paying off a closed cc vs. open

[ToddLipps]

I have 2 maxed out 5000 credit  cards. One is open, the other is closed.

I have $5000 to pay towards them.  What would give the greatest increase in score?

Paying off the closed account

Paying off the open account

paying half on each

Or would it not make a difference?  Assume I have no other debt.  Or is this not enough info to know?

[guiness56]

They both are counting toward your utilization. 

I would pay off the closed one first, then get the other one down to at least 30%.   10% would be ultimate.

[eyesopen]

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@guiness56 wrote:

They both are counting toward your utilization. 

I would pay off the closed one first, then get the other one down to at least 30%.   10% would be ultimate.

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+1

But check the credit limit balance on the closed card as you pay it down. I closed 2 cards before I found this site (e.g. a mistake). (1) closed account (Chase) maintained the credit limit balance which helped my score. The other card (Target) reduced the credit limit balance with each payment, had a negative impact on my score. It was a balancing act. I paid off Target first because the interest was highest. This month is my last payment on Chase so I'll see what happens as a result.

[RobertEG]

I offer a somewhat different perspective.  It also depends on other factors.

First, what is the APR on each account?  Financially, it is best to concentrate on the card with the highest APR.

If one card is at 24% APR, that is approx 2% a month in interest on the balance, or $100 on  $5K balance.

If the other card is at, say, 12%, that is approx 1% a month in interest, or $50.

Second, you also have future FICO implications to deal with.  In the short term, paying one or the other wont have much impact.

Clearly, it wont affect overall % util.  Maxed cards are one of  the worst things in FICO scoring of utilization.

A long term affect worth considering is your future CL, which will determine your future % util.  You are going to lose the CL on the closed account, once it is paid.

That is a given.  Protection of future CL is thus dependent on what you do with the open account.  If you continue to carry maxed, or nealy maxed, balances on the open account, you run a much higher risk of their doing a CL decrease on you.

I would not necessarily lean towards the closed account. 

[guiness56]

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@RobertEG wrote:

I offer a somewhat different perspective.  It also depends on other factors.

First, what is the APR on each account?  Financially, it is best to concentrate on the card with the highest APR.

If one card is at 24% APR, that is approx 2% a month in interest on the balance, or $100 on  $5K balance.

If the other card is at, say, 12%, that is approx 1% a month in interest, or $50.

Second, you also have future FICO implications to deal with.  In the short term, paying one or the other wont have much impact.

Clearly, it wont affect overall % util.  Maxed cards are one of  the worst things in FICO scoring of utilization.

A long term affect worth considering is your future CL, which will determine your future % util.  You are going to lose the CL on the closed account, once it is paid.

That is a given.  Protection of future CL is thus dependent on what you do with the open account.  If you continue to carry maxed, or nealy maxed, balances on the open account, you run a much higher risk of their doing a CL decrease on you.

I would not necessarily lean towards the closed account. 

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What is your reasoning behind these statements?  Any OC account with a balance counts toward your overall utilization.  If the account is closed and the OP is maxed out it is counting toward utilization in a big way.  Paying it off will definitely help.

[RobertEG]

My reasoning is long, rather than short, term

Sure, % util on the closed account still scores, but once paid, its entire CL is lost.

The current CL on the open account is more important, in my opinion, in the long term 

I would protect that by getting its util down.  Avoidance of a CLD.

I dont offer this is the better approach, just another factor to consider.

[Anonymous]

I read once there is a bug in the system that if a closed account has a balance it's cl still figured into util

[guiness56]

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@Anonymous wrote:
I read once there is a bug in the system that if a closed account has a balance it's cl still figured into util

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If the CC is closed and has a balance, whether or not there is a CL reporting determines if it is counted toward utilization.