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Credit Cards

Thursday’s need-to-know money news

April 24, 2014 By Liz Weston

teen-creditToday’s top story: The retirement age for millennials is increasing. Also in the news: The pros and cons of delaying your social security benefits, how to avoid buyer’s remorse, and at what age should a teenager start building credit?

Five Retirement Warning Signs for Millennials
Recent college grads may not be able to retire until age 73.

Social Security At Age 62? Why Delaying Your Benefits May Not Pay Off
Your mileage may vary, of course.

How to Avoid Buyer’s Remorse
From handbags to homes.

Are your kids old enough to start building credit?
Should old enough to vote also mean old enough to charge?

This is one Social Security document you don’t want to toss
The return of the paper benefit statement.

Filed Under: Liz's Blog Tagged With: buyer's remorse, Credit Cards, millennials, Retirement, Social Security, Social Security benefits

Q&A: Helping retired parents refinance

April 21, 2014 By Liz Weston

Dear Liz: I am trying to help my retired parents refinance their home. Currently they are paying over 8% interest. (This loan should be illegal.) The problem is their credit score, which is around 536. They had a tax lien in 2004 (it has been paid off for over four years) and some minor credit card issues. The total card debt is less than $1,000. I see several bad footnotes on these cards. Some of the cards have a balance of less than $100. What is the best and fastest way to help them get the mortgage they deserve?

Answer: Your parents don’t have a single credit score. They each have their own scores. Mortgage lenders typically get FICO scores for each borrower from all three credit bureaus, for a total of six scores. Lenders look at the middle score for each person and typically base rates and terms on the lower of those two middle scores.

If that number is indeed 536, your parents have serious, recent credit problems. You may not think an unpaid credit card is a big deal, but it is to credit scoring formulas, which are designed to help lenders gauge a borrower’s risk of default. People with unpaid bills are far more likely to default on a new loan than people who pay their bills on time, and their respective credit scores reflect that reality. What people “deserve” isn’t a factor. How they handle their credit accounts is.

What you’re calling “bad footnotes” are likely records of late payments and perhaps charge-offs and collections activity. Those typically can’t be erased, but your parents can stop the ongoing damage to their credit by paying their bills on time and paying off any overdue bills to their credit card companies.

If the accounts have been sold to collectors, the process gets trickier. Paying off collections typically won’t help credit scores, but lenders usually want these accounts paid off before they will make a new loan. Your parents can try negotiating to have the collection accounts deleted in return for payment, but they won’t be able to erase the late payments and other negative marks reported by the original creditor.

Once they start handling their credit accounts responsibly, their credit scores will start to improve. The improvements will happen slowly, though, and they may well miss the opportunity to refinance at today’s low levels.

Filed Under: Credit & Debt, Credit Scoring, Q&A, Real Estate Tagged With: Credit Cards, Credit Score, debt, real estate, refinancing

Friday’s need-to-know money news

April 18, 2014 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: How to find the right credit card. Also in the news: Improving your financial knowledge, setting good financial examples for your kids, and why payday loans are as bad as Peeps.

What Credit Cards Should I Avoid?
Finding the card that best suits your needs.

5 Ways to Improve Your Financial Knowledge
Celebrating Financial Literacy Month!

Your Bad Financial Habits Can Hurt Your Kids
The ways in which you spend money can be a bad influence on your kids.

The may be sweet, but they’ll rot your wallet.

Social Security Debt: Do You Owe and Should You Worry?
What to do with overpayments.

Filed Under: Liz's Blog Tagged With: Credit Cards, financial literacy, Kids, payday loans, Peeps, social security debt

Can a small credit card improve your credit score?

April 7, 2014 By Liz Weston

Dear Liz: I am trying to increase my credit scores so I can buy a house in a couple of years. My scores are pretty bad, but I do have a car loan that I have never been delinquent on. I have recently obtained a secured credit card with a $300 limit. Will a credit card with such a small limit help improve my credit score?

Answer: Yes, but you may need longer than two years to get your scores up to snuff, depending on how bad they are.

Regaining points always takes much longer than losing them, so you should make sure to pay all your bills on time and use your new credit card lightly but regularly. Charge less than $100 a month and pay the balance in full, because there’s no advantage to carrying a balance.

After six months or so of regular payments, consider adding another card to the mix. In a year or two, you may qualify for a regular credit card that will continue to enhance your scores.
Also, make sure you’re looking at your FICO scores, because those are the credit scores most mortgage lenders use. Other scores may be offered for free or sold by the credit bureaus, but they typically aren’t FICOs.

Filed Under: Credit & Debt, Q&A Tagged With: Credit Cards, Credit Score, q&a

Tuesday’s need-to-know money news

April 1, 2014 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: The dangers of medical identity theft. Also in the news: the pros and cons of identity theft insurance, how to pick the perfect credit card, and how to save your retirement after losing your job.

Medical Identity Theft: The Fraud That Can Kill You
The repercussions are serious.

Is identity-theft insurance a waste of money?
Is the protection worth the cost?

How to Pick the Perfect Credit Card
The important things to consider.

Lost Your Job? Here’s How to Save Your Retirement
Don’t panic.

5 Ways to Fix a Failing Personal Budget
Everyone makes mistakes.

Filed Under: Liz's Blog Tagged With: Credit Cards, Identity Theft, medical identity theft, personal budget, unemployment

Thursday’s need-to-know money news

March 27, 2014 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: What to expect when you’re hit with a penalty APR. Also in the news: What to do when your home equity line is about to end, everything you need to know about personal finance in 100 words or less, and stories from America Saves Week.

Am I Stuck With a Penalty APR on My Credit Card?
How long until you can get your old rate back?

What to do if your home-equity line is about to end
What to do before your month payment shoots through the roof.

Everything You Need to Know About Personal Finance in 100 Words (or Less)
Short and sweet.

12 Personal Finance Stories For America Saves Week
Learning from others.

What The NCAA Bracket Can Teach You About Personal Finance
Be prepared for upsets.

Filed Under: Liz's Blog Tagged With: advice, America Saves Week, Credit Cards, home equity line, NCAA tournament, penalty rate

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