Should I close low limit accounts?

[jandlynn]

Hi,

My scores are currently EX: 593 (via PSECU) - TU: 674 : EF:  639

I have a bunch of credit cards and all of the balances were close to capacity.

Today, I paid down a great deal of these balances.

I couldn't pay them all off, and I didn't want a maxed out card to continue to hurt, so instead of paying some cards off, I paid all of my cards down significantly.

I have a BOA visa maxed at 5k, I made a $4k payment today, also

Discover $3k maxed, payed balance down to $500 today

PSECU Visa $2k maxed, Payed balance down to $500 today

Old Navy $2k card payed the balance down to $250 today

Walmart $1200 paid down to a $200 balance

Best Buy visa  limit of $650 paid down to $100

Best Buy store card limit $500 paid balance down to $74 today

Home Depot 1200 limit (maxed) paid down to $300 limit today

Lowes $1000 limit paid balance down to $150 today

JC Penny limit $1,000 paid balance down to $150 today

Shell Card $500 limit paid balance down to $250 today

First Premier Bank $600 limit paid in full today

Orchard Bank $450 limit - paid in full today

Credit One $600 limit - paid in full today

Target $200 limit - didn't pay down - balance is $75

I also finance a 2012 Honda Pilot for $30k today. I also have a mortgage for $409k (1 year old, no lates)

All of these payments should be reflected in my next credit cycle, but will the new car wash out the positive effect of paying these balances down?

Also, my target card is only $200, I've had it for 4 years and have never been late. They refuse to grant me a CLI. Shoudl I just dump it? I've been told that low limit cards will hurt my score.

I earn a decent wage (broke $160k this year, and broke $150k previous 3 years), yet my credit scores suck. I struggle to obtain credit and I really want to be in a position where I can qualify for a decent $7.5k+ card.

Can someone please give me some tips because I have been trying to obtain credit for 4 years and I am failing!

I think the thing that is really hurting my scores is the 1 late payment I have on my TU and EQ reports. It is a student loan and it was listed as 90+ days late in May of 2007.

Weird thing is that EX is the only one that doen't list that late payment, and they are by far my lowest scoring report.

Any and all advice is greatly appreciatted.

[AndySoCal]

I with what you did today will help your score  I would guess 30 points or more depending what else is in your credit report. Be patient until all these updates report to the bureau. Your credit utilization I am guessing had to 80% or more and that can kill a score. Rather than getting more cards see if you can get a CLI from B OF A. since you are want 7.5K card. I  would also close the Credit Bank and First Premier cards since they all have high fees.

[pipeguy]

Considering your income and other available credit cards, why are you holding on to these "rebuilder at best" cards?

First Premier Bank $600 limit paid in full today

Orchard Bank $450 limit - paid in full today

Credit One $600 limit - paid in full today

Close these three yesterday IMO.

[jandlynn]

Thank you for the replies.

Right now, I guess that I am only holding on to those starter cards because I am afraid of what will happen to my scores if I close them.

Since they are all at zero, my overall utilization will imediately increase. I'm not sure if that is really a valid reason to hold on to them or not though...

[pipeguy]

Considering the terms, fees and interest rates for First Premier and Credit One forget any minor drop in utilization, kill those two at least !

[payingoffdebt001]

What if they are his oldest cards, wouldnt that hurt his AAoA?

[pipeguy]

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@payingoffdebt001 wrote:

What if they are his oldest cards, wouldnt that hurt his AAoA?

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No. 

Account information stays on your report for up to 10 years (I say up to because Equifax has their own way of dropping inactive closed accounts, at least in my case).

The OP has enough open accounts that killing the sub-sub-prime and rebuilders won't change a thing IMO.

[RobertEG]

I would NOT close them unless your reason is to eliminate a yearly account fee.

Three reasons.....

First, while not significant with your overall CL, you could just ignore them, and thus have three individ cards scoring at 0% individ util.  FICO scores individ card util as well as overall util.

Second, each card counts in computing your % cards with balance.  Prior to your recent paydown, you had 100% of cards carrying a balance.  Now that is down to 17/20, still too high.  Two of the three that now report $0 balance are your low CL cards.  They are helping there.

Third, by closing the cards, you always run the risk that the creditor, for admin reasons, will just decide to delete the entire TL from your CR.  If they choose to do so, and those cards are your oldest, it WILL hurt your avg age of accounts.

[Anonymous]

The general mantra for best FICO scores is to have all accounts but one report a zero balance; with the one remaining account reporting less than 9% utilization.

Given that (and it does tend to work pretty well for most folks), I would consider paying all accounts but one down to zero.  Make sure the one remaining is under 9% utilization.  Then look at closing accounts.

FICO also scores on number of accounts with a balance, so paying off all but one will likely result in a score bump.

Congrats on your great paydowns, btw.  I'm betting your FICO will be happy when those new balances report.  Keep us posted!

[jandlynn]

Experian jumped ~90 points from 588 to 679 (car loan gave me new score)
Tu jumped to 698
Eq only bumped up another 15 points to 658, weird.

Thank you all for all the tips