No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
The closed accounts with balances eat up your available utilization on your open accounts. It doesn't matter which one you take care of first as they both need to be reflecting a zero balance. If you can do a PFD you are much better off because the balances will be removed entirely aong with the whole tradeline. I am assuming that since it was closed with a balance it is probably showing as a charge off, right?
Who are the two collection companies? Some of them are easier to work with than others.
Since you need to get rid of both, some people like to get rid of the smaller one first because it gives an immediate win
Are these collection accounts or just the original accounts on your report? Are they reporting their original limits?
A closed account will factor into your utilization along with its limit. Once it is paid in full, it will not count for utilization anymore. So depending on how your utilization looks, you can see a score drop when you pay off a closed account. For example, let's say you have one open account with a $1K limit and a $500 balance. And you have a closed account with a $9K limit and a $500 balance. You're going to have an overall utilization of 10%. ($500+$500)/($1K+$9K). But once you pay off the closed account, your utilization would jump to 50% because it would only be calculated based on your open account.
Walt, are you sure how the closed accounts report?
Because when I have seen them on the credit reports and they are closed but have a balance the credit limit reports as zero.
So in your example if you have one open account with a $500 balance and a $1000 credit limit, both the balance and the limit report. Continuing the example, if the second card has a balance of $500 and a previous credit limit of $9000, but the card is now closed, the balance will read $500 but the limit will read zero. So as long as he has the balance on the closed account it will use up his utilization entirely (100% in this example).
IME, if an account is closed by the creditor OR the consumer, the limit will be zero on the closed account. Please correct me if I am wrong.
@StartingOver10 wrote:Walt, are you sure how the closed accounts report?
Because when I have seen them on the credit reports and they are closed but have a balance the credit limit reports as zero.
So in your example if you have one open account with a $500 balance and a $1000 credit limit, both the balance and the limit report. Continuing the example, if the second card has a balance of $500 and a previous credit limit of $9000, but the card is now closed, the balance will read $500 but the limit will read zero. So as long as he has the balance on the closed account it will use up his utilization entirely (100% in this example).
IME, if an account is closed by the creditor OR the consumer, the limit will be zero on the closed account. Please correct me if I am wrong.
From the Closing Credit Cards sticky (http://ficoforums.myfico.com/t5/Credit-Cards/Closing-Credit-Cards/td-p/347190):
Tidbits (this section is courtesy of moderator, Lel)
- If a closed CC account with a balance continues to report the original credit limit, then both the balance and the CL of the closed account will be used in the utilization calculations.
- If a closed CC account is reporting a zero CL, even if there is a balance on the CC, the card will not be included in the calculations.
- If a closed CC account is reporting a non-zero CL but has a zero balance, the card will not be included in the calculations.
- If a closed account reports a CL that is equal to the balance (balance chasing), then this will be included in the calculations. This is the worst-case scenario with regard to utilization.
----
If it reports a limit, it counts for utilization. If it does not report a limit, then it is not included in utilization at all, i.e., if reporting a $0 CL, it does not count as 100% utilized.
I can attest to the first scenario, i.e., where the card contiues to report a limit, from personal experience. I do not have any experience with closed accounts reporting $0 CLs, so I am only repeating what is on the sticky for that scenario. Whether the lender chooses to continue to report the original CL is probably a YMMV thing.