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07-25-2007, 09:45 AM #1
- Join Date
- Mar 2007
Credit Cards and Home Equity Loans
I am a lurker who reads the Daily Digest. I don't usually post, so bear with
The reason why your credit score is hurt if you pay off Credit cards and then
account, is because your credit score is based on how much credit card debt you
opposed to how much credit you have available.
For example, if you have 3 cards with limits of $1,000 each, your credit line is
you have $500 worth of credit on each card, your debt to credit available ratio
$1,500: $3,000. But, if you pay off one card, and then CLOSE that account, you
$1,000: $2,000. That is still half, but your credit score goes down because your
available credit has gone down.
It is suggested that you close no more than one credit card every 6 months, so
your FICO score to recover. If you close to many at once, it looks like you
cannot take on
any more credit at all, and therefore you cannot manage your money and it is
hard to get
approved for loans and mortgages.
ALSO, for everyone taking out HOME EQUITY LOANS to pay off Credit Cards, that
backfire. If you have credit card debt, and cannot pay, the credit card company
repossess your house. You are in bankrupcy, but you can still keep your home. If
out a home equity loan, and you cannot pay, you can LOSE YOUR house!!! That is
Hope everyone has a great day, and I'm sorry if this is too technical!
All of my posts were transferred from
the budget101 Discussion list
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