A little Confused

Wendy,

I was wondering the same thing.  My opinion is that if I left the account open & inactive it will still show up on the credit report.   Not sure if it would be a negative or positive though.  If I closed the account out, wouldn't it disappear from the credit report eventually?   Hopefully someone has the answer out there.

Wendy,

        I most certainly agree.  Every financial company has their own rules & guidelines on the credit report it seems.  Some will let the client have up to $5000 in collections, some will not.  I have become best friends with the underwriter's with the lenders we use.  It is to the point that I know what they are going to say most of the time when I submit the scenario.  To make things worse, they are always changing the guidelines.... smile it is Monday!!

The lenders that I have spoken to all say about the same thing.  You want the credit available out there.  One went on to say that the ideal situation is to have a 30% balance/70% open on your credit cards.

Wendy- The closed accounts will still show on the credit.  They show on my reports.  I think that they will disapear after 7 years or so.  Not confirmed though.

Well I am currently working on a client who has paid the price for closing accounts. About 7 months ago she checked her credit score and it was in the 720's . Now the beginning of this year she decided to close all her accounts but one, a major credit card. Her credit score is in the low 600's.

What happens is the credit score is based activity. If there is no activity there is nothing to measure. I am not sure of the whole science of it. No one is really. What I have boiled it down to is its good to keep at least three active tradelines. That you use frequently. Even if you just pay your bills with it and then send that money you would have paid your bills with to the credit card company.

It will do wonders for your credit. So in essense , your right some banks (investors) will accept closed accounts on your report as long as you do not owe anything. Its tricky and they are not all based on the same criteria. So what I advise to my clientes is to always have positive activity. If you close an account try not to do a more than one at a time.  Just my opinion.

I've been in a few positions in my career that have taught me a lot about the do's and don'ts or credit. I've also done a bit of credit repair for clients too get them to qualify for the best loan possible. Unfortunately, I've heard many stories like Shawna's (with the fico dropping due to closing accounts). Here are a few tips that I think will help. - Keep revolving debt at 30% or less (credit cards and such- (reallocating debt might be a good option)). For the most part there is no need to close old credit cars, having a few available credit sources with out a high available balance and low actual balance will greatly help increase a fico score, most lenders want at least 3 trade lines that are open. In some cases a lender will prefer to see that an account be closed or settled if it is an open collection account. There are a few ways to go about this and each case should be looked at individually to maximize the benefit to the borrower (sorry not one answer for everyone). For example paying off an old collection in many cases will actually lower a credit score (due to the account becoming "active" in the process of being paid off). A good tip is having the lender get their required credit report before you take care of the collection. Then get the paperwork showing that the collection has been taken care of, and the lender will be able to use the FICO score that hasten been affected by the settling of the collection. -Wow, Hope I didn't get carried away there.  Know it sounds Cliché but I guess I get a little passionate about my job. Anyway, if anyone wants me to look at any particular scenarios, I would love to put in my 2 cents.

 A good tip: If you have a couple months before your client is ready to purchase or refi it's always a good idea to review their credit ASAP to ensure that when the time comes they will have done all they can do to ensure the best loan terms.

Brendan Burgess

Phone    (702) 987-4812

Toll Free (866) 689-1843

Email: Brendan@properhomeloans.com