ChoiceData Blog

Credit Score Question: "Should my borrower pay off AND close their credit card account?

Thursday, September 08, 2011

We receive questions on a regular basis regarding credit scores, and felt it might be beneficial to share some of these Q&A's here on the blog.  Please note that our findings are not scientific and are solely the result of information we've obtained from FICO®( and our experience working with credit scores on a regular basis.

One of the more popular questions we're asked is: "Should my borrower pay off his/her credit card accounts AND close them?"

Like so many other score-related questions, the quick answer is "it depends."  For the purposes of this question we will not address specific underwriting conditions or guidelines, and will focus solely on the effects to the credit score itself.  In short, a FICO® score considers more than just the balance owed in its calculations.  Therefore, if the goal is to increase a borrower's score as much as possible, these additional factors should be considered before making the decision to close the account(s).

According to MyFICO (, a FICO® credit score is broken down into five categories, detailed below:

After reviewing this chart, it's easier to understand the different ways in which a single credit card account can potentially impact a FICO® Score.  "Amounts owed" make up 30% of a person's score, therefore paying off a credit card balance would almost certainly be considered a positive action.  Closing the account, however, might then negatively affect the score as it could reduce the remaining types of credit in use, and/or reduce the length of the individual's credit history.

MyFICO has a great breakdown of what's included in a person's FICO® score, including several other basics on scores and credit reports.  Please visit the link below for more information, and feel free to contact our office if you have any other questions.