PAYING OFF CLOSED ACCOUNT WITH A BALANCE AND EFFECT ON CREDIT SCORE

[Prosper777]

Hi Everyone,

I've been lurking on this forum for ages and you guys actually saved my life!

Now I'm just trying to help a friend a little and hope you guys can chime in with some advice because I've searched and haven't really found the aswer to this yet.

My friend has a credit card account with Citi and during those crazy times of the credit crunch Citi began to cut/chase his limit down and later ended up closing his account but was "kind enough" (sarcasm!) to note on the credit report that it was "closed by consumer". He was never late and has paid this account continuosly for the past 8 years or so. He is thinking about paying it all off (he has about $680 left on a $1900 credit line) in hopes of boosting his credit score. Do you guys think that this will actually increase his credit score or decrease it since this account has been closed for so long but still reports the good paying history? Good people with experience with this type of problem please advise, we greatly appreciate it!

[Anonymous]

Your friend has taken 8 years to pay off $1,220 out of a $1,900 limit? 

What is the minimum payment and interest rate? $15 a month with a 40.25% rate? 

[Prosper777]

He is lucky that he was able to pay the minimum and not go bankrupt since he lost his job twice during the past 8 years. Now, do you have any advice to actually help him? Thank you!

[Anonymous]

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@Anonymous wrote:

Your friend has taken 8 years to pay off $1,220 out of a $1,900 limit? 

What is the minimum payment and interest rate? $15 a month with a 40.25% rate? 

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lol....my thoughts exactly

im interested to know if citi has been reporting these payments to his credit report or did it vanish from the credit report ages ago.

regardless, since this first occurred 8 years ago, i dont think it would have any negative impact to his credit anymore. it's usually 7 years + 180 days for the negative mark to stay there.

but seriously.... why did it take so long to make those payments?

[Anonymous]

I'm no expert, but I think it would help a little because his utilization would go to 0% (however, I'm not sure if utilization comes into play with a closed account). My advice would be to pay it off and open up a small starter card (capital one platinum). He would need to keep utilization under 10% every month or at least by the statement cut date. Jmo

[Prosper777]

Oh my, why so much disdain? I've just explained that he is lucky to have been able to continue to pay the minimum since he lost his job twice during the past 8 years. Can someone with a good heart please reply and try to help him? Thank you!

[Anonymous]

I'm trying to help but we do need more info though...

does he have any more accounts (loans, credit cards, etc)

680 out of 1900 is around +30% utilization. can he make it to below 10%? leaving a balance of less than 190.

does he have any other deliquent or derogatory information on his report?

did he create an account on creditkarma to see whats on his report for TU and EQ (not fico though, vantage)

in the last two years, did he apply for credit?

Wondering about what the credit score is isnt as important as knowing what he wants to do with the credit score. so what does he want to do?

[Kidcat]

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@Anonymous wrote:

Your friend has taken 8 years to pay off $1,220 out of a $1,900 limit? 

What is the minimum payment and interest rate? $15 a month with a 40.25% rate? 

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He said that his friend was balance chased, so I presume the original balance and CL was higher.

[Kidcat]

OP- my understanding is that the credit limit reports on a closed account ONLY so long as there a balance on the card.  Once it is paid off to zero it should cease to be included in the utilization factor for FICO.

[Prosper777]

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@Kidcat wrote:

OP- my understanding is that the credit limit reports on a closed account ONLY so long as there a balance on the card.  Once it is paid off to zero it should cease to be included in the utilization factor for FICO.

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Thank you so much for your understanding and good advice, Kidcat. I truly appreciate it! And yes, you're right, he was balance chased and was still able to keep all his other credit cards open and paid them all on a timely manner, never missing or late on one single payment even though he lost his job twice during this period.  All his accounts and balances/credit limits are reported to all 3 bureaus as paid on time including this closed one. Thank you so much for taking the time to reply!