Just Paid Off All My Credit Cards... Now What?

After four traumatizing years, my debt management program has ended and I am Debt Free! The rate I was given was 6% for this pay-back program. But I'm not sure what happens next. Will the credit card companies keep the cards open, but increase the percentage rate? Will they cancel the cards automatically or do? I don't want to deal with these companies any longer. Before I contact these card companies directly or my debt payment program, I'm hoping a person here has first-hand experience of what I've gone through and advice.

Thanks for any help!
Regards, iZoe

You would likely need to contact the CC companies and/or the debt management broker to see if they are going to cancel your cards. Were it me, I'd be inclined to think that my cards were still open and active as the CC companies probably see an opportunity to "cash in" all over again. Unless you were to disclose the management program you were dealing with, and the terms you agreed to, you are unlikely to get any specific and actionable input.

That said... CONGRATULATIONS. Paying off old debt is an great accomplishment and a rough learning experience that will stick with you for a long while.

Like you, I do doubt Chase (yes, I'll name them) will cancel these cards, but nor do I expect them to keep the 6% interest I enjoyed. I do fear that canceling these cards (or not having one) will negatively affect my credit score or keep me from getting a future credit (union) card; this is my main worry. The debt management program I worked with was American Consumer Credit Counseling. They are non-profit and saved my butt (IMHO). Thanks for the "Congrats" and yes, after four years of living without a credit card, I've no intention of ever letting debt get so out of control ever again. I hear a block of ice in a freezer is a good place to keep needed credit cards. ;-)

Debt is on the same lines as addiction for me. Congrats that you finally are out of it, and hopefully you stay debt free. ^-^"

iZoe said:

I do fear that canceling these cards ... will negatively affect my credit score or keep me from getting a future credit (union) card; this is my main worry.

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A valid concern. Leave them open, and cut 'em up if you don't want to use them. Activate new ones they send you before you dispose of them. Don't keep the numbers handy so you won't be able to use them online or on the phone! However, some companies will cancel your card if you don't use it. They should give you a notice of their intention first. So keep the numbers somewhere.

Having said that, I use mine for everything. I never write a check at a retail store, and rarely use cash. But I pay the balance every month. My spouse uses our debit card. You could try that. The trick is remembering to enter those purchases in your check book.

Your credit score is based not only on how much credit you have, but how much credit you use! What I mean by that is that the best way to re-establish a good rating is to use your credit cards and pay them off. The key is to only buy what you can afford to pay off that month when the bill comes in. This will show that you are using your credit cards responsibly. This does take quite a bit of discipline for some people however.

In my case, due to my late wife's medical bills, I had no choice but to go bankrupt in 1997. We owed over $1 million and there was no way I could ever pay that in my lifetime. I had to close all of my accounts, except one. Oddly enough, the only company that let me keep my card was American Express!

Things really sucked for a long time, but nearly 14 years later my credit score is in the mid 700's and there is no record of the bankruptcy.

1991-C4 said:

Your credit score is based not only on how much credit you have, but how much credit you use! What I mean by that is that the best way to re-establish a good rating is to use your credit cards and pay them off. The key is to only buy what you can afford to pay off that month when the bill comes in. This will show that you are using your credit cards responsibly. This does take quite a bit of discipline for some people however.

In my case, due to my late wife's medical bills, I had no choice but to go bankrupt in 1997. We owed over $1 million and there was no way I could ever pay that in my lifetime. I had to close all of my accounts, except one. Oddly enough, the only company that let me keep my card was American Express!

Things really sucked for a long time, but nearly 14 years later my credit score is in the mid 700's and there is no record of the bankruptcy.

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That's great to hear!
I personally think the whole credit score thing is a whole scam! It seems like they are changing the ways your fico score can get harmed(yes, harmed, because they rarely changed it for the better). To get a good loan, at least one if you are looking to finance with decent interest, you need a good fico score...to get a good score, you have to build up a credit history...reminds of a game. I don't like it one bit. I can't wait to pay off my student loans. I hate credit cards. I also hate how people are forced to proceed with bankruptcy after these outrageous medical expenses. How about the hospitals not even charge you...since there probably no chance they'll ever get it without you being under an insurance plan.

As for the OP, do you know if your agency bought off your debt? If so, you most likely won't be the debt holder authorized to close the account, the agency that is helped with your debt management will be the only one who can cancel them. Not really sure why it's like that.

Got this info from: http://credit.about.com/od/creditreportscoring/qt/closecardscore.htm

"Because the person's credit report will continue to show an active outstanding balance for that account - even though the account has been closed - the FICO formula will continue to include that account in its calculation of utilization rate.* *As the consumer pays down that account's outstanding balance, the decreasing balance should have a positive effect on the person's utilization rate and FICO score, everything else being equal. Once the outstanding balance is reported on the credit report as zero, the FICO score will no longer include that closed revolving account in its calculation of utilization rate.*Just to be clear, the formula always tries to include any open revolving accounts in its utilization rate calculations, whether those accounts have outstanding balances or show a zero balance."

Sounds like closing the card won't affect the score either way...

Closing accounts doesn't help your credit score, it actually lowers it because as someone already said, it's the utilization of your credit that affects your score the most, along with payment history and length of time the accounts have been open.

So if you close an account that has a bad payment history and had a $10,000 limit but you've had open for 5 years, and open a new one and use $2,000 immediately but it only has a $4000 line of credit, your score could drop dramatically.

Congrats to the original poster - you should build up your credit again slowly.

It is odd that if you always pay what you can afford, and never go into debt, then you can have an awful credit rating.

In the old days before credit cards and hire purchase, everybody would have had a bad credit rating, despite being financially responsible.

If only governments could act like households back then.

That siad, I now have no debt (no money but hey), and am thinking of getting a credit card and using it responsibly just to get my rating up.

I never spend money that I don't have. >_>" Use the credit card but pay it in full when the first bill comes.

I think the general idea of building credit from nothing is to take the $100 you have, spend $80, save $20 and borrow $10. The next month you spend the $80, save $10, pay the previous $10 off and borrow another $10. Repeat this for years and you wind up with a history of being able to pay $10. You also have $10 times many months in savings for a down payment. When you go for large credit, you can show you can both save money and pay debt while still meeting your personal expenses. Banks like this pattern when you want to take out a note. You have your downpayment invested, and thus an interest in completing the loan (and maybe getting some back) and behaviour that says you will meet your monthly commitment proportional to the $10/10% you have shown you can reliably pay.

The government doesn't understand this apparently.

maybe this government will devalue the dollar completely like what happened in greece and yugoslavia.... then the people that survive mass inflation and street riots can rebuild this country in a few years after the major devaluation of the dollar. Those of us that manage to survive will be able to rebuild this country to be nice again.

G4 ibookboy said:

maybe this government will devalue the dollar completely like what happened in greece and yugoslavia.... then the people that survive mass inflation and street riots can rebuild this country in a few years after the major devaluation of the dollar. Those of us that manage to survive will be able to rebuild this country to be nice again.

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Maybe you should get your news from a more reliable source. Greece has not devalued its currency, it cannot do so because it's part of the Eurozone. One of the reasons why Greece is having so many issues is because it cannot devalue its currency and become more competitive that way.

As for Yugoslavia, there is no such country.

I have 17 credit cards, I Pay in Full each month.
If anyone needs help repairing credit, I know all the ways to have items deleted, be glad to help anyone here for free.

MY guess is you will get a Creditline decrease down to a small amount for a while, and the APR will go up...