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Cpngratulations are definitely in order, but according to tons of books I've read, you should never close a credit card account once you've paid it off, since AAoA (Average Age Of Accounts) is an extremely important
determinant in how lenders perceive prospective cardholders.
A lengthy credit history makes you far more attractive to prospective lenders than someone who is new to the world of credit.
Liz Pulliam Weston, former personal finance columnist for the Los Angeles Times, has been doing likewise for MSN for a few years now, and I'd recommend subscribing to her weekly newsletter, as well as exploring her archived newsletters.
I'd also sign up for a credit monitoring service from one of the 'Big 3'; for $14.95 a month or thereabouts, it's a great deal IMHO.
according to tons of books I've read, you should never close a credit card account once you've paid it off, since AAoA (Average Age Of Accounts) is an extremely important
determinant in how lenders perceive prospective cardholders.
In my case, I don't care about my credit score that much. Not borrowing money for anything anymore these days. Too old. Now, if these card holders want to switch me to one of their no fee cards, that's OK. Don't know if doing that preserves the 'history, but to have 4 or 5 cards, each of which charges $40-$50/yr - I don't want to spend that anymore.
Second, the available amount of credit available (cards still open) will be a negative when calculating your score.
I went to school with a woman who was the VP of a bank, got tired of it and was going back to school to be a nurse.
This is similar to what she said (She was in charge of mortgages)
HOWEVER: May I point something out?:
You (the OP) can keep up the 'bad' habits, and end up in the same situation again.
OR, you can take this opportunity and change your habbits.
When you are not in debt, savings are easy.
When you save money... you do not need debt.
I changed duty stations at one point and closed my local accounts. In the new area (I like having local banks in addition to USAA) I took in a bank check to open the azccount. They told me they needed to run a credit check.
I asked them why as I was simply opening a checking account. They said 'incase I needed a loan'
Didn't understand why, and when I asked the lady said 'incase I needed a new car.'
When I pointed out to had that the Bankcheck was for in excess of $28K... and asked her why I wouldn't just pay cash....
She had no idea.
People are brainwashed.
IF my old truck breaks down tomorrow...
I'll just go write a check for another... (Although I'd rather it happens in warmer weather so I can ride one of my Motorcycles as I shop)
If I have say 10 credit cards with high balances = ois it better to pay all of them over 51% off or pay like 5 of them completely - whats better for credit score - for future etc... Never ever late on a payment
No it will nnot hurt once the amount is paid off. The day are gone that crdit score is the only factor;now days insome to outstanding debt is getting more important.Yuo would be the same boat at elast for awhile as the person who pays off credit early or maintqins no balance. But you will be betetr offf than the perosn who never uses crdit and has no history. You will i time if you amintain a incomne find you are the perosn those fine print advertisements for )% auto loans mena;well qaulitifed borrowers. A good history combined with a good income to debt ratio means alot how days compared to just the resent past.
Thanks for your reply but you have misunderstood my question!
Maybe I was not clear in my orginal posting. My goal is not figuring out how to get the perfect score but to understand this question:
FIRST: I am not paying off the $60K in debt over time, but instead I am going to pay it off immediately after I get the funds from my house sale.
Here is my question reclarified:
If I have a long history of high balances and minimum payments (over four years of at least $40,000 in debt) but next month I completely pay off my credit cards and have a zero balance on everything, will my long recent history of high debt on multiple cards and minimum payments hurt my FICO score AFTER I pay off all my debt?
I would think creditors and the credit reporting agencies could look at my situation in two ways AFTER I PAY OFF ALL MY DEBT::
1) Great, she has now paid off all her debt. She has a long history with credit, always paid her credit card bills on time, handled high debt and now owes nothing. She deserves a really high FICO score.
OR:
2) Yes she has recently paid off all her debt but she has a history of charging up her credit cards almost to the max and then sending in minimum payments for years. It is likely she will do this again and again. Her history of high debt on multiple credit cards should limit her FICO score in the future even though she owes nothing
Correct me if I'm mistaken, but, in reading between the lines, it sounds like you are asking if you pay off a large credit debt at one time, will your FICO score rise enough in a short time ... to qualify you for a large mortgage (or other?) -- [Are you planning to buy another house?] The reality is that one's credit 'history' has a greater impact on one's FICO score and on a lender's willingness to extend credit, than any single action.
For example, a major action (foreclosure or lump-sum payoff) will have a greater impact on one's credit 'history' than a series of small actions, but, your payoff example is unlikely to suddenly move your FICO scores from 500 to 800! AND it shouldn't! -- After all, one doesn't get 'special credit' for suddenly paying off one's debts; when that's only what one should have been doing all along anyway. That's why, for example, it takes about 5-7-years to get a bankruptcy or a foreclosure off of one's credit 'history'.
Suppose you had a friend who had a long history of borrowing money ... and then slowly paying it off a little bit at a time over several years. Suddenly, a 'windfall event' allows them to pay-off their debt to you. Now they want to borrow a large sum of money, claiming that they will pay you back in a TIMELY manner. Will your decision be based more on the zero balance of their current debt ... or on their history of being a slow payer? (Of course, credit card companies like 'slow, but, reliable payers ... since they make considerably more interest ... but, others simply want their money they are rightfully owed ... without the drama and delay of bare minimum payments).
Location: 23.7 million to 162 million miles North of Venus
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This is a 3 year old thread, and, the OP went inactive several days after posting it three years ago. It was resurrected by the following new question by a new person ....
Quote:
Originally Posted by moseyca
If I have say 10 credit cards with high balances = ois it better to pay all of them over 51% off or pay like 5 of them completely - whats better for credit score - for future etc... Never ever late on a payment
With 10 cards that have high balances, I would suggest that you concentrate more on paying them off over thinking about your scores at this point. Even if you cut the utilization, on half of them, down to 49%, that utilization amount is still too high and it's going to negatively affect your scores. Work at paying them off and your scores will take care of themselves.
The bad news is I am in debt to nine different credit cards $60,000. The good news is the house has sold and I will get a $120K profit from the sale. So in about a month I will be able to completely pay off my credit card debt and owe absolutely nothing on my credit cards. I will owe nothing to any other creditor after that too.
Here is my question: My FICO score is average due to the fact that I have always paid my credit card bills on time but mostly only the minimum payment. I have had at least 40K owed on a variety of credit cards for at least 4 years. My FICO score is only average because I owe about 75% of my available credit. So my utilization rate is bad.
So when I COMPLETELY pay off my credit cards next month will be credit score be really high? Or will my FICO score be impacted for a while because of my long history of excessive debt and years of minimum payments?
On the good side:
* I have had credit cards for over 20 years. Most of the cards I have now I have had for over ten years minimum
* Always paid them on time, never late
* I have a history of high balances that will have been paid off completely without any late payments
* I have had a car payment and a mortage in the past that were always paid on time
So, what is going to happen to my credit rating after I pay off all my credit cards? After I pay off my debt all at once next month what impact will my years and years of high balances and minimum payments have on my credit rating? (I know they will hold it against you if you pay late but how about years of minimum payments on high balances, will that impact my credit rating and FICO score in the future after all my debt is paid off?)
$60k may more may not be impacting you now. What's $60k as a percentage of your total credit limit?
My credit shot up about 80 points in a few months when I went from 80% utilization down to <10%. It'll happen quickly if there is any negative impact currently. If you've been late on payments, however, that just takes time.
Meh just saw the date. Oh well.
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