Ask Liz Weston

Get smart with your money

Credit & Debt

Q&A: How to get a debt collector to stop calling about a bogus bill

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Dear Liz: I’m getting daily robocalls from a debt collection agency, even though a check of our current credit reports shows that we owe no one anything. (My husband and I both have stellar credit.) Google tells me that this collection agency is known for shadiness and that the Consumer Financial Protection Bureau has fined it for illegal debt collection practices and repeated violations of consumer reporting rules. I want to make these annoying daily calls stop (I never answer) but I worry that engaging with this company at all, for instance with a letter telling them to go away, will just cause more problems. What’s the best way to handle this kind of situation?

Answer: Debt experts sometimes advise against contacting collection agencies if you owe money, can’t afford to pay it back and are worried about being sued. The concern is that any response from you will trigger increased efforts to collect the money.

Since you don’t owe anything, though, there’s nothing to stop you from trying to end these annoying calls.

The CFPB recommends sending a letter to the collection agency demanding to know more about the alleged debt, including why the collector thinks you owe it, how old the debt is, how much is owed and details establishing the collector’s right to collect. The CFPB has a sample letter on its site you can use. Ideally, this letter would be sent within 30 days of the first phone call to preserve your rights under federal law, but there’s nothing stopping you from sending it at any point.

Once you have information about the supposed debt — or if the calls continue and the agency hasn’t responded — you can send a second letter telling the agency you don’t owe the money and to stop contacting you.

Q&A: Ins and outs of HELOCs

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Dear Liz: We have a home equity line of credit through our credit union. I have been paying it down very aggressively and it will be paid off in two months. That is our only debt. I was considering leaving a small ($100) balance. It would cost $7.50 a year to have the loan available but we would have immediate access to $200,000 with no paperwork, etc. Your thoughts?

Answer: Contact your credit union and ask if it’s necessary to maintain a balance to keep the line of credit open, because typically that’s not the case.

You should know, however, that HELOCs typically have two phases: a five- to 10-year “draw” period, during which you can borrow and repay the line much as you would a credit card, followed by a repayment period of 10 to 20 years during which you pay down any amount still owed. You normally can’t draw out additional money during the repayment period.

If your HELOC is nearing its repayment phase, you can replace it with a new HELOC that you leave open and unused for emergencies. Closing costs often range from 2% to 5% of the loan amount, although some lenders discount those fees.

Q&A: A spouse’s debt, your credit score

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Dear Liz: My spouse and I have added each other as authorized users on our credit cards. My spouse has more debt than I do. Does this impact my credit scores?

Answer: Possibly. Credit scoring formulas look at how much available credit is being used on each account. If your spouse has higher balances than you but also higher credit limits, your credit scores may not be harmed much, if at all. If, on the other hand, your spouse is using most of their available credit, your scores could suffer.

Most services that provide credit scores (including possibly your bank and your credit cards) typically offer some explanations about why your scores aren’t higher. If the explanations include anything about excessive credit utilization, you may want to consider getting yourself removed as an authorized user from the problematic cards.

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.

Q&A: Dumping debt could make you ‘credit invisible.’ Why that’s a problem and how to fix it

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Dear Liz: I have a credit card issue that I’ve not been able to resolve and hope that you can provide some helpful suggestions. I am a debt-free senior. I owe nothing on my house or vehicles and I pay off my one credit card each month. I’ve no missing payments on utilities. My credit card reduced my credit limit last year saying that my credit scores were too low. In fact they’ve fallen from 800s to 600s over the last year. The bank that issues my business credit card says they use an algorithm that allows no human interaction for adjustments for people like me who are debt-free. Any suggestions?

Answer: Many people who once had good credit become “credit invisible” if they’ve paid off all their loans and stopped using credit cards.

But regularly using a credit card or two should be enough to stay visible to the credit score algorithms and to keep good scores. The problem may be the type of card you’re using. Business credit cards often don’t show up on personal credit reports, so your use of the card wouldn’t be included in credit score calculations. If that’s the case, consider applying for a personal card to start rebuilding your scores.

The other possibility is that you’ve become the victim of identity theft. Please check your credit reports at the three major credit bureaus. You can do so for free by typing AnnualCreditReport.com into your browser window or by calling (877) 322-8228.

Q&A: Credit freezes

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Dear Liz: You recently suggested a credit freeze. I agree that’s a good idea, and probably the only good way, to try to protect your credit.

But I’ve tried to periodically unfreeze my credit reports and that rarely goes well. The banks won’t tell you which credit bureau or bureaus they use to check your credit, so you have to temporarily thaw your reports at all three. This weekend, only one bureau worked well. At another, I was able to sign on but got a message the site was temporarily unable to access my information. The third didn’t recognize any of my possible usernames, so I tried my Social Security number and date of birth, which it also didn’t recognize. I’m SURE I don’t have those wrong, so I’d say part or all of their database is offline. More than likely I’ll be able to sort this out on a weekday when the bureaus staff their phones, but so far, I’ve worked on unfreezing my credit for two days and only one of the three services responded correctly.

Answer: Freezing and thawing your credit reports is certainly easier and faster than it used to be — plus, these services are now free by federal law. But as you’ve learned, you need to keep careful track of the credentials associated with your accounts at each credit bureau, including any login IDs, passwords and personal identification numbers.

You can write this information down and keep it in a secure location, but also consider using a password manager. These secure software programs allow you to create unique credentials for each site you visit. Given the prevalence of database breaches, it’s essential that you don’t reuse usernames and passwords. The programs also can help you change your passwords regularly, which is also important in keeping your information secure.