Ask me anything about your Credit Score

[SossMan]

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SossMan,

Not sure if you've already mentioned it, but can you talk about strategy regarding closing credit cards accounts?

Say I opened first account 2 yrs. ago as an add-on to a primary acct. holder with 800's credit. Then 8 more up until now, without any cosigners and all on my own credit. Credit lines range from 20k for the 1st (as add-on when I had zero credit) to $5kish avg. for the others which are my own.

Can I close the 1st and oldest credit card (where I'm not even primary), so I don't have to worry about some error messing up my cosigner's credit? I regularly open new credit cards because of good offers / high credit lines for perhaps if I ever need it, but now its just getting to be too many cards that I have to keep track of every month. I keep hearing that closing them reduces overall unused credit, and thus lowers the score. But by how much? And what if I keep opening new ones and don't use the credit? Can I just close and replace old ones that are no longer attractive?

Thanks in advance.

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I sort of talked about this earlier, but this is a good question. The book answer? Never close them, so long as you are using them and paying them on time, they will only help.

The practical answer is that if you are worried about one slipping through the cracks, then you might consider consolidating. One 30 day late will wipe out whatever benefit you are getting by keeping them open.
Close the newer ones, though. Always keep the older ones open.

(from a credit score perspective...of course if a new one is 0% and the old one is 26%, it makes sense to close the older one...from a score perspective, though, the older one is better)

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Ok, more specifically then:

If I have 10 credit cards and the oldest is 2 yrs old and the others all around 1 yr old, how mature do the others need to get before I can close the oldest one for minimal damage to the score?

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I should be more specific. Closing the old ones won't decrease your score. It will, however, take longer for your score to increase due to length of credit history. I would guess that even with no late payments, your score is only in the mid-high 600s because of all the new credit and lack of history. This really is something that only time can help.
If there are no annual fees on the old ones, keep them open and just don't use them. That way they will still report for a while until your new ones are more seasoned.

That is a lot of cards, though.

[SossMan]

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Soss-

I have a score of 623 due to some late payments of credit cards 5 years ago. I have worked so hard to get my credit over 500 by secured credit cards and secured loans.

1. does the amount of the secured loan matter or just paying on time
2. what can i do if i have paid the loan on time for 6 months but the loan still doesnt show up on my credit report.
3. is it possible to have paying rent on time reported to the agencys and how would i convince my apartment to do that

Thanks so much for the help. You are very generous with your time.

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1. The amount counts, but it's definitely not linear. Also, a 30 day late on a $300 secured card has the same damage as a 30 day late on a $10,000 unsecured card. In short, it's not really enough to worry about. Just pay them on time.

2. All you can do is ask that it be reported. Not all comanies report to the CBs. Some report to only one or two, so it's possible that you only pulled from one bureau and they simply are not reporting to that one. If you are buying a house, most good brokers can do a credit suppliment to add nono-traditional tradelines to your report. It won't really affect your score, but it will have an effect on the number of tradelines you have for qualification purposes.

3. No, I've never heard of rent being reported until you stop paying and they send it to collections. Same as utilities and Verizon, etc...

[SossMan]

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I sort of talked about this earlier, but this is a good question. The book answer? Never close them, so long as you are using them and paying them on time, they will only help.

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About the same time I got the mortgage I took advantage of a free credit report thingy online. They complained about "too much available credit" as being one reason I wasn't higher. Sure sounds to me like they want me to close some of the credit cards.

Also sounds to me like the credit card companies' generosity of constantly increasing my credit limits over the years isn't necessarily good for my credit. I never ASKED for $20K of credit on any card and never have come anywhere close to using that much. But the companies all seem to think I should have that much available just in case I want to charge my next auto purchase.

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The effect of 'too much available credit' is minimal compared to the effect of 'proportion of balances too high'. I'm guessing you have a very high score. Those reasons that they list on there are what keep your score from being 850. FWIW, I've never seen even an 840 and probably less than 3% have 800+.

[SossMan]

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So I'm 20 years old and now have a good amount of money from poker. All I have is a checking account and one of those visa check cards that's apparently really a debit card but works just like a credit card.

Is that bad? Should I get a credit card and buy a couple things with it instead of my check card just to help my credit?

Also, for a brief period when I'd just gotten to college, I had two bank accounts and accidentally overdrew one because all my money was in the other. Is that really bad?

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Yes! get a credit card. If you can't get one, get a secured card or two.

The overdraws won't go on your credit unless you never paid them back and they sent them to collections.

Bad checks, overdraws, etc...don't get reported until they go to collections.

[SossMan]

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I’m pretty particular about keeping my credit cards paid off and current. However, according to my credit report in April of 2005 I was 30 days late on one of my credit cards. When it was a ridiculously low balance of like $10 and I didn’t recall ever getting a bill for it so I assumed it was too low of a balance and they carried it over for a month. Then when I did get a bill it said I was late so I remember paying it that day and telling them that I never received the first bill. They said okay but it looks like they reported me as being 30 days late anyway. This was the first time I was ever late with a payment. How much would being late 30 days once in the 5 years I’ve had this credit card hurt me, is there anything more I can do to dispute ever receiving the first bill, and how long does a late payment continue to affect your credit score? Thanks for all the info this is a wonderful thread.

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If it's an isolated incident, it probably had an effect on your score when it happend and for a few years. It's likely not hurting your score very much if any right now. It will fall of after 7 years.

Usually, if there is a balance of less than $15 or so, the whole amount is due every month, so stay on top of that.

[SossMan]

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I'm 25, and I have zero credit. I have a decent amount of cash, and I've paid cash for every purchase I've ever made. I live in a house (mortgage is 100% in my fiancee's name currently, we'll change that after we get married), I bought my car from my Dad and I've never used any kind of payment plan for any other major purchase. No credit cards, never had student loans, etc. I'm not a big fan of spending money I don't have, and thus far in my life I haven't had to do it.

What would be the best way to get my credit off to a good start? Getting and using a credit card? Any specific strategies I should use when choosing when to pay it off? More than one card? Anything else I could do to get a good score starting from a clean slate?

Thanks!

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Well, I'm hesitant to tell you to go spend money, but there are a few things that you can do. You will ultimately need credit for something, so you should start. 25 is pretty late, but at least you aren't like the majority of 25 year old and have effed up credit that you are trying to fix...

Get a couple cards. If you can't get approved for one due to lack of credit, get a secured card or two or three.

Also, next TV or Fridge you buy, go ahead and get the 0% free financing from BestBuy or Sears or whatever. It doesn't cost you anything if you pay it off in whatever time frame they give you, and you will be able to build credit. You can also be added to your fiance's credit cards as an authorized user and you will get whatever history she has (only if it's good!!) Have her call her CC company and request to add an authorized user (make sure you use that term)
The only way you will be able to get on the mortgage is by refinancing (as far as I know, unless you have some mortgage with a small local bank), so don't do that unless it makes sense financially.

[Korch]

A few things:

A) My parents paid my tuition for me. Apparently, they didn't make the last payment. Fast forward 2 years, I finally found a letter from a collection agency in my name (my parents kept to themselves previous letters). Although my parents were the one paying the tuition, the letters were addressed to me so I'm liable for the failure to pay this last incremental part of my tuition. It was sent to a collection agency and my credit is pretty bad. I had a few missed payments on minor cards in college, so my credit wasn't good anyway. Interest has accrued on the remaining part of my tuition, although they've offered to waive that interest. If I pay them, will they say that they weren't paid in full (and hurt my credit rating worse than if I paid in full?). Also, since this hit my credit report about 2 yrs ago, if I pay now will it actually make my credit worse? They say if I pay they'll "work" to help my credit, but I'm not sure I believe them or think whatever they do will be of much help.

B) I have a similar last name to my father and I actually have much of his credit history on my credit report. It shows I have a credit card opened before my date of birth. All that credit history is actually good, and probably why my credit is in the 600s and not lower. Do I need to take my dad's stuff off my credit report?

[Guppies]

Is there any way I can find out my credit score for free? All I can find is free credit reports that don't report my credit score without a fee.

[jba]

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I’m pretty particular about keeping my credit cards paid off and current. However, according to my credit report in April of 2005 I was 30 days late on one of my credit cards. When it was a ridiculously low balance of like $10 and I didn’t recall ever getting a bill for it so I assumed it was too low of a balance and they carried it over for a month. Then when I did get a bill it said I was late so I remember paying it that day and telling them that I never received the first bill. They said okay but it looks like they reported me as being 30 days late anyway. This was the first time I was ever late with a payment. How much would being late 30 days once in the 5 years I’ve had this credit card hurt me, is there anything more I can do to dispute ever receiving the first bill, and how long does a late payment continue to affect your credit score? Thanks for all the info this is a wonderful thread.

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A friend told me about this and it actually works.

Send a physical letter to the customer service or credit department telling them that you enjoy doing business with them, this was the only incident, yadda yadda. Ask them nicely in the letter if they'll please remove the mark.

I had a similar situation with an auto loan with one 30 day late mark, and they removed it no problem. mind you this was *after* I had paid off the loan and was no longer doing business with the lender - if you are still a customer, all the more reason for them to do you a solid.

Also, he said that with any account that is in collections if you are defaulted on, you can bargain with the collection company on the amount that you pay *and* you can put the negative report on the table in the negotiations. Whoever put a negative report on your credit has the ability to remove it at any time for any reason, use that to your advantage. Do all negotiations via certified postal mail.

[Korch]

"Whoever put a negative report on your credit has the ability to remove it at any time for any reason, use that to your advantage."

Can you confirm this S-man?