Hello, I am new to this forum and have a couple of questions. During my younger years when I had a "spend it while I have the credit" attitude I managed to reach the limit on a number of cards. Over the years my credit score was pretty bad and when the credit card account was sold to another bank they would close the account. I closed a couple of the smaller limit cards on my own (probably not the best idea) Now I only have one card that I use that has a 1500 limit which about 1200 is used. But, on my closed accounts I owe about 8000. I read that having a card close to the limit will negatively affect my score. But do the closed accounts count towards this too? What I mean is do the old limits on my credit cards still apply and I need to pay down these accounts. I need to up my score by about 30-40 points over the next few montsh if possible. Some of my older accounts have crazy interest rates so I have been paying them down first and have not bothered with my open account. Hope some of this makes sense!! Thanks in advance!
I don't know for certain, but it would be rational to count balances on closed accounts as debt, and use that same amount in place of a credit limit for FICO calculations. You don't have additional available credit on that account above the balance. If these accounts have good payment records, with no lates, you are still better off than someone trying to recover from charge-offs. When you pay them off, you will have a good credit history, and low balances. There are two issues: 1) Do not take on more debt than you can handle, or for that matter, use credit to live beyond your means. You have $9000 debt, which is taking a chunk out of your monthly cash flow. in effect, the banks own that piece of you. 2) If your goal is to position yourself for getting good loan terms when it matters, such as to buy a house in a year or so, you might want to both pay off your outstanding debt, and to open a couple of additional accounts, but only on good terms, and not increase your outstanding debt by running up additional balances. To a mortgage lender, or to any potential creditor using FICO, you want to present a picture of a long history of paying your debts on time, low current debt, and a number of open credit accounts, all with positive payment history and some age to them. Lots of debt is bad. No accounts are bad. Recent accounts are bad. Several old accounts with low debt and good payment record are good.
