@Anonymous wrote:I have searched the board and read most of the post on closed or closing accounts, but none seem to address my specific issue.
Here's the deal. My wife and I are trying to get our score in shape to buy a new house. (A work relocation prompted a sell and move to a new town) Once we started the process of paying down our credit card debt, the credit card companies started lowering our credit lines. Thus making it look like we were maxed out on the cards and lowering our score. A mortgage loan officer with the bank said we should close most of these accounts that are lowering the credit lines. When asked how this would affect our score, she told me that in our situation it would actually help because the credit lines would be frozen at their current amounts and as we paid the balance down our score would go up because the difference between the credit line and the amount used would be greater. If I understand correctly this is the utilization rate. Is this a good plan? I thought closing accounts was a bad idea. Any advice would be appreciated.
Thanks
Here's a moderator post relevant to your questions:
In your situation (short term FICO gain necessary + "balance chasing" practiced by CCC as you pay down), your loan officer's advice seems prudent.
Generally, a closed account with a non-zero balance continues to factor into the FICO utilization calcs - both the CL and balance. Conversely, a closed account with a zero balance removes the CL from the util calc. So if closing your card will freeze the CL and the CCC continues to report your diminishing balance, then closing your account will help your FICO score - in the short term - by preventing the balance chasing behavior.
If the CCC is balance chasing, your account may be in danger of being closed. CRs list whether account is closed by creditor or consumer. While FICO doesn't care who closed it, future creditors may wonder why a creditor closed the account.
Will you have enough credit available to meet your needs if you close these accounts?
Long-term considerations...
However, also consider how long the card has been open. If you close an account, it will eventually drop off your reports which will have a negative affect your AAofA if it was your oldest TL.
