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Regular Contributor
mahiven
Posts: 176
Registered: ‎04-19-2011
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Question about closing credit cards...

You might have seen my other posts around the website. My three scores are currently all low 600's. My goal is to buy a house early 2012. In order to do this, I have been counciled by many people that paying off my credit cards will raise my credit score by about 100 points, if not more. Here is what I have:

 

Wells Fargo - 6 years old - $1500 limit, $1200 balance

USAA - 2 Years old - $6000 limit, $5700 balance

CapitalOne - 7 months old - $750 limit, $500 balance

CapitalOne - 2 months old - $500 limit, $300 balance

 

So as you can see, my balance to CL ratio is high. My credit monitoring site is reporting it as 88%. Not good. I know I need to pay them down. HOWEVER, my question is .. my AAoA is reporting as 1.5 years, which is because of the two fairly new C1 cards that I got before I started trying to rebuild my credit and realized that AAoA was important. If I pay those off and close them, how much is that going to knock my score, if any? Would it be better to pay them off and leave them open and not worry about the AAoA? My thought was if I closed them my AAoA would go up to 4 years, right?

 

Additionally, my two C1 cards charge me a annual fee. My Wells Fargo, up until a month ago, didn't have an annual fee but now it does because they said my balance to CL was too high.



03/19/2011 EQ: 627 EX: 602 TU 590 (lender pull) 07/16/2011 EQ: 646 EX: 629 TU 647 Fell off the wagon in 2012. Starting over in 2013.Current Score: 01/07/2013 EQ: 646 EX: ??? TU 608 Goal Score: 700 club

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MarineVietVet
Posts: 14,914
Registered: ‎07-14-2009
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Re: Question about closing credit cards...


mahiven wrote:

You might have seen my other posts around the website. My three scores are currently all low 600's. My goal is to buy a house early 2012. In order to do this, I have been counciled by many people that paying off my credit cards will raise my credit score by about 100 points, if not more. Here is what I have:

 

Wells Fargo - 6 years old - $1500 limit, $1200 balance

USAA - 2 Years old - $6000 limit, $5700 balance

CapitalOne - 7 months old - $750 limit, $500 balance

CapitalOne - 2 months old - $500 limit, $300 balance

 

So as you can see, my balance to CL ratio is high. My credit monitoring site is reporting it as 88%. Not good. I know I need to pay them down. HOWEVER, my question is .. my AAoA is reporting as 1.5 years, which is because of the two fairly new C1 cards that I got before I started trying to rebuild my credit and realized that AAoA was important. If I pay those off and close them, how much is that going to knock my score, if any? Would it be better to pay them off and leave them open and not worry about the AAoA? My thought was if I closed them my AAoA would go up to 4 years, right?

 

Additionally, my two C1 cards charge me a annual fee. My Wells Fargo, up until a month ago, didn't have an annual fee but now it does because they said my balance to CL was too high.


Closing these cards will not affect your AAoA or credit length history. This is dicussed in detail in this thread: Closing Credit Cards. Closed accounts will continue to report for up to 10 years after closing.

 

Your utilization is at 88% (7,700/8,750). That is very, very high. FICO scores not only overall utilization but individual account utilization plus the number of accounts reporting a balance at any one time. Here is how your individual utilization comes out:

 

Wells Fargo - 6 years old - $1500 limit, $1200 balance  80%

USAA - 2 Years old - $6000 limit, $5700 balance  95%

CapitalOne - 7 months old - $750 limit, $500 balance  67%

CapitalOne - 2 months old - $500 limit, $300 balance  60%

 

Not only are you being hurt by the high utilization but I think even more important is that you must be paying quite a bit in interest each month. That would be my major reason for getting those cards paid off just as fast as possible. Lowering the utilization would be secondary but this would happen as the balances are lowered.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

 

 

Valued Contributor
tntexans72
Posts: 1,071
Registered: ‎04-24-2008
0

dditiRe: Question about closing credit cards...

You can save big $$$$ in %%% rate down the road by paying down your revolving debt to less than 5% when you apply for that home loan. Not to mentioned your score will increase, therefore giving you a better loan rate. It's the only logical thing to do...and that is to optimize your CRs when you app for any new credit in the future.

Regular Contributor
mahiven
Posts: 176
Registered: ‎04-19-2011
0

Re: dditiRe: Question about closing credit cards...

So if I am understanding you correctly:

 

a) Closing the accounts does not improve my AAoA. The accounts will continue to report (this explains why the Home Depot card I closed 2 years ago is still reporting...) and therefore I will lose out of two open, reporting accounts.

 

b) My utilization is high (no surprise there.) It seems like the secret to my sucess will be paying these off because not only will it free up nearly $300 per month but it will also shoot my score up to where I can be approved for a mortgage without any real problems.

 

Thanks for the response.



03/19/2011 EQ: 627 EX: 602 TU 590 (lender pull) 07/16/2011 EQ: 646 EX: 629 TU 647 Fell off the wagon in 2012. Starting over in 2013.Current Score: 01/07/2013 EQ: 646 EX: ??? TU 608 Goal Score: 700 club

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Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
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Re: dditiRe: Question about closing credit cards...

[ Edited ]

Do you know anyone with an old card with good history, preferably $0 balance, that would add you as an authorized user.  That would improve your AAoA and help your utilization (someone correct me if I'm wrong on the utilization point). 

 

I saw your posts in the Mortgage forum.  I do know that AU tradelines are sometimes viewed differently on manual review depending on the lender.  You might want to ask over there what effect adding the AU to bring utilization down and boost AAoA in order to boost score would have on your mortgage app.  Assuming it could get you above 640, would that be enough, or would the lender then discount the AU line?  I don't know but I bet someone else could help you.

 

Edited to fix typo


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Moderator Emeritus
tinuviel
Posts: 4,875
Registered: ‎11-02-2010
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Re: Question about closing credit cards...

[ Edited ]

mahiven wrote:

You might have seen my other posts around the website. My three scores are currently all low 600's. My goal is to buy a house early 2012. In order to do this, I have been counciled by many people that paying off my credit cards will raise my credit score by about 100 points, if not more. Here is what I have:

 

Wells Fargo - 6 years old - $1500 limit, $1200 balance

USAA - 2 Years old - $6000 limit, $5700 balance

CapitalOne - 7 months old - $750 limit, $500 balance

CapitalOne - 2 months old - $500 limit, $300 balance

 

So as you can see, my balance to CL ratio is high. My credit monitoring site is reporting it as 88%. Not good. I know I need to pay them down. HOWEVER, my question is .. my AAoA is reporting as 1.5 years, which is because of the two fairly new C1 cards that I got before I started trying to rebuild my credit and realized that AAoA was important. If I pay those off and close them, how much is that going to knock my score, if any? Would it be better to pay them off and leave them open and not worry about the AAoA? My thought was if I closed them my AAoA would go up to 4 years, right?

 

Additionally, my two C1 cards charge me a annual fee. My Wells Fargo, up until a month ago, didn't have an annual fee but now it does because they said my balance to CL was too high.


I would recommend NOT closing them. Pay those two smaller limit cards off ASAP. As has been mentioned, you are scored on util on your individual cards as well as on your total util on all cards combined. So, you will receive a boost from having gone from >= 50% util on each of those two cards to 0% util. And, you will have the $1250 combined CL available from these two cards to factor into your total available credit, thus improving your overall util. You may then work on paying off the larger, older accounts. This is how I would approach it, FWIW.

 

(Edited for typo)


Current Scores: EQ 775 (03/04/2014), EX 756 (03/01/2014), TU 760 (03/01/2014)
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