Ask Liz Weston

Get smart with your money

Credit Cards

Q&A: Credit use and your scores

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Dear Liz: When my credit utilization decreased to 24%, my credit score rose from 675 to 690. My utilization has since decreased to 17% but my score remains 690. Approximately what does my credit utilization have to be to see a credit score over 700?

Answer: Keep in mind that you have many credit scores, not just one, and the formulas used to create these scores can vary considerably. But in general, the less you use your available credit, the better. People with the highest credit scores tend to use less than 10% of their credit limits.

Q&A: Authorized credit card users

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Dear Liz: Following your advice on building credit, we recently added our son as an authorized user on one of my credit cards. My question is, what happens when I pass away? Does the card remain with him as the only user? Do I need to address this in my will?

Answer: Your executor, the person you named in your will to handle your estate, will be responsible for closing the account when you die. If there are any balances owing, the debt will be paid from your estate. There’s no need to make special provisions for the account in your will. By that time, your son, one would hope, would have cards of his own, so the closure shouldn’t affect his credit scores much if at all.

Q&A: Multiple payments may help credit scores

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Dear Liz: You recently wrote that using more than a small percentage of your credit cards’ available limit can hurt your credit scores, even if you pay your balances in full. I pay my credit cards in full each month and I also make several payments (via my bank’s online payment service) during the month. Do these multiple payments hurt or help my credit score?

Answer: They probably help. The balance that matters for credit scoring purposes is the balance that’s reported to the credit bureaus, and that’s typically what you owe on your statement closing date. Making multiple payments before the statement closing date should lower that balance. Just remember to make a payment between the statement closing date and before the due date to avoid late fees.

Q&A: Mom has dementia and credit cards. How does her family cancel the accounts?

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Dear Liz: My mother has two credit cards that have had no activity for a year and a half due to being in an assisted living facility. She is living with dementia and no longer able to make any decisions (personal or financial) on her own. Should I or am I even able to cancel these cards or do I have to wait until she passes and send in a death certificate to the bank?

Answer: Theoretically you could close the accounts for her if you have a legal document known as a financial power of attorney. These documents are designed to help you take over the finances of someone who is incapacitated. Unfortunately, banks and credit card issuers sometimes refuse to honor powers of attorney despite legal requirements that they do so. You might need to hire an attorney to force them to accept your authority. You can get referrals to experienced attorneys from the National Academy of Elder Law Attorneys and the American Bar Assn.

If you don’t have this document and your mother is no longer of sound mind, you probably would have to go to court to become her conservator to make financial decisions for her. That can be an expensive process.

But there might be a simple solution. Some credit cards have an “off” switch that prevents anyone from making charges on the account. If the card has this feature and you can access the account online, you may be able to effectively disable the account even if you can’t formally close it.

Q&A: Got an old credit card that you no longer use? What to do instead of canceling it

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Dear Liz: I have been keeping a credit card that I no longer use because I’m afraid that canceling it may reduce my credit score. I have had the card since 1983, and it shows on my credit report as my longest credit relationship. I have other credit cards that I use regularly. I no longer have a mortgage. Should I keep the unused card?

Answer: Closing the card certainly won’t help your scores, but it’s impossible to know in advance how much they might be hurt. That doesn’t mean you should never close a card, but you may want to consider alternatives, particularly because this is your oldest card.

Does the issuer offer another type of card with cash back or other rewards you could use? If so, consider asking for a “product change” to the new card. That should preserve your long history with the account while supplying you with a credit card that better suits your needs.

Q&A: If the credit card is paid off, will the credit score go up or not?

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Dear Liz: If I pay off my credit card and carry a zero balance, will my credit score go up quite a bit?

Answer: That depends, among other factors, on how much of your available credit you were using on that card. The closer you were to being maxed out — which means using most or all of your available credit — the more dramatic the improvement you might see.

But your credit scores also depend on a number of other factors, including how long you’ve had credit, how many open accounts you have, how much of the available credit you’re using on those accounts, when you last applied for credit and whether you have any negative marks, such as late payments, in your credit reports.

In general, credit scores respond favorably if you use only a small portion of your available credit. People trying to obtain top scores generally try to keep their credit usage below 10% of their credit limits.