FICO Scores Lower Due to Closing Credit



 


Credit card companies, such as Citi, are overcoming some major changes that have recently been brought on by new credit laws. Credit issuers are now adding additional fees to their customers' accounts, as well as hiking up their APR.

Customers are in shock when they find these new fees on their statements. Your best defense against these new changes is to be prepared. Should you find yourself in this situation, you might automatically want to shut down your account. This piece was written to explain to credit card holders why that isn't in your best interest at this time. Read on in this article to learn more.

There are a ton of credit card holders that are going through these new changes with you. You never have to feel like you're the only one, or that you're being targeted for some reason. You may have thought these new fees were due to negative changes in your credit score, but that isn't the case at all. Citi's customers are now facing a fee that's imposed on them once a year. To get the fee refunded to their account, the card holder must put a minimum charge on their card. (The minimum, of course, is set by the Citi company itself.)

In order to reach this minimum, customers have to make more purchases and bigger purchases that they may or may not normally make. If they choose not to do this, they may be facing a loss of credit or even a decreasing FICO score. Credit scores will be affected negatively regardless of whether the customer closes the credit line or the creditor does. Citibank credit card holders that want to continue using their credit line are advised to monitor their spending to ensure their fee payment will be refunded. Customers who fail to make the dollar mark set by Citi won't see a refund of the fee.

Citi's latest fees are coming under fire due to the fact that inactivity fees are most likely going to be against the law soon. The Citi firm assures the public that this isn't the case, but the new charges customers are experiencing are because they haven't purchased a certain amount using their card. The public is now wondering whether or not these new charges should be thrown out. Although no other cases similar to this one, answers will hopefully be given when the new laws are finished up in the future. This issue continues to boggle and draw in the press and public.

Of course card holders will continue to choose to close their credit lines. Additionally, consumers can pay off their outstanding balance at the same rates they pay now. Recent changes to the credit card companies' policies make it so credit borrowers may close out their credit lines and not pay newer rates.

Right now, closing your line of credit that has a remaining amount on it can do bad things to your FICO score. Credit bureaus track the portion of credit handed to you and also the portion that you're utilizing currently. A good part of your FICO score reflects this amount. For instance, imagine you incurred $8,000 debt between several cards. You were handed $16,000 of credit to use.

You close out your Citi card that has a zero balance, but has a max out of $6,000. You just went from having $16,000 of credit down to $10,000. The $8,000 you owe is a much larger portion of $10,000 than it was the $16,000. Changes like this are brought to the credit bureau's attention and can ultimately change your credit score for the worse. A lower score hinders your ability to take out loans and such. Luckily, with low or non-existent balances, the credit bureaus overlook the portion of credit you're using, and you won't need to be concerned with these issues.

The best way to get past a negative credit history is to watch and maintain it. Try to check up on your score as much as you can. Note any items that you want to dispute, and do so with the offending company as well as all three credit scoring systems. Errors, no matter how small, can severely harm your FICO score. Past-due payments should be corrected by on time and current account payments. Having a positive credit payment will be on your credit report for a decade. You may continue to strive for good credit by slowly applying for new credit cards.






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