Dear Liz: Recently, you advised someone that it was OK to cancel a credit card. When someone responded saying they did just that and got a 4-point hit on their credit rating, you again stated it was nothing more than a short-term glitch and not to worry.
And you call yourself a “certified” financial advisor? You have no idea what you are talking about. Maybe you should confine your answers to what you know. Just who are you “certified” through?
If a cardholder chooses to cancel a credit card, they have to be specific and firm with the card issuer that THEY canceled the card. The cardholder also has to demand that the card issuer send them, in writing, a letter stating that effect. Card issuers have no problem canceling cards. However, card issuers will post on credit reports that THEY canceled the card, which makes the cardholder look like a bad credit risk, whether that is the case or not. That will be posted on the cardholder credit reports for years. Which in turn, allows current and future card issuers to the cardholder to increase their interest rates and/or deny them higher credit limits or even a credit card. That makes it more challenging for cardholders to get decent rates on mortgages, auto loans and more.
You know nothing about credit cards, much less the credit reporting agencies. Stop giving people false information.
Answer: Your email address indicates you may be in the business of providing financial advice to others. If that’s the case, it’s critical that you keep up to date. Much of what you’ve written either isn’t true or hasn’t been true for decades.
The credit scoring formulas used by lenders don’t distinguish between accounts that are closed by the consumer and those that are closed by lenders. There’s no need to add a note to your credit reports explaining the decision was yours. No one would likely read it anyway, as lending decisions are highly automated.
You can learn more about credit scoring at a number of reputable financial sites, such as NerdWallet or Bankrate. Experian, one of the three major credit bureaus, also provides solid information for consumers. And you may be able to find my book “Your Credit Score” in your local library or online. Initially published in 2004 and updated four times, it was one of the first books to explain credit scoring to the public.
As for the certified financial planner designation, it’s offered by the CFP Board of Standards and is one of the more rigorous certifications financial advisors can get. You can learn more at https://www.cfp.net/.
I think this was an example of a very mature and professional response to a judgemental criticism given in a biting tone. And it was constructive.
A credit score is just one variable passed through a model to determine credit worthiness. A financial institution absolutely will use this information if it is available and a predictive variable in their credit model. I would know as I’ve personally written these models. A credit score is very different than an evaluation of creditworthiness for a multitude of financial products. Your hard pull credit report has less than 100 variables on it. All the credit agencies sell proprietary reports that can have as many as 2000 variables on them and are incredibly granular.