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I recently financed a portion of an engagement ring purchased at Zales (via Citibank Zales account opened in December ‘08) under the premise that I would have 1 year at 0% interest, during which time I planned to pay off the remaining balance (currently just under $2,500). On my first statement, I received an amendment to the terms of my cardholder agreement indicating that my interest rate is changing to approximately 24% (seemingly on my next statement), presumably due to market conditions, as I haven’t made any late payments. If I'm interpreting the information correctly, I will have 25 days to opt out of these changes, at which point my account will be closed and I will have the opportunity to continue to pay off my balance under the previous terms. Normally, this would be a no-brainer for me b/c I don't plan to use this account anymore anyway, but I also hope to buy a house over the next few months, and I was wondering if closing this type of account will adversely affect my debt to credit ratio, and potentially bump my credit score down and compromise my ability to get the best possible interest rate (or qualify at all) for my mortgage. I believe my FICO score is in the low to mid 700s.
I will have around $2,000 to pay toward this account and another credit card account ($4K balance) in two weeks, and I expect to receive another quarterly bonus around this amount before I hope to close on the house this summer (but after I’d hoped to obtain a prequalification letter). Both of these accounts have $5K limits, and they are (or were, I guess) both at 0% promotional rates. I opened the other account last summer and planned to have it paid off by the time it goes to a fixed rate of 7.9% this fall.
I had originally planned to put the $2K toward my other card so that both accounts would be under 50% utilization, and so that I would have more available credit in case of an emergency (since I can’t use my Zales card for this type of thing and I don’t run into many jewelry-related emergencies).
Because I believe my understanding of the credit scoring process and the corresponding criteria to be lacking, I wanted to ask for some advice to determine the best way to proceed here. It’s my assumption that I should keep the Zales account open, apply the $2K to my Zales account, and then work to pay the remainder off as quickly as possible to take the minimum possible hit from the new 24% APR; however, I wanted to ask for some advice from someone who is more financially savvy than I am in these matters.
Any suggestions would be greatly appreciated!
I will have around $2,000 to pay toward this account and another credit card account ($4K balance) in two weeks, and I expect to receive another quarterly bonus around this amount before I hope to close on the house this summer (but after I’d hoped to obtain a prequalification letter). Both of these accounts have $5K limits, and they are (or were, I guess) both at 0% promotional rates. I opened the other account last summer and planned to have it paid off by the time it goes to a fixed rate of 7.9% this fall.
I had originally planned to put the $2K toward my other card so that both accounts would be under 50% utilization, and so that I would have more available credit in case of an emergency (since I can’t use my Zales card for this type of thing and I don’t run into many jewelry-related emergencies).
Because I believe my understanding of the credit scoring process and the corresponding criteria to be lacking, I wanted to ask for some advice to determine the best way to proceed here. It’s my assumption that I should keep the Zales account open, apply the $2K to my Zales account, and then work to pay the remainder off as quickly as possible to take the minimum possible hit from the new 24% APR; however, I wanted to ask for some advice from someone who is more financially savvy than I am in these matters.
Any suggestions would be greatly appreciated!
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