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Frequent Contributor
revvystoke
Posts: 338
Registered: ‎02-02-2010
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what happens with a closed account?

 I closed a couple of my accounts today, I was talking with a loan officer about refinancing a small loan and he told me he would give me a better rate if I had a little less available credit, my income after taxes is 52k a year. I have no derogs and have a util of $7k used of 44k. I closed a paypal account (highest interest @ 14%) with a balance of 3k, cl of 6k and a couple of small store cards with cl under 3k with no balances.

 

I have 5 accounts that have cl's under 3k that I don't use and plan to close in the upcoming year because of af's. Nearly all of the inq's have fallen off. My oldest accounts and ones with highest cl's I plan to keep.   

 

Wondering how closing the paypal account  will effect me? I plan to pay it off by next month. I haven't closed an account before. 

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bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: what happens with a closed account?

 

Well, the hit comes from increased utilization as the CLs on the closed accounts are no longer added to the total.  So did you pay off the 3K on the paypal before closing?

Closing cards with a balance still on is generally considered a bad idea (because you lose the CL but keep the outstanding balance).

 

If 44K is the old total, it doesn't take closing that many 6K and 3K accounts before utilization can become a problem.   If possible, after the loan, try to increase the CLIs on the non-AF cards.  You do want to close low-limit unused cards with an annual fee, but make sure you don't need the CL!

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Jutz
Posts: 1,216
Registered: ‎05-10-2012
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Re: what happens with a closed account?


bs6054 wrote:

 

Well, the hit comes from increased utilization as the CLs on the closed accounts are no longer added to the total.  So did you pay off the 3K on the paypal before closing?

Closing cards with a balance still on is generally considered a bad idea (because you lose the CL but keep the outstanding balance).

 

If 44K is the old total, it doesn't take closing that many 6K and 3K accounts before utilization can become a problem.   If possible, after the loan, try to increase the CLIs on the non-AF cards.  You do want to close low-limit unused cards with an annual fee, but make sure you don't need the CL!


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revvystoke
Posts: 338
Registered: ‎02-02-2010
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Re: what happens with a closed account?

I am in no hurry on re-fi on the loan I will wait until after I get everything squared up. Was just wondering if there were any other long term effects other then higher util. 

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webhopper
Posts: 7,225
Registered: ‎09-16-2011
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Re: what happens with a closed account?

Closing a CC (credit cards) does not lower your FICO scores in and of itself. When deciding to close a CC there are two important things to consider. In the short-term, closing a CC can have an adverse affect on your UTIL percentage calculations and this in itself can definitely lower your scores. In the long-term, a closed CC in good standing (nothing derogatory reporting) with a $0 balance will generally be deleted from your CRs (credit reports) after 10 years. Once this account is deleted, you lose the history and age and this might lower your scores.

For More information on how closing credit cards can impact your FICO score, please check out the following link: Closing Credit Cards.


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SnackTrader
Posts: 1,567
Registered: ‎09-15-2012
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Re: what happens with a closed account?

I wanted to shed some light on the income you stated.   Lenders almost exclusively use Gross income, so before taxes or any other deductions.  I mean, net income is certainly more useful to you as the person who spends that money, but just remember that unless asked specifically for net income, gross income is allowable on most if not all loan applications.


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