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Credit Utilization Open/Closed Help

DR527
Regular Contributor

Credit Utilization Open/Closed Help

What helps your credit more. Paying off closed accounts with balances? Or paying off open accounts with balances? 

Example: You have three CC and a total balance on all three of $25k. Card #1 is open has a CL of 5k. Card #2 is open has a CL of $15k. And card #3 is closed, has a CL of $5k. You have $15k to pay off debt. Assuming that all three cards are maxed out and you want to maximize your score. Where is your money going to help the most?

 

Option 1: Pay off Card #1 fully and $10k of Card #2. 
Option 2: Pay off Card #2 fully.

Option 3: Pay off Card #1, Card #3 fully and put $5k towards card #2.


If their are other options, or better options. I'm curious to hear them. Thanks in advance. 

7 REPLIES 7
FireMedic1
Community Leader
Mega Contributor

Re: Credit Utilization Open/Closed Help

Util %'s is calculated with open or closed accounts regardless. Did you close the cards with a balance? Or were they charged off? Pay down the highest util % card first then work your way down.



Homeowner Sept 2020. 2021 Explorer ST Chase 3.1%. Sharing my recovery after BK from learning here. Started 540's. EX FICO 9 801 as of 05/03/2023. I stayed around to pay it forward for those who helped me back then.
Message 2 of 8
DR527
Regular Contributor

Re: Credit Utilization Open/Closed Help

I get that, I'm looking for a approach to give to someone else. If all of the cards are maxed out. I'm not sure if there is a benefit to paying off open cards first. Before closed cards? Nothing is late or charged off. Zero late payments. 

I'm not sure how FICO will calculate open accounts vs closed. Of the three options I listed. Is there one option that will gain more points? Or does FICO say. A dollar paid to a closed account is the same as a dollar paid to a open account, zero difference?

Message 3 of 8
EAJuggalo
Established Contributor

Re: Credit Utilization Open/Closed Help

You have to pay off the closed card first.  That is being figured as owing 5k with a credit line of 0.  Then you take the other two down to half.  That would net you the best score improvement.  But finances over FICO.  Pay whichever is charging the highest interest percentage and go from there.

ETA: The closed card is killing scores by reporting over the limit.

EX700 TU 704 EQ 694 4/03/22
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Message 4 of 8
FireMedic1
Community Leader
Mega Contributor

Re: Credit Utilization Open/Closed Help

Once again. It doesnt matter FICO-wise. Take care of ther open ones first so no AA occurs with maxed out cards. Util is util open or closed.



Homeowner Sept 2020. 2021 Explorer ST Chase 3.1%. Sharing my recovery after BK from learning here. Started 540's. EX FICO 9 801 as of 05/03/2023. I stayed around to pay it forward for those who helped me back then.
Message 5 of 8
SeaProbe
Contributor

Re: Credit Utilization Open/Closed Help


@EAJuggalo wrote:

You have to pay off the closed card first.  That is being figured as owing 5k with a credit line of 0.  Then you take the other two down to half.  That would net you the best score improvement.  But finances over FICO.  Pay whichever is charging the highest interest percentage and go from there.

ETA: The closed card is killing scores by reporting over the limit.


From personal experience, I don't believe that is universally so. One DP: when I closed my Discover card (a story for another post), they reported it as closed but to this day my credit reports show the full CL it had when it was open.

 

The card did have a balance as of the date that I closed it, however autopay brought it to zero on the next statement's due date. My credit score did not change - well, not much as it always bounces around a bit day to day - despite it reporting as closed for more than a month before it later reported as zero balance.

Message 6 of 8
kb2ehj
New Contributor

Re: Credit Utilization Open/Closed Help

One thing I haven't seen mentioned yet, is do you really want to start racking up late payments on your open accounts?

The closed ones are yes hurting you but not reporting as anymore late then they already are.

 

Don't damage your score anymore then you have to.......if nothing else make at least the minimum plus a little extra.  Then as said put money towards the largest one that you owe on first and work your way down.

Message 7 of 8
DR527
Regular Contributor

Re: Credit Utilization Open/Closed Help

It's a coworker, he wants to buy a house. He asked me to look at his credit report. And I had him download MyFico. He is trying to buy ASAP. So he asked what to do and I wasn't sure how utiliz worked for closed accounts. I think he's more concerned with a score boost. 

Message 8 of 8
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