Ask Liz Weston

Get smart with your money

Credit Cards

Q&A: Identity theft fears? Get a credit report, credit freeze

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Dear Liz: I divorced 32 years ago. Recently, I received calls from a collection agency about a debt that has not been paid. I discovered that my ex used my phone number as one of his contact numbers. My number is supposed to be unlisted and unpublished, but he found it online. I have stopped receiving calls from the agency, but how do I stop this from happening again?

Answer: Please check your credit reports to make sure your ex didn’t swipe even more sensitive digits: namely, your Social Security number. If his credit is bad, he may be tempted to pretend to be you in order to get credit cards, loans or other accounts. That’s identity theft, and there are steps you should take now to protect yourself.

You can access your credit reports for free at AnnualCreditReport.com. (If you’re asked for a credit card number, you’re on the wrong site.) Look for any accounts that aren’t yours and consider freezing your credit reports at each of the bureaus. Credit freezes prevent someone from opening new accounts in your name. You can thaw the freeze whenever you need credit, also for free.

You can’t prevent someone from adding your phone number to their credit applications, but under federal law you can tell a collection agency to stop contacting you, and it must comply. Make the request in writing.

Q&A: How to kick your ex off the credit cards

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Dear Liz: My divorce was final in 2016. My ex and I divided our credit cards as part of the settlement. I have several joint credit cards with high credit limits and zero balances. I have used them once a year to keep them in active status. Do I consider canceling them or do I risk lowering my credit score if I do?

Answer: If these truly are joint credit cards, then your ex potentially could run up a balance and default, damaging your credit. Obviously, that’s not ideal. With joint cards, neither party can be removed by the other, so the best option may be shutting down the account.

But joint credit cards are increasingly rare. Most cards used by couples have a primary cardholder and an authorized user. The authorized user is not responsible for paying the bill and can be removed at any time.

Contact the issuers to find out your status on each card: Are you a joint account holder? Primary or authorized user?

If you’re the primary holder on a card and your ex is still an authorized user, ask that your ex be removed. If the account truly is joint or if you’re the authorized user, consider opening one or two cards in your own name before taking any further action.

Your credit scores may still take a hit when you close accounts or get removed as an authorized user, but the additional lines of credit may limit the damage and ensure you still have access to credit.

Q&A: How to protect your identity beyond a credit freeze

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Dear Liz: I volunteer for an organization that does background checks every two years. A recent check found my name and Social Security number was used in Texas from 2019 to 2021. I have never been to Texas. What can I do to find out how this happened, and how to protect my Social Security number? I have already frozen my account with the three main credit bureaus.

Answer: You may never know exactly how this happened, but you can make an educated guess.

Most Americans’ Social Security numbers have been exposed in one database breach or another, including the massive Equifax breach in 2017 that exposed the personal information of nearly 150 million people. As a result, Social Security numbers are sold by criminals on the dark web for just a few dollars.

Because Social Security numbers have become all-purpose identifiers — something they were never intended to be, by the way — criminals can use a purloined number to get jobs, steal your tax refunds, receive medical care and apply for credit, among other misuses. They also could pretend to be you if they’re ever arrested, something known as criminal identity theft.

Freezing your credit reports will help prevent someone from opening new credit accounts. Credit freezes typically won’t help with the many other types of identity theft, however.

If you haven’t already done so, create a personal account on Social Security’s site to check your earnings record. If what you see doesn’t match your own records, contact the Social Security Administration by calling (800) 772-1213. If someone used your Social Security number to work or get your text refund, contact the IRS at irs.gov/identity-theft-central or by calling (800) 908-4490.

You also can report the fraud to the Federal Trade Commission at IdentityTheft.gov, a site that will create a recovery plan to help you navigate the next steps.

Q&A: How a new credit card can help your credit score

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Dear Liz: I’ve received a notice stating that a retail credit card I’ve had for more than a decade will be converted to a Mastercard. I already have an American Express charge card and a Visa rewards credit card. I don’t need another credit card. But I’m concerned. Will the conversion hurt my credit scores? Or is having a credit card versus a retail card better for my credit scores?

Answer: Congratulations! Such conversions indicate you’ve been using the card and your other credit accounts responsibly. If you continue to do so, the new credit card could help your credit scores more than the retail card.

Although getting new plastic is both good and bad for your credit score, a credit card is typically factored into more FICO scoring variables than a retail card, said Ethan Dornhelm, FICO’s vice president of scores and predictive analytics.

“So to the extent that you have positive behaviors, it’s more likely to have a broader positive impact,” Dornhelm said.

The flip side is that if you mess up by missing a payment or running up big balances, those mistakes could have a greater effect on your scores, Dornhelm said.

Closing the account probably would be one of those mistakes, since closures reduce your available credit and in general should be avoided unless there’s a compelling reason, such as a too-high annual fee. The benefits that came with the retail card, such as discounts and free shipping, probably will transfer to the credit card, so you can continue to benefit from the account without worrying that it will hurt your scores.

Q&A: Why home equity loans are a better option than credit cards

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Dear Liz: My husband is 68, I am 70, both of us are retired and on Social Security. We have little in savings. My husband wants to charge $10,000 to a low-interest credit card to pay for a new furnace and water heater. He plans to pay the minimum each month and at the end of each year transfer the balance to a different credit card with low interest. Is this a good idea?

Answer: You may have better options.

Many credit cards offer low introductory rates that expire after 12 to 21 months, but you typically won’t know before you apply what your credit limit will be.

You may not get a high enough limit to make all your purchases or you could use up so much of the limit that it causes damage to your credit scores. (Scoring formulas are sensitive to how much of your available credit you’re using, and ideally you wouldn’t use more than about 10% to 30% of your credit limits at any given time.) When you apply to transfer your balance to another low-rate card, you’ll run similar risks.

A home equity line of credit or home equity loan might be a better choice. HELOCs have variable rates, but you would have a source of funds you can tap and repay as needed (much like a credit card, but backed by the equity in your home). Home equity loans typically have fixed terms and rates, so you can borrow what you need and pay off the debt over time (often 15 to 20 years).

If paying back the money would be a hardship, a reverse mortgage might be an option. Reverse mortgages can be complicated and expensive, however, so talk to a housing counselor approved by the Department of Housing and Urban Development before proceeding with one.

Q&A: Business credit card dilemma

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Dear Liz: I am a sole proprietor and have two business credit cards. I used my Social Security number to apply for the cards and put $2,000 to $3,000 a month on these cards, yet all this credit card activity is not reported to Experian, thereby hurting my credit score, and I now have “stale credit” per Experian. Is my credit card activity not reported because my cards are considered business cards?

Answer: The short answer is yes. Although you used your personal credit history to apply for the cards, business cards typically don’t report activity to the consumer credit bureaus (although negative activity may be reported, such as if the account is delinquent).

You can remedy the situation by getting and using a personal credit card or two. If your credit report has become so stale that it can’t generate a credit score at all, you may need to start with a secured card or look into a credit builder loan.