Paying off CC question

Discussion in 'Credit Talk' started by jeffalan49, May 5, 2016.

  1. jeffalan49

    jeffalan49 Member

    Hello, again. This board is awesome. Question: I have this: CreditOne bal of $1,200, HD with bal of $500 and CareCredit with bal of 700. I am in the position of being able to pay off all 3 balances.
    1) Should I pay all down to a $0 balance?
    2) Will cards close because of $0 balance?
    3) Will I see an increase of credit scores? These 3 cards are the only ones I own.

    Please advise. I do not want to close the accounts. I just do not want that monthly payment any longer.
    Thank you.
    -Jeff
     
  2. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Hello again Jeff! Glad you like the board!

    It's unfortunately not as busy around here as it once was back in the day, but we're hoping we can change that in the coming months. Please help us spread the word! If I may ask, I'm curious how initially came across the site?

    Now, on to your questions.

    1.) If you have the cash, then yes- I would suggest you pay down all 3 balances to $0.
    2.) No, cards will not close due to $0 balance. You'll want to keep using the cards every now and then, just to make sure you still have some activity though.
    3.) I don't know what your credit limits are on all 3 of these cards, but I will assume that your credit utilization ratio is pretty high. You should definitely see a bump in your FICO scores by paying off all the balances. I can't say exactly how much, but it should be a nice bump.

    Let us know how it goes and what kind of increase you see in your credit scores!
     
  3. jeffalan49

    jeffalan49 Member


    Hi. Been using this site for a while. Sometimes under a different name because I forget my user name and such. All 3 cards are pretty much maxed out. I asked the question about carrying a zero balance on all 3 cards because many years ago, I want to say Discover, they closed my account because of zero balance. If cards get closed, its not good for the credit report.
    -Jeff
     
  4. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Were you using the Discover card regularly when it was closed on you years ago? Credit issuers will close accounts when they have a $0 balance and aren't being used at all month after month, but they won't just close your card because you have a $0 balance.

    There's also a big credit myth floating around out there that somehow your credit scores improve when you carry balances too, but that's totally bogus. You should always pay your monthly balances in full by the due date. Credit utilization accounts for 30% of your FICO scores, so it's very important and you want to ideally keep your utilization under 10%.

    You're absolutely right that closed accounts can have a negative impact on credit scores, but I really doubt that will happen for you in this situation. If I were you, I wouldn't hesitate to pay off the balances and stop making those hefty monthly interest payments.
     
  5. mijd

    mijd Well-Known Member

    JeffAlan49, Joshua's correct. As your credit scores improve you should think about asking for CLI's. This way charging small amounts will not put you at 30% or more utilization. There are many ways to request CLI's and most (but not all) will require a hard pull.

    Joshua, I too heard that carrying a balance of 10% or less on one card will boost your CS. I also heard that closing accounts with a balance will negatively affect your score and your utilization. However closing a card with perfect payment history but because it has a AF maybe a good idea? Just wondering.
     
  6. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Hey mijd- it's a total credit myth that carrying a balance of 10% or less on a credit card will boost your FICO scores. It's just not true.

    Closing accounts in general could have a negative impact on your credit score in a variety of ways. It can affect your credit utilization ratio, length of credit history, credit mix, etc. and will most likely drop your FICO scores unless you're replacing the card with another new one. I always think it's a wise practice to get a new credit card first with hopefully a similar credit limit, then close the old card with the annual fee (making sure the balance is paid in full first).
     

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