ROGER O asked in Business & FinanceCredit · 1 decade ago

my credit score is 647 and I have three credit cards and a mortgage?

1 limit is 11,000-balance is 10,000 2 limit is 2,000-balance is 1,900 3 limit is 500-balace is 300. I have the money to pay them off but should I leave a little balance on them and keep paying a monthly payment to better my score?

10 Answers

  • VT
    Lv 5
    1 decade ago
    Favorite Answer

    I agree with the other responders: Pay the balances off in full and do it immediately.

    FALSE: Carrying a small balance (and thus paying Finance Charges) is necessary to maximize the 35% of your credit score that concerns your payment history. See the truth, below.

    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 $500 credit limit, you must not have a balance higher than $150, which is 30% of $500. So a paid off account will have a zero balance on it, and you can'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'll hurt your FICO score. Close a paid off account, and you'll take away $0 in total balance, but you'll take away all those dollars in credit limit, and up goes your total utilization, and maybe down goes your score.

    Beware of the dreaded Universal Default clause. If it's written into those fine-printed pamphlets you received with your credit application for example, lender A, then it means that lender A can jack the interest rate up if you get into trouble with lender B or C, even if your behavior with lender A is perfect. You are in grave danger of setting off a Universal Default clause, either by (1) a slight lowering of your below-average score (FICO 673 - 723 is average, depending on the survey, but you are above sub-prime, which is 620 - 625), or (2) because card 1 and card 2 are at greater than 90% utilization of their credit limit, which is called "maxed out".

    After you pay them off, do not close the accounts unless your credit reports say that they are secured credit cards (i.e., they have a security deposit). If the secured credit card company is charging you any fees (for example, an annual fee) just to keep the account open, you can call them and try to get the account converted to unsecured, get your security deposit returned with interest and have all fees permanently waived.

    TRUE: You will avoid finance charges, and get the same maximum scoring if you have a small balance from a NEW purchase on the day the creditor "cuts" a new bill. Cut date is usually the end of the business day that is your current balance due date. Pay your bill off in full before due date, and make one, small necessary purchase (gasoline, groceries, a utility bill on auto-charge) that is less than 30% of your credit limit. Example: You have a $500 credit limit, and have a $300 balance. You're at 60% utilization (too high) and at the end of the month you get a bill for $304.50, which includes new Finance Charges. It's due toward the end of the 2nd month. Make a small NECESSARY purchase (groceries, gasoline, a utility bill on auto-charge) of say $30 in the second month AND pay off the whole $304.50 bill, immediately, but no more. They cut a bill at the due date in the second month showing a new balance of $30, which is just 6% of your limit. A few days later, they report this $30 balance to the credit reporting agencies.

    Beautiful. Keep doing this for 24 consecutive months, and you'll score max points for both payment history (35%) and utilization (30%) and you will have paid no finance charges.

    15% of your FICO score is for length of credit history, the longer the better. 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 your oldest accounts, you'll hurt your score because (1) you lose your oldest account and (2) the average age of your accounts goes down.

    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 (Best Buy, 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.

    I have no financial or legal interest in any of the companies mentioned.

    Please vote: Did this help?

    Source(s): Read the articles, "What's In Your Score", "What's Not In Your Score" and "Credit Inquiries" plus all the articles under the Support tab.
  • 5 years ago

    4 years ago you would have been fine. I would recommend that you take out your banks minimum loan. Something around 2500. They will want work info for this. Don't spend the money, and pay it back after a couple months. A couple months later do the same thing. That should give you a credit base. As far as needing a work contact to get a mortgage, any reputable establishment will require this and much much more. If you find a place that is willing to finance you without the credit score/ work history/ bank account information you are probably in the process of getting completely ripped off. Buying a house is one of the biggest investments you will probably ever make. Don't rush it. That is exactly how people lives got turned upside down back in 08.

  • Anonymous
    7 years ago

    I'm confident that you might find every financial answer at:

    RE My credit score is 647 and I have three credit cards and a mortgage?

    1 limit is 11,000-balance is 10,000 2 limit is 2,000-balance is 1,900 3 limit is 500-balace is 300. I have the money to pay them off but should I leave a little balance on them more

  • 1 decade ago

    Absolutely, pay them off. Your credit score is getting clobbered because of your high balances. There is no advantage to your score whatsoever in keeping the debt. You get an equally good record of timely payments from keeping a zero balance and paying in full before the due date.

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  • 1 decade ago

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  • 1 decade ago

    You should always pay the balance by the due date to get the best credit.

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