of good credit, which is paid on time and as agreed. Close the account and pay it off in 5 years or less. Doing so keeps you FICO clean.
07-29-2009 05:01 PM
07-29-2009 05:03 PM
07-30-2009 02:07 AM
I have two credit cards with Chase that have a lot of outstanding debt on them. I have been paying them off slowly with no overdue payments anywhere on my credit report. Chase just recently sent me info saying that my minimum payment will go from 2% to 5% of the outstannding balance. This means I will go from paying them $600 per month to over $1600. I cannot afford this. I called and discussed this with them. On the account with the most outstanding debt, they suggested I close the account and agree to pay them $413 a month for 5 years at 2% interest. This card is currently on a balance transfer deal which I pay 3.99% interest until paid in full. I have been payiing it faithfully for two years with no late payments. They say they will list on my credit report that the account was closed at my request. Questions: 1) should I trust they will list it as closed at my request, 2) will closing the account affect my credit score even if I continue to pay it off under this proposed agreement? and 3) why would they offer this instead of just leaving it open and charging me the current 3.99% but allow me to continue to pay 2% of the outstanding amount. I don't understand why they suggested dropping the interest rate when I didn't ask for that. I was just calling them to say I couldn't afford to pay 5% each month and this is what they suggested. Anything I should be wary of?
Take the deal. Paying just half the interest rate is a good thing. So is having an extra $187/month to put towards other outstanding debt.
Look to your wallet first, FICO's will take care of themselves in the long run.
07-30-2009 02:45 AM
Yes, I agree. That is what I have been saying all along!!!!!!!! If you cancel your account on your own, there is no effect, but many people on here say there is.
I think you are confused.
Whether you close the account or the creditor closes the account, the end result is the same.
If closing an account has a negative effect, it is only because of any increased credit utilization ratio. If closing the account causes your credit utilization to go up, there will likely be a hit on your FICO score. If it does not cause your credit ultilization to increase, there will not be a hit.
07-30-2009 04:54 AM
In your subject line you did ask...will this hurt my score.
It will for a while. Your outstanding balance will still be figured in your util%, where by closing the card, you won't have that % of available credit to help balance outyour total util.
That being said, it's still a good deal to close the card, pay it off at the low int rate. While your score will take a hit for the util issue, as this gets closer to $0 bal, your score will continually go up. (as long as you aren't maxing out other avail cards)
Given time & on-time payments, this TL will continue to serve you well & your scores will improve.
07-30-2009 05:40 AM - edited 07-30-2009 05:44 AM
would be nice if it was a myth. i actually believe what i read on bankrate.com more than anything or anyone.
My "mythical" comment wasn't meant to be specific. I was trying to infer that to chase a FICO score rather than doing what is the best financial decision is counter productive to their goal.
NOTE ON "CLOSE COMMENT:" This is next information is not to argue, so please do not take it in that manner. I am only sharing a real example FYI. This may not be the results in al cases.
My brother had a VIsa Card which he obtained during builder years. It was up to a 4500 CL. They "cancelled" the program (meaning all cards, all accounts issued were closed). His credit report showed a closed account, by grantor.
He immediately paid it off so that it was zero balance before it reported to the CR. His report showed a closed account, zero balance, closed by grantor.
I told him (when he explained what happened) that IMO it is better for LO review to be "closed by consumer" so that it doesn't appear as an AA. I suggested that he write a letter requesting the account be closed at his request and it be updated on his report.
He wrote a letter to the CCC requesting the account be closed at his request and updated on his CR. His letter asked that they consider his request to close to be effective at the time of his final payment to "close out" the account. They actually honored the request and his CR was updated to reflect "closed at consumer request." In this instance, there was NO change in his scores, not even a single point.
So, I personally agree that to a LO it will have a better appearance, though not necessarily a decidedly big difference. But I did not see a difference in FICO in this case. I cannot say with all certainy that it would never make a difference since nobody knows what FICO does in every case (highly subjective, dynamic and muti-dimensional algorithm).
Again, this is not being represented as authoritative argument, just a recital of an applicable example.