Question: I recently just paid off all of my credit cards in full (took out a personal loan from a family member). Two out of the three were previously suspended. Now that the ballances on those cards are $0 they are still suspended.
Does anyone know (or can offer some insight) if a suspended card with a zero ballance still has a poor reflection on your credit report? Should I close these accounts out completely since they are suspended anyways?
Answer: That wouldn’t be a bad idea. Only two problems with it.
First, you will have to make sure that the closure is a HARD closure. If you just ask the CC company to close the account, it will be inactivated, not CLOSED. And if someone runs a charge through on the inactivated account, the account will suddenly be OPEN again. So make sure that the account is actually CLOSED.
Second, while having the account marked “closed at customer’s request” will look better on a credit report than “suspended”, the “suspension” part is likely to stay on your credit report for up to seven years after there is NO activity on the account. In actual practice, this might take eight years or longer to really impact your credit reports.
On a side note, if you can get the suspension lifted somehow, NOT closing the accounts would actually be better for your credit rating. That is, if you are smart enough to SHRED the credit cards (and all replacements that they send you when the cards expire). The reason has to do with the availability of credit in relation to the amount of credit used.
For example, if you have four credit cards with $40K (total) of credit available, they all have a ZERO balance, now you have a really low ratio of credit used in relation to credit available. This will improve your FICO score, which is all that matters on your credit report.
Yeah, some people argue that your credit report is more than just your FICO score. In actual practice however, lenders will never see your credit report if your FICO score isn’t high enough. They pull the FICO first, say “too low”, then don’t bother to look at anything else. OR, they see the FICO is really high, and don’t bother to pull the report, figuring (correctly) that there are no problems in the report anyway. So FICO is everything, as far as credit goes.it’s not the suspension that lowered your credit score, it’s the late payments, and it takes seven years from the last activity on the account before the credit reporting agencies have to take it off your credit reports.
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