cc utilization question

[jbee]

Question for all of the utilization pros.

I have 2 credit cards that I'm trying to pay off.  1 is a closed account but have a balance of 785 and the limit is 1175.  The other is an open account which has a balance of 1100 and credit limit is 1500.  Both interest rates are about the same.

My question is which should I pay off first to boost my score?  I wasn't sure if I paid off the 1st account if it would help since the account is closed.

Thanks for your advice.

[lkcrew426]

When you pay off the closed account, it quits affecting your utilization. I would pay down the closed one say to $100, and then pay off the open one completely and take your time paying off the rest of the closed account. IMO

[Peach8321]

jbee,

How much do you have to pay down/off these cards right now?  Or are you just trying to decide which should get extra funds?  Are you trying to do this for a mortgage or loan or just to raise your score in general?

If you have enough to pay off the closed card and you are trying to get a mortgage, do that one first - the reason being that lenders don't like seeing a closed account with a balance, that's a bigger negative than an open account with a balance.

If you are trying to focus on just general score raising...then I say split whatever large amont you have between the cards and then do a 30-70 split with future money between closed and open (more to open) because since it's closed, there's not too much more they can do to you but you want to keep the open card happy since they can damage you more.

That said, try and pay them both down to $0 as soon as possible so you don't have the debt hanging over you and then you can ask for CLI or new cards with higher amounts

good luck!

[jbee]

Thanks for the responses...

I'm trying to do both I guess.  I'm going to apply for a mortgage in July or August but I want to get my score up to the 700s first.  I will have both of the cc paid before I appy, but I was just trying to see which would boost my score faster.

I have an extra $1,000 to pay toward them.   I guess I can pay the closed account under 10% and put the remaining amount on the other.

Thanks again.

[Wolf3]

Pay off the closed account first.   The credit limit will show as balance every month, hence 100% utilization.    It also looks bad for manual review.   Mortgage people like zero credit card debt.   Pay all as quick as you can afford.

That said, concentrate on what the FICO score will be when you apply.   It makes no difference what it is until you apply.

[Uborrow-Upay]

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@cruthisfamily wrote:

When you pay off the closed account, it quits affecting your utilization. I would pay down the closed one say to $100, and then pay off the open one completely and take your time paying off the rest of the closed account. IMO

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+1

[jbee]

Ok, so I think I will pay the closed account down to under 9% utilization and the rest on the open account.  Do you know how much of a point increase I should expect going from 69% utilization to 30%? 

[Lel]

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@Wolf3 wrote:

Pay off the closed account first.   The credit limit will show as balance every month, hence 100% utilization.    It also looks bad for manual review.   Mortgage people like zero credit card debt.   Pay all as quick as you can afford.

That said, concentrate on what the FICO score will be when you apply.   It makes no difference what it is until you apply.

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I don't believe this is correct, but I can't find the reference on these forums that addresses it.  But as I recall:

1. If a closed account continues to report the original credit limit, then this CL of the closed account will be used in the utilization calculation.

2. If a closed account is reporting a zero CL, even if there is a balance on the CC, the card will not be included in the calculation.

3. If a closed account reports a CL that is equal to the balance (balance chasing), then this will be included in the calculation.  This is the worst-case scenario with regard to utilization.

The OP's closed account seems to be reporting the original CL, so scenario 1 applies.  If this is the case, then paying it down to 9% utilization before tackling the open account's balance would theoretically maximize the OP's credit score, since the closed account's balance and CL would still be factored into the overall calcuation of utilization of revolving credit.

[Uborrow-Upay]

Lel wrote:   "...I can't find the reference on these forums that addresses it..."

I couldn't find it, either...but you've got one heckuva memory for the details!

[Lel]

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@Uborrow-Upay wrote:

Lel wrote:   "...I can't find the reference on these forums that addresses it..."

I couldn't find it, either...but you've got one heckuva memory for the details!

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Can I quote you on this?  DW would beg to differ.  You miss one anniversary and...

In any case, I did find where I had read these details previously.

http://ficoforums.myfico.com/t5/Credit-Cards/im-scared/m-p/590866/highlight/true#M189133