Ask Liz Weston

Get smart with your money

Credit Scores

Q&A: Should I borrow to boost my credit scores?

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Dear Liz: I’m one of the beneficiaries named in my late relative’s will, and plan to use the money to buy a new car. Should I pay cash up front and avoid the interest charges on a loan, or set up monthly payments to help enhance my credit score (currently just under 800)?

Answer: A car loan might boost your scores, especially if you don’t already have an installment loan such as a mortgage on your credit reports. But once your credit scores are in the high 700s, you’re typically getting the best rates and terms from lenders. You’d be paying interest for no reason other than bragging rights.

Q&A: Credit cards and co-signers

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Dear Liz: My son is in his mid-20s. He has a credit card that we co-signed and that has a credit limit he would likely not qualify for on his own. He would like to remove us as co-signers as he starts to take more personal control of his finances. Would it make more sense to apply for a new card using only his income information, and then slowly stop using the old card? Or is it better just to take the hit on his credit rating now and request our removal from the old card?

Answer: It’s not clear whether you’ll be able to bow out of this arrangement without closing the card. Most major credit card issuers don’t allow co-signers. More typically, parents would add their children as authorized users. While the parents can remove their children from the account, the opposite isn’t true.

If this is a co-signed card, the issuer may have an option for removing you. Your son will need to call and ask.

In general, though, it would be better for his credit to apply for a card on his own and leave this account open.

Q&A: What to do with a drawer full of unused credit cards?

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Dear Liz: At 75 and 79, my husband and I have no plans to buy a new car or property. We own our home and cars. We have excellent credit ratings. We use one major credit card. I’m consolidating our financial life for our heirs. We have a drawer full of cards we never use. Is there any reason not to just cancel these cards and save our heirs the trouble? Should I care if my 850 credit score tanks?

Answer: At this point, simplifying your finances probably makes more sense than trying to keep your credit scores as high as they can possibly be.

Cards you aren’t using still need to be monitored for fraud, which is a hassle, plus you may be paying unnecessary annual fees. Reducing the number of accounts should make your life easier, but don’t go too far.

As explained in previous columns, each spouse should have at least one card on which they are the primary account holder. A spouse who is an authorized user often loses access to the card when the primary account holder dies and card issuers close the account. Few credit card issuers offer joint accounts these days, so you should determine who is the primary account holder and who is the authorized user on each of your cards before deciding which to close.

You can reduce the damage to your scores by trying to preserve as much of your current credit limits as possible. Ideally, the cards you keep will be the ones with the highest limits. If you’re closing other accounts at your chosen issuer, you can ask that the credit limits for the shuttered cards be transferred to the card you’re keeping.

Q&A: Is one credit card better than two?

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Dear Liz: I have a long-standing credit card with a national bank. As I travel a lot, I just opened a travel rewards card with the same issuer. I would prefer to keep the new card and close the old one, rather than keep two cards active with the same issuer. I understand from reading your columns this might (temporarily?) lower my credit score. Any other downside?

Answer: It’s hard to predict how an account closure will affect credit scores or how long the impact will last. The effect is likely to be greatest for people with few credit accounts and short credit histories. You may be able to mitigate some of the damage by asking that the credit limit from the old card be transferred to the new one.

Before you do that, however, consider why you’re averse to having two cards with the same issuer. The old card may have benefits the new one lacks, and could be a helpful backup if your new card is lost or compromised. The case for keeping the old card is strengthened if the annual fee is low or nonexistent. Just remember to use the old card occasionally to minimize the chances the issuer will close it for you.

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

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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.

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

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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.