Closing out a credit card

Hi Terry

We have about 50k to 60k in credit card debt. Chase, our mortgage holder, offered to increase our mortgage from currently at about 247k to about 272k. Value of the house is bwteen $350 and $400. the $25k in cash would then be used to pay down three credit cards. While our monthly mortgage payment would increase by $50 we would save about $700 per month. The lender said that when the three cards are paid off, they must write a letter to close the card. They state that the card holder usually leaves it open anyway and if they don’t it only hurts our credit score for 3 to 6 months. Do you think the potential damage to our credit rating from closing three cards outweighs the savings which would really help pay down the other debt.

Thank you

Terry Says:  The first step is to pay down the card balances.  And to then pay extra on your mortgage every month to pay that down too!  Are you getting a lower rate on the new mortgage?  Are there fees to be paid for appraisals, closing costs, etc, and are those fees being rolled into the mortgage balance?  What lender said “they must write a letter”??  I’m not quite sure I understand that part.  But one thing is sure, paying down your outstanding debt will help your credit score.  But that score might be significantly damaged for a while if you have been late in paying your credit cards, or only have paid the minimum amount.    Since you won’t be applying for new credit after you do this mortgage refi, your credit score shouldn’t be the main concern.  The real thing to think about is reducing your credit card balances –and then avoiding charging them up again!