topic Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff in Credit Cards

Question regarding closing a high APR card with high balance and my FICO score..and other stuff :)

Anonymous — Mon, 26 Oct 2009 02:52:18 GMT

I have a Citi MC and an Amex as my 2 major cards. The other credit cards that I have are "department store" cards, a Best Buy, Kohl's and Goodyear Card. My husband has some cards in his name that also factor into my debt payoff plan, but for this question that is not a real factor. (His cards are among our lowest total balances and have decent APRs)

Here is the breakdown

Amex (11.99APR) 21,900 CL and 18,343 Balance

Citi MC (18.99APR) 13,800 CL and 10,000 Balance

Best Buy (20.99APR) 2700 CL and 1,956 Balance

Kohls (21.90APR) 1500 CL and 73.00 Balance

Goodyear (22.36APR)2100 CL and 0 Balance

(also have an auto loan with a balance of 2100 or so left but that is also not a factor in my question, just some additional info if needed)

I have a PLUS score from all three agencies: 768, 750 and 746. I have no delinquencies and no late payments, no problems period.

I am currently laid off but I am still able to make dents in the debt with severance, unemployment and my husbands income. We are currently focusing on the 2 of his low balance cards and my Best Buy Card ....before moving on to the high balance cards. I'm using the snowball effect, although it's lost a bit of momentum after I lost my job.

So Citi is raising my APR to 26.99% as of December, and my options are to smile and take it, or opt out and close the card to lock in the 18.99 rate (which isnt the best rate to begin with anyways!) and pay it off. As you can see, no room to balance transfer that debt to the Amex. In addition I fail to see how someone with a good score could have 20-23% APR's or is that, as I always understood it to be, "normal" for those branded cards?

Will closing this card damage my credit score a lot? Or is the ding worth it to keep on working towards being debt free? Should I try to open another card to help offset the damage to the utilization percentage by closing this card? Maybe open a card with a low APR balance transfer and keep this card open and transfer that balance? I just think its CRAZY that I should pay near a default rate on an account in good standing and history and its not a pill I'd like to swallow.

I have read so many things that give me conflicting information on if the CL on a closed card goes down to 0 or not in this situation.

Are there any other suggestions you may have for my situation? Thanks in advance for any help.

Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff

haulingthescoreup — Mon, 26 Oct 2009 11:07:16 GMT

Hi, welcome to the forums! Sorry to hear that you got caught in the Citi ratejack.

First of all, your credit scores aren't FICO scores, the ones that lenders generally use. They're what we call FAKO's, using different scoring formulas and different score ranges. It's impossible to reliably extrapolate from FAKO's to FICO's. At some point, when you've got some disposable income again, you should really pull your FICO Equifax and FICO TransUnion scores. (As of February 13, 2009, Experian refuses to let consumers buy our FICO Experian scores.)

Anyway, sounds like you and your husband have a plan, and I'm glad you're able to still work at it while being laid off.

If you decide to keep it open and pay at the higher APR, it will cost you an extra 8%/ month, or around $67/ month, less as you pay it down. I don't know if you and your husband will be able to handle that one on income --that's something that only you can decide.

When a credit card is closed with a balance, it continues to factor into your total utilization, as long as neither the balance nor the credit limit is $0. So if Citi allows all these cards to continue having (and displaying) current CL's, closure won't affect revolving util or history. If they change the CL to $0, it will be ignored for calculating util, so you'll have to figure out what will happen to your overall util. If they get really nasty and start "chasing your balance", or reducing the CL each time a payment is made, making you continually maxed out until you have paid off, that will hurt your util until the balance reaches $0.

This info comes directly from Barry, the myFICO admin. It sounds a bit illogical in a way, but it's meant to keep people from deliberately closing individual high-util cards to improve total util, so I suppose it makes sense.

We've had many posts from people with very high FICO's who've also gotten rate-jacked. Right now, the common thread seems to be carrying a high balance, as in your case. Banks know that unless you've got a nice savings account that you're willing to raid, they've got you over a barrel, and unfortunately, you look like a nice source of extra interest income to them.

If you haven't already, please read Understanding Your FICO ® Score and Credit Scoring 101 (at least the first post.)

These will give you the background knowledge you need to understand what you read here on the forums.

Message Edited by haulingthescoreup on 10-26-2009 04:07 AM

Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff

Anonymous — Mon, 26 Oct 2009 15:12:54 GMT

Thanks and I appreciate the advice

FAKO, huh? Im a bit miffed that I actually paid for that through experion...I have the credit protector thing for free as part of a settlement when Fidelity lost some customer data, and I paid for that PLUS score through them...grrrr

So regardless I am at Citi's mercy on if they decide to be "nice" when I do close the card. The 67$ is a bit much right now since that card is not my focus as I continue with my debt payoff plan. I'm thinking with or without that card my util % is way high, and thats not going to change much till the smaller cards are all paid off and the focus changes to the higher balance cards.

Im tending to lean on the side of "credit score be damned" right now...I really want to be as debt free as possible.

Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff

MarineVietVet — Mon, 26 Oct 2009 15:30:39 GMT

@Anonymous wrote:
Thanks and I appreciate the advice

FAKO, huh? Im a bit miffed that I actually paid for that through experion...I have the credit protector thing for free as part of a settlement when Fidelity lost some customer data, and I paid for that PLUS score through them...grrrr

So regardless I am at Citi's mercy on if they decide to be "nice" when I do close the card. The 67$ is a bit much right now since that card is not my focus as I continue with my debt payoff plan. I'm thinking with or without that card my util % is way high, and thats not going to change much till the smaller cards are all paid off and the focus changes to the higher balance cards.

Im tending to lean on the side of "credit score be damned" right now...I really want to be as debt free as possible.

Welcome to the forums.

If you don't anticipate applying for any new credit in the near future I approve of your plan to concentrate on paying off debt instead of not concerning yourself with a score right now.You'll find that as you pay down your debt the right way (always paying on time, reducing your utilization, etc.) your score will improve at the same time.

Good luck to you.

(myfico)
7/09 TU-742 EQ- 779
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802

CC interest free as of 8/09
Time can heal all wounds and a low FICO.
"Hello my name is Sandy and I'm a recovering crediholic".

Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff

Anonymous — Mon, 26 Oct 2009 15:47:59 GMT

Thanks for the warm welcome I'm not sure if I will be applying for any credit in the near future, my car isnt the greatest and I may be forced to eventually. So while I'm not as concerned with the score as I am with debt, I dont want to take a HUGE hit. Would requesting CLI's on some of the smaller cards help me in that situation? TYIA.

Re: Question regarding closing a high APR card with high balance and my FICO score..and other stuff

MarineVietVet — Mon, 26 Oct 2009 16:13:34 GMT

@Anonymous wrote:
Thanks for the warm welcome I'm not sure if I will be applying for any credit in the near future, my car isnt the greatest and I may be forced to eventually. So while I'm not as concerned with the score as I am with debt, I dont want to take a HUGE hit. Would requesting CLI's on some of the smaller cards help me in that situation? TYIA.

You can always request CLI's. But ask each issuer whether such requests will result in a hard inquiry or a soft one.

I understand about the need for transportation. If you have to get another car don't buy a new one. There are lots of decent used cars you can buy. I would wait as long as possible before car shopping to get those utilizations down. There is no reason to pay a higher interest rate than necessary. Getting a car loan might cost you a few points for the initial inquiry and the new credit but the revolving debt is what you need to take care of. Utilization (whether good or bad) of revolving debt accounts for 30% of your total score. It's one of the biggies that is looked at.