Ok NEED someone's advice!!!

BuffaloBoy · ‎09-18-2014

I have a 590 average score.

We have 4 cards with about $14,000 worth of debt - almost all the cards at 24% interest rate.

I was approved at my credit union on an auto loan at 7% to wipe all that debt out.

Here's the catch - they want to pay the accounts off themselves and they require that the accounts be closed after they pay them off. WHAT DO I DO? Should I just not do it? Will closing all those cards tank my score????

IOBA · ‎09-18-2014

My suggestion would be to let them pay it off - if that is a condition of the loan.

As for closing the loan, well, maybe you will be forgetful and forget to close the accounts out after they have been paid off. You do and should wait until the payment clears and the debt is paid off before you consider closing them.

Consider NOT using the cc's. Go to cash.

Your CU is probably concerned you will use the cc's and rack up the debt again.

*** paying down the debt should help your score

*** a new inquiry and a new debt with 100% utlitization may lower your score

Overall, the damage won't be bad.

Revelate · ‎09-18-2014

+1 to IOBA's comments.

Satisfy the condition of the loan, then in six months open up a couple cards. Yes you'll take a hit to your FICO score with all your credit cards being closed but it's temporary and it sounds like a huge financial win getting the loan done. Finances >>> FICO every single time when we're talking refinancing debt to a substantially lower interest rate.

takeshi74 · ‎09-19-2014

@BuffaloBoy wrote:
I was approved at my credit union on an auto loan at 7% to wipe all that debt out.

Guessing that's just an incorrect choice of word but they approved you for an auto loan to consolidate your credit card debt?

@BuffaloBoy wrote:
WHAT DO I DO? Should I just not do it? Will closing all those cards tank my score????

You have two choices -- agree to the terms or find another way to deal with your debt. Depending on your utilization your scores are probably already taking a major hit. It's not surprising that they want to have the revolving accounts shut down as you'd be in even worse shape if you racked up more debt after consolidating.

There's a thread in the Credit Cards subforum linked via the Helpful Threads sticky that addresses impact from closure.

http://ficoforums.myfico.com/fico/board/message?board.id=creditcard&thread.id=117125&jump=true

Short version is that AAoA isn't immediately impacted but utilization is immediately impacted. If the accounts are closed with zero balances you'll probably be in better shape in the long run despite any short term damage. I'd also agree that your long term financial siutation is much more important than short term scoring concerns. You shouldn't be seeking credit while paying the loan off anyway so your score isn't really relevant until then.