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Credit Cards

Q&A: My kids grew up. Will their credit scores go down?

June 24, 2024 By Liz Weston

Dear Liz: Many years ago I took out a credit card to pay for my two children’s college expenses. They were authorized users for miscellaneous expenses. They no longer use or even have access to the cards. Now they are both in stable, well-paying jobs. I would like to keep the card but remove the authorized users. How would this affect their credit scores? Or mine, for that matter?

Answer: You helped your kids establish good credit by adding them as authorized users. Removing them won’t affect your credit scores. The effect on their scores depends on how well they’ve managed credit on their own.

The impact should be minimal if they’ve continued to build credit by opening their own credit cards and paying those on time. Ideally, for credit-building purposes, they’ll also have a solid history paying an installment loan, such as a mortgage, student loan or auto loan.

If they haven’t used credit much and have a thin file — generally, fewer than five accounts showing on their credit reports — the damage might be more significant. If that’s the case, you may want to delay removing them as authorized users while they open other lines of credit. They should know that they don’t have to carry debt to have good credit: Just using credit cards lightly and paying the balances in full should do the job.

Filed Under: Credit Scoring, Kids & Money, Q&A Tagged With: authorized user, building credit, Credit Cards, Credit Score, Credit Scores, credit scoring, kids and money

This week’s money news

June 10, 2024 By Liz Weston

This week’s top story: Weekly mortgage rates dip, home price gains soften. In other news: New digital nomads on the block: families, why you should consider train travel in Europe, and 3 steps to take after transferring a balance to a new credit card.

Weekly Mortgage Rates Dip, Home Price Gains Soften
The drop brings the 30-year fixed rate to about where it was two weeks ago and slightly under May’s monthly average of 7.01%.

There Are New Digital Nomads on the Block: Families
As the cost of living rises in many places, full-time family travel can cost about the same as staying put.

Why You Should Consider Train Travel in Europe
You can easily travel through Europe by train because of its well-developed route network.

3 Steps to Take After Transferring a Balance to a New Credit Card
Moving the debt is just the first step. Have a game plan for paying down the balance before the interest-free period ends.

Filed Under: Liz's Blog Tagged With: balance transfers, Credit Cards, digital nomad, family travel, mortgage rates, train travel in Europe, travel

Q&A: Is getting old reason enough to cancel some credit cards?

June 10, 2024 By Liz Weston

Dear Liz: Recently, someone asked if closing a credit card would be worth the hassle and you responded that there is no compelling reason to do so and in fact, it might hurt your credit scores. As an older person, I can think of two good reasons: theft and fraud. Many of us of a certain age no longer carry a mortgage or other debt. But, I am finding it harder to keep track of my finances. I would like to cancel three of my five credit cards for that reason.

Answer: You misquoted my response. What I actually wrote was, “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.”

Wanting to reduce your risk is reason enough to close a card account. All of us would be smart to consider simplifying our finances as we get older, says Carolyn McClanahan, a certified financial planner and physician in Jacksonville, Fla.

You also might think about who could help you manage your finances as the task gets more difficult. A legal document called a power of attorney allows you to name a trusted person to take over should you become incapacitated. You can familiarize this person with your finances and consider giving them online access to your accounts so they can help you spot fraud, theft or missed due dates. Involving them now, when you can help guide them, is generally better than waiting for a crisis and hoping they can figure everything out on their own.

Filed Under: Credit Cards, Q&A Tagged With: aging, cancelling credit cards, cognitive decline, Credit Cards, Credit Score, Credit Scores, credit scoring, Estate Planning, managing finances, power of attorney

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

May 20, 2024 By Liz Weston

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.)

Filed Under: Credit Cards, Credit Scoring, Q&A Tagged With: Credit Bureaus, Credit Cards, credit report, Credit Score, Credit Scores, credit scoring, late payment, Late Payments

This week’s money news

May 6, 2024 By Liz Weston

This week’s top story: 7 surprising facts about credit cards. In other news: Weekly mortgage rates rise again, look to last-minute scholarships when you can’t control FAFSA delays, and best cities for freelancers and self-employed workers 2024.

7 Surprising Facts About Credit Cards
Card issuers have a lot of leeway in terms of when and how they can make changes to your account. Some changes may be unwelcome, but others can work in your favor.

Weekly Mortgage Rates Rise Again, While Home Sales Increase, Too
Mortgage rates have climbed five weeks in a row and are now at their highest levels since the week before Thanksgiving.

No Financial Aid Package Yet? Look to Last-Minute Scholarships
You can’t control FAFSA delays, but you can control whether you research and apply for scholarship awards to lower your college costs.

Best Cities for Freelancers and Self-Employed Workers 2024
These 10 metro areas have a relatively large percentage of self-employed workers, relatively low state income tax rates and more.

Filed Under: Liz's Blog Tagged With: best cities for freelancers and self-employed workers 2024, Credit Cards, FAFSA delays 2024, scholarships, weekly mortgage rates May 2024

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

April 22, 2024 By Liz Weston

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.

Filed Under: Credit Scoring, Q&A Tagged With: automatic payments, Credit Cards, Credit Score, Credit Scores, credit scoring, good will letter, Late Payments

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