Should I Get a Loan to Pay Off Credit Cards?

Question: I have about $4,500 on one of my credit cards, the other is paid off. I keep struggling to pay this off because of other unexpected expenses keep getting in the way. I save 3 percent of my salary in a 403(b) plan for retirement and put $70 a month aside in a regular savings account. All of my bills get paid on time. I have a good credit score of 759. Lately, I have been getting offers for a loan up to $40K to pay off expenses. At one time I used Prosper and I did pay them off, and I’m in good standing with them. Should I take them up on their offer again to pay off everything that I have and just keep the one company to focus on? Some of the interest rates on what I have are at 4 percent, 7 percent, 11 percent, and 16 percent. Maybe I can get another loan at 12 percent if I borrow 40K. I’m just so confused. I want a zero balance with everything, and it’s just taking so long to get there.

Angie O. in Connecticut

Steve Rhode, the Get Out of Debt Guy, responds…

Hi Angie,

There are a few different approaches to tackling this. All have valid pros and cons. So, let’s take a look and some different things you can do to jumpstart your debt payoff strategy.

Using a debt consolidation loan to pay off your credit cards

Consolidating debt into a loan simplifies things because it gives you one payment to make. That way, you can stop juggling bills. Your excellent credit score will determine what the interest rate on your consolidation loan will be. Then you’ll need to do some math to see if the interest on the loan and the benefit of the one payment are a better value than what you are currently dealing with.

When evaluating the benefit of taking out a new loan, you want to look at two costs:

  1. Monthly cost
  2. Total cost

You’re currently making all of your monthly payments, so a lower monthly payment may not be needed – as long as you’re paying something comparable to what you pay on all your individual bills now, the loan will work for your budget. The main thing you want to assess is the total cost of the loan. Will the total interest charges over the life of the loan be higher or lower than the total interest charges on all your debts paid off individually?

Get free quotes from top debt consolidation loan providers now, so you can decide if this is the right solution for you.

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Focusing on motivating payments first

I find that most people enjoy paying off debt fast and the math is secondary. In other words, you’re finding it hard to stay motivated to pay off your debt because you’re focused on that biggest balance. This can make it hard to stay the course because you don’t feel like you’re getting anywhere while you chip away at that large balance.

If this is the case, focus on paying off your lowest balance debt first. Then roll those now extra funds you would have paid on that debt into the next lowest balance. This approach will knock off creditors and let you focus on fewer and fewer individual accounts.

Exploring other options for debt relief

I recently wrote a big post on debt consolidation. The post goes into greater detail on more issues to consider.

Overall, I’m very impressed with your approach and progress. You are taking smart steps to save and invest in your retirement while you’re reducing your debt. You are ahead of 90 percent of people with this approach. Reading your current strategy put a smile on my face.

One word of warning, not all loan offers you receive in the mail are created equal. If the “lender” is not a mainstream name you recognize, examine the offer deeply. You can see other similar mailers people have received, here.

Don’t waste another sleepless night worrying about debt! Let connect you with professional debt help today.

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Question: I have a delinquent account with a former auto financing group. It was last paid in late 2017. However, I wanted to start making payments again – because once a month, the account is reported as a delinquent loan. I spoke with my lender and they said that I can pay any amount per month, but my account won’t be reported as current, and it won’t stop being delinquent until it is paid in full. Why is that? Even if I paid the $162 a month they’re asking for, it won’t stop being delinquent until paid in full. I am a college student with very little money. It’s a collection/charge-off for $5,800, but I can only pay $60 a month. There is also more than a dollar of interest accruing per day. How am I supposed to pay off this car collection and have it reported on my credit report as being paid?Kristina in Florida

Gerri Detweiler, Credit Expert, responds…

There’s no reason the payment history should report you as being current when in fact there would be missed payments. To bring your account current, you would need to pay the past due amount. Then, continue to make your timely agreed-upon monthly payments. This will not remove your past delinquent history.

From your description, it sounds as if the car was either repossessed, or the delinquent loan was accelerated so the full balance is due now.

If the car was repossessed, then it would have been sold at auction for a low amount, and you would be responsible for the remaining balance of the delinquent loan – even though you would no longer have access to or the use of the car.

I’m worried you’re confusing what you’re able to afford now with what you contractually agreed to when you financed the vehicle. Contracts are absolute. Life is not.

What you can do

If you’re worried about the delinquent loan being satisfied – and being reported as paid – then paying the full balance the lender is demanding in accordance with the financing agreement is the logical way. Another alternative would be to file bankruptcy to eliminate the debt and others you may have.

Alternatively, you can attempt to negotiate with the lender to come to a solution you can both agree to. However, the lender has the right to stick to the terms you legally agreed to in the initial financing agreement.

All of that being said, if you feel the lender has acted illegally, then you should absolutely consult with a consumer attorney who is licensed in your state.

Debt Consolidation vs Bankruptcy: Which Should I Choose at 75 Years Old?

Question: I have $25,000 in credit card debt and only $2,000 a month in income. I’m 75 years old. Is bankruptcy a better choice than debt consolidation?

Bruce in California

Steve Rhode, the Get Out of Debt Guy, responds…

Just on face value, bankruptcy would certainly be at the top of my list to investigate further for you. You should meet with a local bankruptcy attorney who’s licensed in your state and discuss your particular situation.

If your assets are limited or not protected in bankruptcy, just given your age and income, it would make mathematical sense if you could eliminate your debt and live on your limited income. I’m less concerned about repaying your old debt – because I’m more concerned you’ll be able to afford to live and get by from this day forward.

Talk to a certified consumer credit counselor today for an expert opinion on your best option to get out of debt.

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Why consolidation may not work for you

If you’ve consolidated your past debt, you would be repaying it out of your limited income. Essentially, you would be trying to repair the past with future funds.

At 75, while I hope life treats you well, the odds are you are closer now to an unexpected medical or another expensive life issue that you’d have to deal with. By discharging the debt in bankruptcy and focusing on living within your income moving forward, just logically that seems like a more prudent approach.

If I were to engage in some pop psychology, I’d guess your reluctance to seriously consider bankruptcy has less to do with your financial numbers than your emotional reluctance.

Should you file for bankruptcy?

Bankruptcy has gotten a bad rap. It has an unearned reputation as the last refuge for deadbeats who cavalierly run up big bills on luxury items, then decide they just don’t want to pay for what they bought. So they fill out a bankruptcy application, walk away without paying a dime, and then run up big bills again.

Of course, bankruptcy doesn’t work that way. Not even close. It’s a powerful tool for serious people, and it’s not at all easy to make happen. It’s also nothing to be embarrassed about.

Look at it this way: If you accidentally slip on a banana peel and fall on your rear end in public, that might be embarrassing. But if you seriously hurt yourself doing so, and if you need surgery to get back to full health – well, that’s not embarrassing.

Bankruptcy is financial surgery for those who have slipped and fallen, often through no fault of their own. They may have suffered a divorce, death in the family, serious illness, natural disaster, or been a victim of crime. Bankruptcy is a way to hit the reset button.

If you want to know more, and if you want a step-by-step guide, check out’s report, Should I File for Bankruptcy?

Does Student Loan Consolidation Work With Personal Debt, Too? strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Question: Can I consolidate my student loan debt with personal debt such as credit cards and car loans?

Aaron in Virginia

Andrew Pentis, certified student loan counselor at Student Loan Hero, responds…

Since you have student loans, you’re probably already aware of the benefits of refinancing. You could lower your interest rate, switch lenders, and enjoy a simpler repayment.

Student loan refinancing also allows you to consolidate your debt — but only your student loan debt. On the other hand, there is a way to consolidate many different types of debt. Just like student loan refinancing, it requires creating a new loan in your debt’s place.

Pros of debt consolidation with a personal loan

You can use a personal loan. Apply the amount you borrow to student loans, credit cards, auto repayments, or other debt. Then you’d have the simplest possible repayment — just one loan with one creditor, instead of a handful of them.

You would shop for a personal loan the same way you’d compare other financial products, seeking the best terms from reputable lenders. A strong credit score and a stable income, either from you or a cosigner, can help you qualify for advertised rates.

But just because you can consolidate all your debt via a personal loan doesn’t mean you necessarily should. It could make for a significantly more expensive repayment. After all, student loan APRs usually beat those of personal loans.

Cons of debt consolidation with a personal loan

Say, for example, you have federal student loans with an average interest rate of about 6 percent and credit card debt with a summed interest rate of closer to 20 percent. Unless you qualify for a personal loan with a rate below 6 percent — perhaps with the help of a cosigner — you will end up paying more in student loan interest, even if you pay less on your plastic.

For the most potential savings, you’ll want to lower the rate of each of your debt types. In an ideal world, you would decrease your student loan debt cost by refinancing to a sub-6 percent rate. Then you’d shrink your credit card rates well below 20 percent, using a personal loan or a balance-transfer card with a zero-percent introductory rate (and no annual fee).

If you’re aiming to consolidate for the sake of simplicity but don’t have at least average credit, consider seeking debt relief assistance instead.

Keep your credit score in mind

If you elect to handle each of your loans separately and on your own, keep in mind the potential effects on your credit report. It’s best to apply for one loan at a time and to make those applications within 30 days of each other to minimize the effect on your credit score [1].

Alternatively, your score could increase if you first consolidate your credit card debt before applying to refinance your student loans. That’s because a lower monthly payment to your credit card issuer could improve your cash flow and lower your debt-to-income ratio [2] in the eyes of your potential student loan lender.

Dealing with more than one kind of debt is difficult. But before rushing to consolidate all your debt, ensure it will make your repayment easier — and more cost-effective. Otherwise, consolidation could be a step in the wrong direction.

What Happens When You Are Sued by a Creditor – and Can’t Afford It?

Question: What options do I have when I’m being taken to court by a credit collector when both the original creditor and credit collector would not accept the payments I could make? My original creditor sent me to collections while I was paying what I could as a single parent with lots of bills. Then I tried to make a deal with the collections firm, but they refused to accept what I could pay until I got my taxes. Now I’ve been served for court and I have no money for a lawyer. What can I do?’’

– Emily in Missouri

Steve Rhode, the Get Out of Debt Guy, answers…

A common misconception is that sending a little bit of money will keep you out of trouble with your creditor or collector – and keep you out of court. It doesn’t and it won’t.

You get no credit (so to speak) for good-faith efforts. The only payment you can make that will keep the creditor happy is at least the minimum payment you agreed to in your original lending agreement.

Outside of that amount, the next payment that can keep you out of trouble is a lesser payment – but one that the lender agrees to accept. Acceptance requires an offer from you and an agreement from the lender to accept the reduced payment. You don’t get to just send what you can afford.

Is credit card debt keeping you from success? Learn how to get your debt under control.

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What not to do

You do have a very good option, but before we get into that, let’s talk about your very worst option. That would be ignoring a court summons. There’s no scenario where that works out for you. It will lead to more costs and more stress.

By not showing up, you will lose by default. The creditor will get a judgment and go for wage garnishment if that is available in your state. So first, check out the report How to Answer a Civil Summons for Credit Card Debt. That will give you step-by-step instructions for dealing with this serious matter.

The good option

So what’s that one good option? It won’t sound like one at first: bankruptcy. That’s the surest way to legally slam the door on your debt. You will be protected from your creditors, and your debt will be eliminated. Forever.

Bankruptcy sounds bad because it’s serious – and because in the past, less-than-scrupulous people have abused it. But it’s also a legitimate and powerful tool for those in need. Each year, this country sees around 1 million bankruptcy filings.

So where do you start? Bankruptcy isn’t something you do yourself, like a weekend home repair project. It’s akin to building an addition to your home. First, check out Weighing the Pros and Cons of Bankruptcy. Then call a professional, which is required under the law. You can reach that person at

If I Die, What Happens To My Wife And My Debts? strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Question: “I have credit debt, but my wife isn’t a user on the card. What happens to my debt when I die? Will she be responsible?” I feel like that is more conversational and still fits the KW.

— Bill in Oklahoma

Howard Dvorkin answers…

First, I hope this is a general question and not something serious. If it is serious, I hope you recover, and I applaud you for thinking about others at such a time.

Second, the answer to your question depends on where you live, and on some other details as well. Let’s break it down.

Where you live

Nine out of 50 states are community property states. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin consider all the property and debt acquired in marriage to belong to both partners. That’s true even if only one spouse made money or lost money.

Fortunately, Bill, you live in Oklahoma. So that’s one less problem you must face.

What debts you have

I assume when you say “credit debt,” you’re referring only to credit cards and nothing else. It’s an important distinction because some debts are different after death. For instance, a surviving wife might be responsible for her deceased husband’s private student loans — even if they don’t live in one of those community property states.

How you set up that debt

If your spouse has co-signed any loan, they’re responsible for that debt. That goes for anyone, not just married couples. You mention that your wife isn’t a “user” of your credit card, but the more important question: Is it a joint card? Even if she doesn’t use it, if her name is on the account, she’s on the hook for the balance.

In general

If this all sounds sort of vague, it’s intentional. When it comes to death and debt, there are loopholes and exceptions all over the place. Generally speaking, however, a surviving spouse isn’t obligated to pay the debts of the deceased spouse.

What to do NOW

Whenever I’m asked questions like this (and that’s often), I’m always glad when it’s not related to a serious illness. That means there’s still time to take steps now before we all face the inevitable. While planning for our own deaths is certainly not fun, it’s definitely important.

[For further information, check out What Happens to Your Debt When You Die?]

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Can The IRS Really Tax My Forgiven Debts?

Question: I had a rough patch in my life and succeeded in getting some credit card debt “written off.” I thought this meant I didn’t have to pay anything.

But now I got a letter from the IRS saying I have to pay income tax! On the forgiven debt! How is DEBT considered to be INCOME? If I had income, I wouldn’t be in debt! SMH!

This is ridiculous! Can you explain this to me? Is it even legit? Or am I being scammed? If it’s true, what can I do? I’m nearly broke as it is, and I was actually thinking about bankruptcy. Would that help?

– Moses in California

— Nida in Pennsylvania

Jacob Dayan answers…

That is a great question, and I completely understand your frustration. I know it can seem almost like a cruel joke being played on you. But unfortunately this is not a scam. When credit card debt is forgiven, it’s rarely a simple process. Here’s a quick video primer…

Hi, I’m Jacob Dayan, the CEO and Co-founder of Community Tax. That is a great question, the answer to your question is relatively straightforward, but as always, I have to caution you that everyone’s tax circumstance is different. As such, it’s often advisable to speak with a tax professional prior to making a decision related to this. Before I break down the answer, let’s review some basics about collections and taxes.

The short answer is that a credit card company will write off a debtor’s balance after months if not years of collection efforts. The credit card company will issue the debtor a 1099 cancellation of debt. What this means, is that the debtor – you – are then required to pay back income tax on the amount that was canceled or forgiven.

The IRS essentially treats any unpaid, forgiven debt as income. And you definitely don’t want to ignore the IRS. If you want to know more about what happens if you do, read the report Understanding the IRS Collections Process available on There is, however, an exception to the requirement of paying taxes on any canceled credit card debt.

The taxpayer will not be responsible for paying taxes if they can prove they are insolvent at, or before, the cancellation of debt. Insolvent means that you have no assets or that your financial situation is basically upside down. Credit card companies will generally wait three years before issuing a 1099 cancellation of debt. Why? Because they must show a consistent attempt to collect the unpaid balance. Credit card companies are not in the litigation business. So, they tend to sell past due accounts to law firms that will collect on the outstanding debt.

If a credit card company fails to collect after roughly six months, they may engage a collections law firm to take over collections. The law firm will try to work out payments of the debt prior to filing suit in a civil court. After three years of attempting to collect, the credit card company will finally write off the debt and issue a 1099 cancellation of debt. I hope this helped clear things up. If you have any other questions, feel free to give myself or my team a call, or visit

Now let’s dig into Moses’ particulars.

Yes, debts can be taxable

Under IRS guidelines, canceled debt counts as taxable income. In ordinary circumstances, receiving a loan is not considered income, and paying it back is not a deduction. But when a lender cancels the debt, the IRS treats the amount of canceled debt as if it is indeed taxable income.

There are exceptions

This is one of the harshest provisions in the tax code because it punishes folks who are already struggling. But there may be help! There are some instances when this “canceled debt income” can be excluded from income, and you can escape tax on it.

For example, if the canceled credit card debt was from a bankruptcy, or if you can prove to the IRS that you owed more total debt than the value of your assets (home, car, retirement accounts, etc.) at the time of the forgiveness, you may be able to avoid tax on the canceled debt income.

Resolution programs

The IRS also has resolution programs specifically designed for those with financial difficulties — such as a payment plan, “Currently Not Collectible” hardship status, or a settlement if you qualify. If you would like more information, we have tax professionals on staff who can conduct an investigation into your tax situation and determine if you might qualify for some relief.

Jacob Dayan is co-founder of Community Tax LLC, a full-service tax company helping customers nationwide with tax resolution, tax preparation, bookkeeping, and accounting.

For help with your tax debt, check out’s Tax Debt Solutions.

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Question: A friend of mine is disabled. Her only income is her Social Security disability benefits. She got into a lot of credit card debt, and one of the credit cards got a judgement against her in court.

A friend told her that because of her low income, the court might just maybe forgive her debt. Is this true?

And what would happen if other credit cards brought her to court? Can she go to jail because she can’t afford to pay the debt back? God, I hope not. Thank you for your help. We appreciate your kindness and your consideration with this question. Thank you so very very much.

— Dori in New Hampshire

Howard Dvorkin answers…

Getting out of debt isn’t as hard as you think. However, understanding how to get out of debt may be the hardest part. Debt management is a program that can cut your total credit card payments by 30 or even 50 percent by drastically reducing the interest rates. And when you’re done, you emerge with no debt and a great credit score.

With debt settlement, you pay pennies on the dollar of what you actually owe. But your credit score can take a major hit, because you’re actually paying less than what you owe. Debt forgiveness means you might pay nothing on your debt, but good look getting a loan in the future.  How do you decide which is best for you? Let help you figure it out. Call now for a free debt analysis.

Let’s start at the end, because that last question is the easiest to answer: No, you can’t go to jail for unpaid debts. As long as you’re not defrauding your creditors or doing something illegal, trust when it says: “No matter what those debt collectors threatened you with, the police won’t be beating down your door.”

If you click that link, you’ll learn that the United States hasn’t imprisoned debtors since the 19th century. It’s no mystery, however, where that fear comes from: Unscrupulous debt collectors either imply it or come right out and threaten it. In 2013, the last year could find statistics, the federal government recorded more than 16,000 complaints that “collectors falsely threatened to arrest the consumer or seize their property for refusal of payment.”

With that out of the way, let’s talk about your friend’s debts.

Yes, it’s possible your friend could have her debt wiped clean. It’s called debt forgiveness, and it’s a powerful weapon. However, like all powerful weapons, it can injure more than just the target you aim it at. That’s why has a report called, A Realist’s Guide to Credit Card Debt Forgiveness.

I urge you and your friend to read it, because debt forgiveness has gotten a bad name lately. Why? Because bad people are advertising that they can clear all your debts with forgiveness — and don’t worry, there’s absolutely no downside! It’s amazing and only we know how to do it!

Of course, you’ll end up paying these middlemen a hefty fee for a shoddy service, and you might even end up worse than before you contacted them. Think of it this way: Would you pay hundreds of dollars to someone promising a guaranteed weight-loss plan that lets you eat as many cupcakes and potato chips as you want, with absolutely no downside?

If you want a serious diet plan, you should consult your doctor first. If you want a serious debt plan, you also need to consult a professional. I recommend calling a certified credit counselor at a nonprofit credit counseling agency, where your friend can receive a free debt analysis. From there, all the options can be explored, from a debt management plan to bankruptcy.

If you don’t know which nonprofit agency to contact, can introduce you to a reputable one. Bottom line, Dori: Your friend doesn’t have to go through it alone.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Ready to seek real credit card debt relief? can set you up with certified credit counselors who know how to help.

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Can The IRS Come After My Husband For Tax Related Identity Theft Due to His Father?

Question: My husband’s father owned a convenient store that he put under my husband’s name. His father didn’t pay taxes for a year — and  now the IRS is going after my husband, since the store is under his name!

He didn’t acquire any profits, as it was his father’s store. My husband was in Texas at the time his father had this issue in Illinois. We are dealing with a $40,000 fee. Is there a way to get out of this situation?

This happened before we got married. Can the IRS come after my paychecks?

— Nida in Pennsylvania

Jacob Dayan answers…

This question is very difficult to answer with the information provided, but I’ll do my best to try and put your mind at ease.

First off, in the interest of being completely transparent, this is a very serious situation and should be handled with extreme urgency!

Hi, I’m Jacob Dayan, CEO, and co-founder of Community Tax and this is Taxing Questions. Here’s a specific situation that happens all too often: a parent sells or gives a business to a child, but that business hasn’t paid taxes in a long time. The child didn’t know about it, so they didn’t budget for it. Now the IRS comes calling with a five-figure tax bill. Is that child on the hook for the sins of the parent?

As for most things’ taxes, the answer is – maybe. In fact, unless a parent deceived their child, the answer is probably. What bad things can a parent do? Well, for starters, if the child’s information was used without their knowledge or consent, that’s identity theft.

I get into the details on But remember this, whether you start, buy, or were even handed the business spend some time considering the tax implications or you better be prepared to spend a lot of money later.

Now, that being said…

If he didn’t know his dad committed tax identity theft

If your husband’s information was used without his knowledge or consent, then you should consider that identity theft — and treat it like a crime. Here’s what your husband should do:

  • File a police report locally.
  • Contact the IRS and let them know this was caused by identity theft.
  • Your husband will need to file an Identity Theft Affidavit with the IRS, explaining all the details he knows to be true regarding the situation.
  • In the Identity Theft Affidavit, he should include the police report and any notices about the issue.

While it won’t be a short process, odds are you can resolve this situation eventually.

If he did know

What if your husband consented to the business being owned under his name and run by your father-in-law? Then, unfortunately, he can be held responsible for any tax responsibilities for the business.

Since Texas is a community property state, this also means that you can be collectible for any of your husband’s tax debts, even though you are not liable for them. If both you and your husband are collectible for the debt, then there are options available to protect your paycheck. But depending on what stage of collections the IRS is in, time may be of the essence.

What to do now

I highly recommend seeking representation by a licensed tax practitioner. This situation is not uncommon for our professionals, and we would be happy to have a preliminary discussion and investigate your situation. Either way, we wish you and your husband the best of luck in resolving this matter!

Jacob Dayan is co-founder of Community Tax LLC, a full-service tax company helping customers nationwide with tax resolution, tax preparation, bookkeeping, and accounting.

Does Closing a Credit Card Account Hurt Your Credit Score?

Question: I have transferred all my credit card debt to a single no-interest card for 18 months. I have five other credit cards, and now all the other credit card companies are increasing the limits on the cards I just paid off. Which is better for my credit score: Cancel them? Hold onto them? Or charge a little and pay them off each month? I really don’t want to use them.

— Kim in Pennsylvania

Howard Dvorkin answers…

Here’s the short, cryptic answer: The best thing for your credit score might not be the best thing for you.

Money in a minute: What if your credit score was a pie?

If you picture your credit score in a pie, it’s divided into five slices. But each slide is not the same size.  The largest – a third of the entire size of the pie – is called payment history. That means, do you pay your bills on time? The next biggest slice is just another a third, it’s called credit utilization. That means how much of your available credit have you spent. As you can see, that’s more than two-thirds of the pie.  Three other slices are really small.

Length of credit history is only 15 percent. And at 10 percent each are credit mix and new credit. What’s this prove? Focus most on the two biggest slices and your credit score will be easy as pie.

Now the long answer…

How a credit score works

Your credit score is based on five factors. One of those is called “length of credit history,” and it comprises 15 percent of your score.

If those five still-open credit cards have been in your possession for years, then they’re actually boosting your credit score. Here’s the problem, though: You need to keep using them for that 15 percent to keep kicking in.

That means you need to make small charges every once in a while — and then pay them off in full. How often? Once a month to be safe, once a quarter on the outside.

Of course, if this poses too much temptation to once again run up your balances, the safe bet is to close those cards. After all, the biggest chunk of your credit score is called “payment history,” and at 35 percent, if you’re late on even a few payments, it’ll swamp that 15 percent you’re benefiting from.

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The second-biggest chunk of your credit score — at 30 percent — is called credit utilization. That’s the fancy way of saying, “How much you owe compared to how much you can borrow.” In other words, if you have $10,000 of available credit on five credit cards, and you’re almost maxed on them, your credit score will suffer mightily.

So as you can see, 65 percent of your credit score is determined by paying your bills on time, and keeping your balances low. That’s why it’s so hard to tell you if closing five mostly inactive credit cards is good or bad for you.

There’s one other factor of your credit score I even hesitate to mention, because it’s the most vague and one of the smallest slivers of the pie. It’s called credit mix, and it represents 10 percent of your score. In plain English, this means you have a variety of different credit lines.

Why is this important to lenders? It proves to them that you can pay back all different kinds of debt. In the case of these five credit cards, closing them would reduce the diversity of the debt you’re holding. So that’s another ding on the credit score.

If you’ve soldiered on through this long explanation, then you might see the wisdom in this advice…

  • Completely pay off the no-interest card within 18 months (or face sky-high interest rates).
  • Keep that card and 1-2 of the oldest cards you have.
  • Make small charges to each, and pay them off in full each month.
  • Close the other cards and don’t look back.

Within a few months, you should see your credit score creep up. Over many more months, if you keep paying off your cards each month, you’ll see it jump. Why? Because you’ll have a history of low balances paid on time, you’ll have a few very old cards, and you’ll be considered an excellent customer by lenders. You can’t beat that.

Want to know more? Check out’s report, How to Improve Your Credit Score Step-by-Step.

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