Rebuilding Your Credit

[chozyn1]

Hey all, ok i got myself caught up in the credit card crunch and got in over my head, now i have a chance to redeem myself. Ok this year alone i opened about 4 cards with a total limit of $2125. I probably have about $500.00 available total on those, not including the other 2 i already had (150/1000). I also had a loan with citifinancial (7500) at a whooping 28%. Now my credit union has offered to pay those balances off if i agree to close all of them. All of my cards have a high interest rate and the rate at the cu wont be more than 17%. So is that a good idea? I figured i could always apply for other cards later down the road, but i want to focus on my budget. so what do you guys think???  

[slyhouse08]

No...don't close them...that will hurt your history...and hurt your scores...

[llecs]

Closing them won't hurt your scores now, historically speaking; the history will stick for the next 10 years.

You may not need to close them at all. If you can keep them open, then do so. You can always pull it out quarterly and use them to buy a cup of coffee or a pack of gum.

However, do whatever you can to kill off Citifinancial. Besides your rate, Citifinancial is likely hurting you as a consumer finance loan (CFL). That can slightly hurt your score, even after you pay it off.

Closing your cards could harm your overall utilization though. If the deal through the CU is a loan and not a CC, then you are killing your revolving mix and that will lead to a score drop too.

Message Edited by llecs on 06-02-2008 04:52 PM

[chozyn1]

ok i went to the cu for a loan to pay off a lot of debt i incurred because of a family emergency. i almost used everything i had in credit to get through that period. but the condition at the cu was that i agree to close the accounts. i guess so i wont fall into the trap again. which i dont blame them, i would ask that of myself because each i say i wont do it again i do thats how i got the citifinancial loan last year and it was supposed to pay off debt but i only incurred more debt because of it and the accounts were back to the way they were. i just dont want to mess my credit up by closing them. i could always get another card after getting these paid off though, right?

[ByrdMan]

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chozyn1 wrote:

ok i went to the cu for a loan to pay off a lot of debt i incurred because of a family emergency. i almost used everything i had in credit to get through that period. but the condition at the cu was that i agree to close the accounts. i guess so i wont fall into the trap again. which i dont blame them, i would ask that of myself because each i say i wont do it again i do thats how i got the citifinancial loan last year and it was supposed to pay off debt but i only incurred more debt because of it and the accounts were back to the way they were. i just dont want to mess my credit up by closing them. i could always get another card after getting these paid off though, right?

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Yeah, I never understood why analysts/underwriters want to be over-officious and have you close the accounts; as if you can't go back and open them again.

That rant said, if you know you have a problem, then stay out of the game. Gamblers should not visit Vegas "to see the sights", alcoholics shouldn't find themselves in a bar (if they are trying to recover) and people who can't handle revolving debt, shouldn't get more CL than they can handle.

Not jumping on you at all, please understand this. If this is a recurring theme, then you have to realize this and take steps to get you out of this rut. Just take a look at the balances and the amount of interest that you are paying to Citifinancial and the CCCs. They laugh every month when you send them a check for the minimum.

Keep reading here and don't get more CL than you can handle responsibly. Best of luck to you. I think that you are making a great first step with your CU, by the way.

[chozyn1]

but someone just said if i reopen i could get into trouble. they are not debt consolidators, they are the cu. i dont want to get into trouble though so i would keep them closed. but i may keep that hooters lol

[ByrdMan]

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chozyn1 wrote:
but someone just said if i reopen i could get into trouble. they are not debt consolidators, they are the cu. i dont want to get into trouble though so i would keep them closed. but i may keep that hooters lol

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When I stated that, I wasn't offering you the advice to reopen. I was in banking for quite a few years, and when the analyst would come back with that requirement, I would just cringe, because I felt that we were just excercising in futility. I know people that signed the form stating please close CC, and then turned around and re-opened. By all means, do what the CU has told you to do in order to get the financing.

My thought to you is that you should keep the CLs at a point where you can be a good steward over them.

[chozyn1]

so i can sign the paper saying "please close", but how do i keep them open? and i can just cut the cards up or something. i want the cards on there as open but ill close them to get that fresh start

[ByrdMan]

The CU will usually generate that documentation for you to close the account, and you sign it at the loan closing.

The accounts will actually close at that time.

Sometime down the road (you determine when you are ready) you can ask them to reopen the accounts and use that old history. No guarantees that they will do so though, but it's worth a shot.