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Discussion in 'Credit Talk' started by Shantel, Jun 29, 2001.
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That's logical. My Discover account is closed though and it still reports a $1,000 limit. But since the account is closed I don't know if the scoring model actually takes the limit into account.
You also have to watch your interest rate. Most places will jack the interest up to 23% or higher like 25%, or 30% when you close an account with a balance.
Why close it? Just put the card away and don't use it. When it's paid off, then close.
When a cardholder is notified of a change in terms, and they do not wish to accept that change, they have the option of rejecting the change - in that case, the account is closed, but the old contract terms remain in effect.
For example, GEORGE Consumer has a fixed 9.99% interest rate on a CC from xyz CC company. Xyz decides they need more than 9.99%, and changes their interest rate across the board to 26.99%. All they have to do is put a notice in with the statement and give the cardholders a chance to opt out within a reasonable time. GEORGE Consumer, who reads all the fine print on the junk he gets with his statement, calls and says, "hold on here, no way you can change this, I have a contract for 9.99%." Xyz will close the account, and let him keep the 9.99% until he pays off the balance. If he doesn't let them close the account, he is stuck with the 26.99%.
RIGHT, GEORGE??? LOL
I'm not just talking about CCs with high interest. But what about those folks who have their accounts closed because of slow payments, or going into a debt consolidation program.
In these cases, you don't have the option to just "put the card away"....it was put away for you. So now you have a CC you can't use but a 2k balance and a big fat ZERO CL. This HAS to affect your score somehow (even if the creditor doesn't report to the CRAs as "Closed by creditor").
One CC, 2k balance, 4k limit - debt-to-limit ratio 50%
One CC, 2k balance, 0 limit - debt-to-limit ratio ??? It's not 100% because you don't HAVE a limit...it's closed.
I graduated from college May 2000.
I graduated with:
Closed Discover 1000 limit; balance 1333
Closed Citibank 800 limit; balance 1000
Closed GTE Visa 500 limit; balance 875
Open Victorias Secret 960 limit; balance 750
(Don't ask and yes they do really sell actual clothing)
Open Capital One 200 limit; balance 100
Collection Account for 743 from Sprint PCS
Student Loans 14833
FICO May 2000: 495
FICO June 2001: 647
I went into credit counseling april 1999 with ameridebt (they suck a&*), I dropped out of that plan end of last year and began making bigger payments to reduce my debt. I did not know my discover was closed. I always checked the account online so I never knew it was closed.
Anyway, at the time when I graduated I wasnt making much money so my debt ratio was horrible.
But everything is a lot better now, so whenever I (wont let it get to the point anymore when they close accounts on me) decide to close an account, I will definitely pay it off first.
The big effect is on the calculation of total revolving debt to total revolving credit limits utilization and the impact on fico.
If you have 2 cc, both each having a $2k balance,and both with a credit line of $4k each, it would show a total revolving debt of $4k with a total revolving credit limit of $8k, making the utilization 50%.But close one cc without paying the balance and it will still show a total revolving balance of 4k and a lower total revolving credit limit of 4k, or 100% utilization.
And some prime cc companies won't open or approve a new cc acct with a utilization above 40%.Some sub-prime will approve with 70% or higher.
You credit report will show the reason for the closure of the account - whether the creditor closed it or you did. There is no effect when you close an account, even with a balance (other than, as has been pointed out - your total available to used credit). With the creditor closing out your account, yes, indeed, that will have a negative effect on your credit rating.
This is a great thread.
Shantel-I hear you. Did the same thing with another company CCA in Phoenix AZ. All accounts that were handled by these folks were reported as "Closed by Credit Grantor" w/exception of 2. Was able to get another company (Cap 1) to change the closed status to "By consumer."
Kristi, or anyone else: Any idea on how willing creditors are to change account status once balance is paid on a closed account from "Closed by credit grantor" to "consumer". Or if they would even consider re-opening?
When I spoke to the CC folks (which is Associates by the way), they told me "To reopen the account, we'll have to pull your credit report". That was last year. I decided against it since at the time, it was in total disarray. But since they pull Equifax (my best) I felt like, okay, sure. HOWEVER, now that I know how things are, I'll SURELY find out if it will be a soft or hard inquiry. They have no reason whatsoever to pull it has a hard inquiry...I have an account with them already!
At any rate, when I attempted to reopen the account last week, the CSR said, "Is the other party on the line?" I said, "Who? My mother?" She said, "This is a joint account so both people have to agree to have it reopened." Well of course my mother wasn't on the phone. She doesn't know WHAT'S going on with this card...hasn't really since she cosigned for it when I was 17!!!!!
So the other day in the mail, I get this form that say, "Both have to agree, please sign and return". Hmmm. I know my mother's SSN and have signed her name on forms (with her knowledge) before. I've just been trying to decide if I want to do the 2-party call or what.
By the way, I'm concerned about this account for two reasons: It's my oldest and the length of credit history keeps coming up on denials. As does the debt-to-limit ratio. This account (as well as my Cap One) are keeping my d-t-l ratios high and I want to fix that (I'm also paying off CCs).
Thanks for the comments Kristi