Will paying off high-balance credit cards and closing them help ot improve credit score?

Question

I have a credit card with 13500USD and I am not paying any interest on right now. I have sufficient funds to pay it off as well. This card was taken just 6 months back. I laso have 2 other cards opened in 2007 and these are not used at all. I want to improve my score by another 10-15% with in 6 months. Is it a good idea to pay off this high-balance card and close all the recent cards? My oldest accounts are 3yrs old and the average length of my credit accounts is 1 yr. I want to boost this averahe length by closing recent unused cards. Is this a good idea?

Answer 1

Paying off the balance is ALWAYS good.  If I recall, it's when your outstanding balances exceed 50% of the available credit that it really impacts your score.  If your credit lines on the unused cards are more than what you owe on the one, your ratio will be under 50% already, so the impact of paying it off would be less than you think.  If you close the newer accounts, you just lowered your available credit total, which will RAISE your percentage - forcing you to pay off that balance to a point to get under that magic 50% number.

Of course, $0 owed and $0 available solves it all.  FICO score = "I Love Debt" score

Answer 2

Another option to paying it off is to pay it down. In factoring your credit score debt to available credit is considered. It is best to have no more than 35% of the limit in use on a card at any given time. So if you have a card with a limit of 10k in order to show an improvement in your score, you should carry no more than $3500 on it.

By all means if you want to pay off the balance you should do so, but not at the expense of your savings. If paying off the balance will deplete your savings ( you should have at least 3-6 months expenses in an emergency fund) I would say pay down the balance to 35%. And continue to pay more than the monthly minimum in order to pay it off in a decent amount of time with out paying too much in interest.

BTW be mindful of the default interest rate after the promotional expires. So that you aren't paying too much interest.

Depending on your score, you could actually harm your rating by closing accounts particularly if you only have a few that are less than three years old. these are what your score is based on. Closing these can hurt.

Answer 3

One of the biggest influences on your credit score is the RATIO of debt to credit on any individual card.  Example: A person who has 3,900 debt on a 4,000 card is deemed to be more of a risk then a person with 5,000 of debt on a 10,000 card.  Basically you don't want your credit card to reflect that you run them "to the ceiling" whenever you get one.  Transferring balances from one to another does nothing to help your score..."you can run but you can't hide".

You don't necessarily HAVE to pay off that card in it's entirety, however, make sure your balance is under 50% of the available credit line.  Also, whenever the "no-interest" period runs out, PAY IT OFF if you have the funds; don't keep tranferring.  Continually transferring from one "6 months no interest" card to another will reflect poorly on your score.  (I am assuming, by the information you provided, that you have "moved" this balance several times over the last years.)

Lastly....Absolutely CLOSE unused accounts.  If you are trying to improve your score as a means of obtaining a mortgage, many lendors will look at you as having the potential to go into debt tomorrow for whatever the total of your available credit line is.  Example:  You have five cards each with a 5,000 limit...even though you don't use them, you are viewed as POTENTIALLY 25,000 in debt.

Answer 4

Well, opening an account will lower your credit score as well as CLOSING an account too will lower your credit score. If your balance that you owe on your credit care is MORE than half your credit card limit, that will definitely lower your credit score. So the best way to increase your credit score is since you already have all those credit cards, spend a little on each once, pay it off every month and if you do that over a period of 6 months, your score will for sure go up. Just dont let the credit card company charge you interest becuase you only make the minimum payment. Just charge enough that you know you will be able to pay back the amount in FULL (to avoid DEBT) at the end of the month. Let me know if there is anything els eyou need!@

Answer 5

You should pay it off but do not close it.  One of the things they look at to determine your credit score is how much credit you're approved for vs. how much credit you have used.  If you have a credit limit of 15,000 but have only charged a few hundred it will greatly improve your score.  On the other hand, if you have too much credit compared to your income that could bring your score down.  So your best bet is to keep a couple cards open just not too many, and keep the balance low on the.  Good luck!

Answer 6

Here's how you do it... on credit cards, you do not want to be any higher than approx 30% utilization on it otherwise it will affect your credit score... so, i suggest to immediately pay down that 13,500 card to 30% of your credit line. THen over the next 4-5 months pay it off a small chunk at a time. This will help INCREASE your credit score.

Note: Do *NOT* close any of your credit cards. That will lower your score usually.

Answer 7

the best way to build your credit is to pay them of monthly above the amount they ask you for

Answer 8

You should definitely pay them off but DO NOT close your accounts. Just cut up your cards and don't use them again but don't close the accounts. Part of your score is determined by your credit history which means how long you've had credit accounts for. If you have annual fees then you may try and close them since you won't be using them. You can also transfer your balance to a lower to zero % APR cards and save a bundle on interest. If you want to find these 0% APR cards go to the following site.

Answer 9

Pay it off, but keep them open, especially the oldest.  Check MYFICO.com for more information about credit reporting.