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Payoff Impacts

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NuMelc
Valued Member

Payoff Impacts

My wife and I recently closed on a refinance to pay off all of our credit card debt with our homes equity. 

 

1. How long after the debts are paid before we see any change to our score?

 

2. We had 10 cards, should we close any as I have heard closing accounts can actually hurt your score, but I know 10 cards is a lot. Also, if we don't use them will the card company close the account anyways?

 

Thanks in advance!

Message 1 of 7
6 REPLIES 6
JediNeo
Frequent Contributor

Re: Payoff Impacts

Hello,

 

1. you should see the change in about a month or two. Depends on when the card reports to the credit agencies.

 

2. Are you loking to apply again? I would say your scores would boost with the debits paid. However your scores will take a hit as your utitization is basically zero. For max scoring you only want one card to report about 10% utilization. 

 

Yes CC can be closed due to inactivity. It varies by lender. Check the T&C for the specific card to find the time frame.

NFCU Cash Rewards | CSP | Freedom Unlimited | WalMart MC | Target Red MC | Citi Costco | AMEX BCE
Message 2 of 7
Anonymous
Not applicable

Re: Payoff Impacts

Nice reply by Jedi, with a small correction.  You do not need to have a card showing 10% in order to have your CC balances optimized.  The amount could be quite small, as little as a loaf of bread or a gallon of milk. 

Message 3 of 7
NuMelc
Valued Member

Re: Payoff Impacts

Thanks for the responses and info!

 

I may have worded the 2nd part incorrectly. We still have the 10 cards, they just no longer have balances. Should we keep all 10 accounts open until the card companies possibly close or lower them?

 

To get the max benefit, should I say use each card once a month and then immediately pay it off the next day? I was thinking I could use one for the electric bill, one for water bill, one for groceries, etc. and just pay them off the day after I use them to avoid interest/fees so there would always be no balance or is that not how it works? 

Message 4 of 7
SouthJamaica
Mega Contributor

Re: Payoff Impacts


@NuMelc wrote:

Thanks for the responses and info!

 

I may have worded the 2nd part incorrectly. We still have the 10 cards, they just no longer have balances. Should we keep all 10 accounts open until the card companies possibly close or lower them?

 

To get the max benefit, should I say use each card once a month and then immediately pay it off the next day? I was thinking I could use one for the electric bill, one for water bill, one for groceries, etc. and just pay them off the day after I use them to avoid interest/fees so there would always be no balance or is that not how it works? 


Yes keep the cards open.

 

Yes pay them in full every month.

 

You don't have to use each card each month. Just need to use each card once every 3 months or so to keep it open.

 

To optimize your score, let one card report a small balance, and the others report a zero balance.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 5 of 7
Anonymous
Not applicable

Re: Payoff Impacts

+10000  to all the other replies.     While the AZEO (all zero except one) method is the best to maximize your score, its mostly only useful if you are looking to gain new credit. Since you are getting it all paid off (super congrats on that) and will have no CC debt, you wouldnt have to worry about that as much.  Just keeping out of debt is a huge +. Smiley Happy

Message 6 of 7
Anonymous
Not applicable

Re: Payoff Impacts

You also mention feeling like 10 accounts is "a lot."  If that means "a lot for us to manage" we can give you some tips.  Here are a few:

 

(1)  On all the cards that you almost never use, set the alerts really low on them.  I set my own cards like that so that the issuer notifies me if the balance ever exceeds $5.  That way you'll feel secure that they are never being abused by bad guys and you won't have to sign in all the time to look at the balance.

 

(2)  Set up autopay on all of them.

 

(3)  Feel free to use them less often than every three months.  I collect case studies where a person had his card closed due to inactivity, and the earliest I have ever seen is 8 months -- and that was only with Wells Fargo.  In all other cases the issuer waited until at least 13 months, with 18 months being more common.

 

(4)  Therefore keeping unused cards in a shoebox and taking them out once every six months for a grocery trip (where you buy a single item with each card) would work fine.  You'll know the strategy that is best for you.

 

Finally, can you clarify for us whether some of these cards are store cards or cards with annual fees?  Those are two situations where closing a card you don't want to hardly ever use could make a lot of sense.

Message 7 of 7
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