closing credit cards??

[Anonymous]

Hi again... Sorry for asking so many questions tonight, but I'm new to this website and have decided to really work on cleaning up my credit report. I have 4 credit cards with over 85% of my credit line used... 3 have increased the rates to 29%. My score is 654 right now... no late payments... 1 charge off due to a loan I cosigned on and the other person made no payments on it. I'm in the process of requesting it be taken off my reports due to circumstances that made my cosigning invalid. I live on SSDI and have finished my final appeal with Social Security to be able to go back to work without losing my insurance benefits. Soo... limited income...

I talked to CitiBank (Hardship Dept.) to try to get my rate down... they would go down to 14% for 1 year, but would be closing the account permanently. I didn't agree to it yet, as I have heard the closing of accounts can hurt my score even more. What if all 3 will agree to reduce the interest rate, but will want to close the accounts?? I'm having a hard time making the payments... I always paid more than the minimum until the last 2 months. 

I have a mortgage with my brother (I am his guardian and we're listed as tenants in common), a car loan and then the credit cards (which I am not using anymore) ... I'm trying to find ways to take the weight off trying to make the payments each month and still be able to buy groceries. 

Sorry this is so long... just trying to educate myself and pull myself out of debt.

Thanks for your advice,

Karen

[haulingthescoreup]

Hi, welcome to the forums!

The deal with a closed account is that as long as they report a balance and/or a CL on the account, it will continue to contribute to your total CL. Once that balance is paid off, though, the CL is gone, and if you still have balances on the other cards, that can hurt, because your total CL will drop. However, the closed account should continue to report for 10 years after closing, meaning that it is counted as part of your history, which is good.

You're in a tough situation, not knowing how the others are going to react. You might want to "triage" your cards, figuring out which ones you want to keep open and which you're willing to let go. But if the high APR's make it impossible to pay off your debt, you might have to allow them to be closed, as long as that gets figures down to more manageable levels. You can always start all over again in the future, with a credit union for instance.

Since you can't really increase your income, you might be stuck, at least for a while. Since you are your brother's guardian, I don't know how ethical (or legal) this might be, but would there be some way of borrowing from him, or of postponing mortgage payments for X number of months? I don't know how high your CC bills are, of course.

Here are two general resources to help you understand how your personal credit works, in case you haven't stumbled across them yet:

Understanding Your FICO ® Score and Credit Scoring 101 (at least the first post)

[Uborrow-Upay]

This is my OPINION ONLY...

Forget all about your scores.  Do what's necessary for you to maintain the things you have and keep food on the table.

Close out the cards after re-contacting each credit card company to try for the lowest rate you can get, even if it's a five year payoff type of thing at much lower interest rates.  Make the deal, close the accounts, and keep up with the arrangements you've made.

You're not looking for a mortgage.  You're not looking for a car loan.  You've been maintaining payments up until now.  The good history will remain if you close these accounts, and you'll get more accounts sometime in the future if good payment continues.  But right now, you've got to think with your wallet.

Your credit score does not even exist unless it's pulled.  You're not looking for credit.  Your existing creditors already know your situation without looking at a score.

Negotiate the best rate you can, close these accounts, and don't worry about the score.  Just make the payments on time, and everything will work out for you in the long run.

I wish you all the best with everything!  

[haulingthescoreup]

Thanks, UB-UP, for the real-world reply! Great advice.

[Uborrow-Upay]

Thanks, hauling!   I was due to hit one, sooner or later.