To pay down open or closed accounts? That is the ?

[Anonymous]

Good Day Everyone,

I just found your forum via a web search and am so glad I did!  Here's the short version of a long story.  I was previously married and divorced, and completed a short sale on the house I had owned with the ex, as I was 60k *gasp* upside down on the house, a little over two years ago.  Now am very happily remarried and am attempting to get credit up in preparation for purchasing new home with current husband in the spring of 2012.  (the new FHA guidelines state that I need to wait 3 years after a short sale before securing another FHA loan).

Of course, the short sale crashed my credit score down to 550, but I'm happy to say that I'm currently back up to 648.  Obviously, I need a much better score than that by this time next year so we can get a good interest rate on the new house.  Throughout the whole thing, I've kept my credit cards paid on time- thank goodness.

Since the short sale, I had several credit card companies try to raise my interest rates in advance of those new laws going into place last year.  I refused, and chose to keep the lower interest rates in exchange for them closing my account.  As a result, I have only four open accounts, three credit cards (home depot, walmart, citi) totalling about 5k and 1 personal loan (hsbc) totalling 13k.  These are all very close to their credit limits.  I also have a couple closed accounts which still carry balances. (5k and 3k respectively)

So here's my situation- over the next several months, I'll have "extra" money coming in- through bonuses at work, extra paychecks, etc- cumulatively, I'll be able to pay down about 10k in debt.  According to my current credit report through Equifax, a very high debt to credit limit ratio is my most influencing negative factor.  Outside of paying off my 5k balance in the three open credit cards, am I better off paying down a portion of that open 13k personal loan account, or am I better off paying off the closed credit cards?

Is your "debt to credit limit ratio" dependent only on the balances of your OPEN accounts, or do closed accounts figure into that calculation as well? Personally, I'd rather pay off those closed ones to get them out of my hair and not have to send them payments, but if I get a better score from paying down the open stuff...that's what I'm most worried about.

Sorry for the long post, I'm just really excited to have found somewhere I think I can get real educated answers from!!!!

[Anonymous]

Good Day Everyone,

I just found your forum via a web search and am so glad I did!  Here's the short version of a long story.  I was previously married and divorced, and completed a short sale on the house I had owned with the ex, as I was 60k *gasp* upside down on the house, a little over two years ago.  Now am very happily remarried and am attempting to get credit up in preparation for purchasing new home with current husband in the spring of 2012.  (the new FHA guidelines state that I need to wait 3 years after a short sale before securing another FHA loan).

Of course, the short sale crashed my credit score down to 550, but I'm happy to say that I'm currently back up to 648.  Obviously, I need a much better score than that by this time next year so we can get a good interest rate on the new house.  Throughout the whole thing, I've kept my credit cards paid on time- thank goodness.

Since the short sale, I had several credit card companies try to raise my interest rates in advance of those new laws going into place last year.  I refused, and chose to keep the lower interest rates in exchange for them closing my account.  As a result, I have only four open accounts, three credit cards (home depot, walmart, citi) totalling about 5k and 1 personal loan (hsbc) totalling 13k.  These are all very close to their credit limits.  I also have a couple closed accounts which still carry balances. (5k and 3k respectively)

So here's my situation- over the next several months, I'll have "extra" money coming in- through bonuses at work, extra paychecks, etc- cumulatively, I'll be able to pay down about 10k in debt.  According to my current credit report through Equifax, a very high debt to credit limit ratio is my most influencing negative factor.  Outside of paying off my 5k balance in the three open credit cards, am I better off paying down a portion of that open 13k personal loan account, or am I better off paying off the closed credit cards?

Is your "debt to credit limit ratio" dependent only on the balances of your OPEN accounts, or do closed accounts figure into that calculation as well? Personally, I'd rather pay off those closed ones to get them out of my hair and not have to send them payments, but if I get a better score from paying down the open stuff...that's what I'm most worried about.

Sorry for the long post, I'm just really excited to have found somewhere I think I can get real educated answers from!!!!

[Anonymous]

i would get rid of closed accounts with balances.

Work on getting your utilization below 9% and no new inquiries.

It's not a quick fix but your score should respond nicely.

EX  782

EQ 802

[john398]

Are the closed accounts reporting $0 credit limits? If so they should not count toward utilzation, someone correct me if I am wrong

[Anonymous]

That's where I'm confused.  There's an area that shows credit available (summed up) and credit used... and both of those figures seem to only be calculating the accounts that are open.  In the closed accounts area, it shows these cards as having a credit balance and still shows the credit limit as what it was before it was closed.  So that's my exact question.  Should I worry first about paying down those accounts that are open, or will paying down the ones that are closed have just as much of an effect on my score?

[Anonymous]

your utilization will be based on open accts.

That is your available credit.

[josie]

If it shows as closed but shows your credit limit as for me it is calculated in your utilization. My example credit limit is 1000 balance owe is 640. It tells me I am at 64% utilization.

[MarineVietVet]

---

@Anonymous wrote:

your utilization will be based on open accts.

That is your available credit.

---

Not always.

- 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.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

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

[RobertEG]

A closed account with debt can easily turn into a charge-off and/or be referred to a debt collector, or result in legal action.

Those accounts, even though closed, are not free of additionaly major derogs being reported.

I would focus on cleaning those up, while at least making min payments on the open accounts.  % util is a factor that you can deal with later.  It is not all about just tweaking current score, it is also about preventing further hemmoraging.

[Anonymous]

I had 16 accts of which I closed 11.  All say closed by consumer.

They do not  include them in my available credit and are not

part of my utilization.

I don't understand what you are saying. 

[MarineVietVet]

---

@Anonymous wrote:

I had 16 accts of which I closed 11.  All say closed by consumer.

They do not  include them in my available credit and are not

part of my utilization.

I don't understand what you are saying. 

---

Then one of 2 things is the reason why they are not being used in utilization calculation:

- 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.

I'm only saying that some closed accounts are figured into utilization depending on the factors I listed before.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

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