Sunday, August 9, 2009

I am about to pay off all of my credit card debt appr. $9,000. How much will this improve my score?

Find out these details: Capital One high balance, the credit limit on all others, the current balances you are about to pay off. If your balances are on open cards that have balances that are less than 30% of the credit limit, you%26#039;ll gain fewer FICO score points. If any account is more than 30% utilized, or if the total of all balances is more than 30% of the total of all credit limits (for Cap1, use high balance instead of credit limit, from your credit reports), you%26#039;ll gain extra points for paying them down below 30%. I guess 30 - 100 points, depending on whether you are maxed out or not. Also, if the account is not reported to a particular Credit Reporting Agency, no change to that CRA%26#039;s FICO score for improving the account%26#039;s utilization.



You didn%26#039;t ask, but do not close the paid off cc accounts. You can hurt your Fair Isaac (FICO) credit score by closing a credit card account.



15% of your FICO score is for length of credit history. The average credit user has an oldest open account that has been open for 14 years. Where do you fit on this scale? These are the toughest FICO points to earn. They also score you on the average length of time all your open accounts have been open. So if you close the old account, you%26#039;ll hurt your score because (1) you lose your oldest account and (2) the average age of your accounts goes down.



30% of your score is credit utilization: how much of your credit limit is used up by your balance? On each revolving account, you need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have a $200 credit limit, you must not have a balance higher than $60, which is 30% of $200. So the old account will have a zero balance on it, and you can%26#039;t get any better than 0% utilization. They also look at total utilization: they total up all your balances, and all your credit limits. That total percentage utilization must be kept below 30% of total credit limits, or you%26#039;ll hurt your FICO score. Close the old paid off account, and you%26#039;ll take away $0 in total balance, but you%26#039;ll take away all those dollars in credit limit, and up goes your total utilization, and maybe down goes your score.



10% of your score is on credit mix. The good types of credit are mortgage, secured car installment loan, prime (unsecured) major credit card (MC, V, AmEx, Disc) and store cards (Macy%26#039;s, Home Depot, etc.). The bad types of credit are payday loans, personal-finance loan accounts for purposes of cash advances, still-secured credit cards and overdraft loans. Ideally, you want to have at least one account for each of the good types of credit. Close the last account in one of the good types of credit, and down goes your score.



But if you have more than 6 open cc accounts, close still-secured credit cards first, if you can%26#039;t convert them to unsecured accounts (call the cc company, and make sure they waive all fees permanently, and return your security deposit with interest, otherwise close them). Super sub-prime secured accounts can be derogatory to your score (credit mix), unless you%26#039;re still young and used one to obtain your first credit.



Keep your old open cc accounts healthy by making one small, NECESSARY purchase (one purchase of groceries, gasoline or a utility bill on autocharge to the cc) each month and using auto-pay to pay it off in full the next month. No finance charges necessary to score max FICO points for the 35% of your score that is for payment history. Just purchase your way, once each billing period, to a small positive balance, and pay if off in full after the bill arrives, before the due date. For the 5th or more card, if it%26#039;s old and open, just use it once every 5 or 6 months to keep the creditor from closing it for lack of use. Your score can be penalized for your having too many open accounts that have a positive balance.



Good for you for taking responsibility and gaining financial freedom.



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I am about to pay off all of my credit card debt appr. $9,000. How much will this improve my score?

what other debts do you currently have, any closed accounts, mortgages, judments, tax liens, etc its hard to say with just this piece of information but i paid off 2 accounts that were appr $500 and my credit went up by 119 points. i have a student loan and revolving store card currently opened with a $100 limit, zero balance. Student loan $3300.00 balance, $50 payment a month. and a few late payment records. All of those factors affect your credit score. if you do have any credit cards make sure heir balance is not higher than 30% of the card limit, if so work on bringing them down to about 30%.

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