Ask Liz Weston

Get smart with your money

Credit Scoring

Q&A: More credit score drama over a missed payment

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Dear Liz: You responded to a woman who was concerned that a missed payment had hurt her credit score. My situation is also about a missed payment. In fall 2018, I received a dunning letter from a bill collector. I did a ton of research because I never received the bill that ruined my previously stellar credit rating (840). My rating sank by 200 points even after the retailer involved acknowledged that I never received the bills. Their office showed all the bills, although addressed correctly, were returned as undeliverable. The executive with whom I had lots of interaction wrote all the bureaus explaining the error was the retailer’s. The credit bureaus did nothing to restore my credit rating. It has been six years and I continue to pay in full on time as I had for the 45 years before 2018. My payment behavior has done little to improve my low score. Maybe 2025 will bring relief, as that will be seven years since the collection letter.

Answer: Your situation offers the opportunity to clarify a few things that confuse many consumers.

The first and most important: We are responsible for paying our credit card bills whether we receive those bills or not. Mail goes astray, emails wind up in junk folders, but if there’s a balance on our credit cards we’re supposed to pay at least the minimum when the due date rolls around. As mentioned in the previous column, setting up automatic payments can prevent missed payments. At a minimum, you should mark your calendar with your cards’ due dates and submit your payments, preferably electronically, in time to avoid late fees. Having online access to your credit accounts can help you track balances, and you can set up email or text alerts to remind you to pay.

Next, the executive you talked to either didn’t understand the credit reporting system or wasn’t entirely frank with you. The credit bureaus’ files reflect what creditors tell them. It’s a dynamic system, with information constantly being updated. If the retailer agreed that the late payments shouldn’t be reported, then it should have stopped reporting the erroneous information. Instead of corresponding with the bureaus, the executive should have been talking to the retailer’s finance arm.

If the executive provided you with a copy of the letter sent to the bureaus, however, you can use that to correct the record. Dispute the late payments with the bureaus and use the letter to back up your claim.

By now, your scores should have regained most of the ground lost to this unfortunate incident. If that’s not the case, something else is wrong with your credit reports. You should request free copies of your reports from AnnualCreditReport.com and scrutinize them closely. (If you’re asked for a credit card, you’re on the wrong site.)

Q&A: Can my credit score really be marred over $20?

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Dear Liz: I have had great credit for years. Late last year, I somehow overlooked a $20 payment due from one of my credit cards. My score dropped by more than 50 points, from about 815 to 765. I quickly paid the $20 and contacted the issuer. They told me they were required by law to report my delinquent payment, which I found out was not true. I went back and forth with them, but they would not do anything to help. I did file an inquiry with one of the credit bureaus, but I was told there was nothing they could do without the issuer’s cooperation. I spoke with someone in the issuer’s corporate offices, but he could not have cared less. It turns out that this hit on my credit could last seven years — and all over $20. I charge thousands of dollars every year on credit cards and pay the balance every month. Is there anything else I can do to restore my credit to the previous levels?

Answer: The federal Fair Credit Reporting Act does require creditors to report accurate information to the credit bureaus. However, some people say they’ve been able to get their accidental late payments removed by writing “good will” letters to their issuers. These letters explain what happened, emphasize the customer’s previous record of on-time payments and politely request the issuer extend some good will by removing the one-time lapse from their credit reports.

Your issuer is under no obligation to grant your request, and some categorically say they won’t. But it can’t hurt to try.

You also can use this incident as a reason to review how you pay your credit cards. Setting up automatic payments to cover at least your minimum payment will ensure this doesn’t happen again. Keep an eye on your credit utilization as well. Aim to use 10% or less of your credit limits. If you find it difficult to keep your charges below that level, consider making multiple payments each month to keep your balance low.

The unexpected drop in your credit scores was painful, but the good news is that you still have great scores. This oversight is unlikely to have any lasting effect on your financial life. And if you continue to use credit responsibly, your scores will improve over time.

Q&A: How to divide up the family home

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Dear Liz: My wife and I plan to leave our house to our four children. My concern is that one may want to sell and split the proceeds; another may want to keep the house, rent it and divide up the income; and of course there’s always the real possibility that one may want to move in and live in it (we live in a nice community in California). My goal is to prevent doing anything that drives a wedge between them. Any advice on how best to approach this issue short of requiring the house be sold?

Answer: You’ve identified some of the complicating factors of leaving property to multiple heirs. There are many others, including changing circumstances and inclinations. The one who now wants to move into the property may be nicely settled elsewhere when the time comes. Or the one who’s keen on creating a rental may decide that screening tenants, collecting rent and fielding 3 a.m. calls about plumbing problems is too much hassle. Some of the heirs may be in a better position than others to absorb the ongoing costs of maintaining the home, including taxes, insurance and repairs. Even if their financial circumstances are roughly equal, they may have trouble agreeing on the timing and cost of repairs or improvements. And that’s assuming there are no reversals of fortune. Someone who is adamant about keeping the home may find themselves in need of funds later. And so on.

Your life isn’t immune to change either, by the way. You, or your widow, may want to downsize someday or need to sell the house to fund long-term care needs.

An experienced estate planning attorney can help you sort through your options because this is a common scenario and one that can be approached in different ways, including requiring the house to be sold, creating a trust or forming a family partnership to manage the property.

The attorney also can help you frame the discussion you’ll want to have with the kids. Knowing their current preferences and circumstances may be helpful, but given your goal, it’s also a good opportunity to emphasize the importance of family unity. Let your kids know you expect them to put family first and that harmonious relationships are worth more than any piece of real estate could be.

Q&A: Closing accounts won’t help your credit scores

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Dear Liz: I have an 834 credit score, with three credit cards. I don’t carry debt or pay annual fees. I’m considering closing one of my cards and replacing it with one available through my credit union. Is it worth the hassle?

Answer: Closing accounts won’t help your credit scores and may hurt them. If there’s no compelling reason to close a card, you might consider leaving the account open and using the card occasionally to prevent the issuer from closing it.

You also might want to rethink your stance on annual fees. These days, few cards without annual fees offer rewards, while many cards offer rewards that more than offset their fees. If you’re new to the rewards card world, consider getting a simple cash-back card. If you’re interested in travel benefits, look for a card that gives you points that you can transfer to frequent traveler programs.

If you’re determined to close the account and open another, apply for the new card first since the closure may drop your scores.

Q&A: Great credit, but rejected for a credit card. What gives?

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Dear Liz: I recently applied online for a credit card and was rejected, as my credit reports were frozen. I thawed them and applied again, only to be declined again. I received a letter stating that the rejection was because I have no installment credit history. I have no debt, credit scores in the mid-800s and $2 million in retirement accounts. Our paid-for home is valued at approximately $1million. This makes zero sense.

Answer: Federal law requires credit card issuers to send the “adverse action” letter you received to explain why your application was denied. But that letter doesn’t have to be the last word.

You can call the issuer and politely ask that your application be reconsidered. Most credit applications are evaluated by algorithms, rather than people. Getting a human involved can make all the difference, so you’ll want to get this person on your side. Be friendly and polite.

Mention all of the factors in your favor, such as a steady income and a (presumably) long history of handling credit cards responsibly. Explain that you don’t have an installment loan, such as a mortgage, because your home is paid off. If you have an existing relationship with the issuer, such as other credit cards or bank accounts, mention that as well.

There are no guarantees you’ll be successful if you ask, but you’re guaranteed not to get the card if you don’t ask. Good luck!

Q&A: Card closure reasons don’t matter

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Dear Liz: Does the reason for a credit card closure affect credit scores? I’ve had retailers close a card simply because it hasn’t been used for a period of time, not because I mishandled the account.

Answer: Credit score formulas don’t distinguish between accounts closed by the consumer and accounts closed by the issuer. The closed account can still ding your scores, but you won’t suffer an extra blow because the decision to close wasn’t your own.