Ask Liz Weston

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debt

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.

This week’s money news

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This week’s top story: Smart Money podcast on smart ways to get out of debt, and pet insurance planning. In other news: Not enough homes are for sale, so let’s pay owners to sell, how to pay for an expensive summer move, and growing loyalty programs mean more travelers competing for perks.

Smart Money Podcast: Smart Ways to Get Out of Debt, and Pet Insurance Planning
Personal finance Nerd Tommy Tindall joins Sean Pyles and Liz Weston to discuss alternative ways to pay off debt when you can’t get a personal loan.

Not Enough Homes Are for Sale, so Let’s Pay Owners to Sell
Tax credits could encourage people to sell their homes in a meager housing market.

How to Pay for an Expensive Summer Move
A credit card or personal loan can help you pay for a pricey summer move, but pay attention to interest rates and trim costs where you can.

Growing Loyalty Programs Mean More Travelers Competing for Perks
If you thought it’s been harder to get upgrades or lounges have been more crowded lately, you’re not alone.

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.

Tuesday’s need-to-know money news

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Today’s top story: 3 times debt can be a helpful tool. Also in the news: How to buy stuff that lasts, how to plan for big expenditures, and how small daily purchases really affect your long-term finances.

3 times debt can be a helpful tool
When debt serves a purpose.

How to Buy Stuff That Lasts
Finding truly reliable and durable products isn’t always easy.

How to Afford Big-Ticket Items for the Year
If you need to make a big purchase this year, such as furniture or an appliance, plan around sales and your budget.

How Much Do Small, Daily Purchases Really Affect Your Long-Term Finances?
Your avocado toast or morning coffee is not to blame for your debt.

Tuesday’s need-to-know money news

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Today’s top story: Don’t let Black Friday debt trigger post-holiday blues. Also in the news: Things to do by year-end for your investments, November mortgage rates continue to rise, and how to shop now and get Black Friday prices later.

Don’t Let Black Friday Debt Trigger Post-Holiday Blues
Prioritize needs, budget your spending, then make a savings plan for next year’s expenses.

Investing Checklist: Things to Do by Year-End
Implementing investing strategies before the end of the year can help maximize your money.

Mortgage Outlook: November Rates Continue Marching Uphill
Rates continue to rise.

You Can Shop Now, and Get Black Friday Prices Later
A few major retailers will retroactively match Black Friday deals.

Friday’s need-to-know money news

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Today’s top story: AARP credit card holders endure bumpy move to Barclays from Chase. Also in the news: 5 steps to level up your side hustle, how much it really costs to drive a new car, and one couple’s journey to tame their debt.

AARP Credit Card Holders Endure Bumpy Move to Barclays From Chase
Barclays apologizes for long call hold times, card transition woes. Issuer beefs up call support.

5 Steps to Level Up Your Side Hustle
Growing your side gig into a legit business requires research, planning and organization.

How Much Does It Really Cost to Drive a New Car?
A 5% increase in car ownership costs means your budget should include more than the monthly payment.

How I Ditched Debt: Pandemic After Payoff Tests Couple’s Resilience
One couple’s journey to tame their debt.