Cost of Closing a Credit Card

Credit Score Close a card Miss a payment Max out your cards
680 40 70 95
720 55 80 115

Does closing a no balance credit card effect your credit score? Chances are, yes.

One of the factors that goes into evaluating your credit score is how much available cash or credit you have versus how much debt you owe. If you have a credit card with a $5000 available balance, once you close it, you have $5000 less available which increases your percentage of debt.

On the other hand, maxing out your credit has an even worse credit score consequence so, if you know you’ll end up spending that available amount, you’re better off with fewer cards.

The above chart shows the approximate point loss if you close a card, miss a payment, or max out your cards.

As you can see, you actually lose more points if your credit score is higher.

What are you doing to protect your credit?

Repairing Your Credit

credit card cash

Do you realize how important your credit score is, all the time?

Who looks at your credit score? Everyone!

  • Insurance companies. If you’re a high risk based on your credit score, you’re a high risk for insurance companies and they’ll charge you a higher rate.
  • Employers. What’s the risk if they hire you?
  • Landlords. If you apply for a rental property, what risk do landlords take with you? Want to know what a landlord will see about you? Check out SimpleScreening.
  • Mortgage Companies. If you apply for a home mortgage, credit score not only affects whether or not you get a home loan, but what interest rate you will pay if you do.  A credit score plays a large role in a lender’s decision to extend credit and under what terms. For example, borrowers with a credit score under 600 will be unable to receive a prime mortgage.
  • Credit Card Companies.  They check your credit score to determine, not only if you get a credit card, but what interest rate you pay if you do.

The higher your credit score, the less you will pay for all the above.

Repairing Your Credit and Keeping it There: Read more…

Will a Short Sale hurt your credit?

Facing foreclosure? You may have heard that one way to protect your credit is to do a short sale.

A short sale is a transaction where the lender allows you to sell your house for less than your loan amount. For example, if you owe $200,000, your lender may agree to let you sell the property for only $150,000 and be willing to forgive the difference. In some cases, since you can market it for less than its worth, this would allow you to sell your property quickly.

If the lender considers this transaction paid satisfactorily, it won’t hurt your credit score. However, if the lender reports this sale as “settled for less than the full amount due” it will negatively impact your score. Be sure to check with your lender before you enter into a short sale to find out how they report “shorts” to the credit bureaus.

Another possible impact is that the IRS views unpaid debt as income and will tax you on the forgiven amount.

Short sales can absolutely help you out of a bad situation, just know the facts before you enter any transaction and determine if its the best solution for you.