Ask Liz Weston

 

A reader recently posted this question, and I thought I’d elevate it to the top of the blog since this issue affects a lot of folks:

Liz – I recall hearing a long time ago that maintaining one or more credit
cards in good standing for a long period of time helps to enhance one’s FICO
score. I recently detected fraudulent activity on two of my credit cards.
Working with each company’s fraud department, I had the existing account closed and the company issue a new card with a new account number and transfer the
legitimate balance from the original account. Does this action interrupt the
long-term credit relationship I have in terms of its impact to my FICO score?
Thank You!

Credit card fraud is incredibly prevalent, and in fact makes up a good chunk of reported identity theft cases. The good news is that typically your credit history with the compromised card is transferred automatically to the new card.

You’ll want to check your credit reports to make sure this is the case, of course; if for some reason the old account shows as closed and the new account’s history begins with the date the card was issued, you’ll want to ask the issuer to export the old card’s history to the new one.

You also want to make this check after mergers. One of my oldest cards was issued by a bank that’s been through three mergers and two name changes, but my credit reports still accurately reflect when I first got the card–which means I’m getting credit for all those years I’ve had it.

 

TransUnion currently provides a service the other two bureaus don’t: the ability to freeze your TransUnion credit report, which essentially prevents ID thieves from opening new accounts in your name. The service is part of a $14.95-a-month credit monitoring package.

Recently, TU announced it would extend the service to anyone who wanted to pay $10 to lock up his or her file, starting next month.

Credit freezes aren’t new. At last count, 39 states and the District of Columbia passed laws allowing their residents to lock up their files at all three bureaus. But some laws cover only identity theft victims, and 11 states still have no laws.

The TU move is a gesture in the right direction, but a freeze at only one bureau has limited use. What consumers really need is a nationwide law authorizing credit freezes for everyone who wants them at all three bureaus.

 

Consumer Reports polled 36,000 of its subscribers to come up with a list of the best and worst credit cards. At the top, not surprisingly, was USAA–an organization that provides financial services to military folks and their families and that tends to get rave reviews, regardless of the product (credit card, insurance, etc.). Cards issued by credit unions also ranked well.

Readers reported far fewer billing problems and other customer service hassles with these cards, especially compared to those at the bottom of the list–Capital One, Direct Merchangs and Providian. The high scorers also charged less, according to CR:

The card issuers that scored exceptionally well in our Ratings–USAA
Federal Savings, the Navy Federal Credit Union, and a group of other credit
unions–also charged median interest rates between 9 and 11 percent, compared
with the 17 percent imposed by the two issuers at the bottom of the Ratings.

If you’re sick of your credit card company, maybe you should check out the plastic issued by your local credit union. Use JoinACU.org to find one near you.