pay off open or closed account first?

Discussion in 'Credit Talk' started by StdntHlp, Jul 6, 2016.

  1. StdntHlp

    StdntHlp New Member

    I’ve read a few other forums with similar questions, but they didn’t quite answer my specific question.

    I had a rough year last year and had a gap in employment (while also attending school full time). I also had other roommate issues (not paying rent, etc. that made times a little more trying for me). Anyway, I have a few credit cards that are not maxed out, but are definitely much closer to the max than they should be. I also have one card that was closed (does this mean it’s utilization is 100%? That might answer my question lol). I have a few hundred dollars right now that I want to go towards my cards and hopefully bring my credit up a few scores.

    Should I focus on bringing my credit utilization percentages down on my other cards that I owe more on by making a large payment, or should I pay off the closed account before I focus on the utilization of open accounts?
  2. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Welcome to Creditnet! And sorry to hear that you had such a rough year in 2015...hopefully 2016 is looking better for you.

    Why was the one credit card account closed? Did you miss payments and was the account closed and charged off by the creditor? If that's the case, then paying it off won't do anything to improve your scores unless you negotiate removal of the charge-off in return for payment.

    Closed accounts with no balances don't factor into your credit utilization ratio, but they can affect it because of the available credit limit that you lost when the card was closed.

    As for the open accounts, you really want to target a credit utilization ratio less than 30% (ideally less than 10%) to see an improvement in your FICO scores.
  3. StdntHlp

    StdntHlp New Member

    Yes. This year is going a lot better, trying to undo as much of the damage as possible!

    It was less than a year old and I missed a payment on it. I also hadn't used it for a while. After I missed the payment, they immediately closed it, but it wasn't charged off. I've been making consistent minimum payments on it, but I also have a few other cards with higher APR and higher balances/utilizations that I've been focusing on. All of my cards are over the 30% mark (besides two that I've paid off). I know that with the amount I can afford to put down I can either pay off the closed account, or bring my highest utilization way down or split it up and bring a couple of them down a little. I just wasn't sure if paying off the closed account would help my credit score as much as it would help if I brought down a different card with a high utilization.

    Since I started making consistent payments again, my score has gone up significantly, but I still have a lot to do!
  4. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Glad to hear 2016 is going much better for you!

    Regarding the closed credit card account, did you ever try to talk with the credit issuer and get them to reactivate your account? If it's been a long time since they closed it, it might be too late now. But sometimes credit issuers will reopen accounts if you call and discuss the issue with them, especially if you only were late on one payment. Just something to think about.

    If it were me, I would pay off the closed account first. Then I would move on and start paying down the balances on the other credit cards until I got them below the 10% credit utilization mark. It's tough to say what will really have the best impact on your credit scores because so many variables are involved, but personally I wouldn't want a closed credit card with a balance lying around. I'd want to get it paid off and put to rest so there's no risk of potentially dealing with a charge-off down the road.

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