How does replacing ITIN with SSN affect your credit?

This post originally appeared May 3, 2018 on as “Can immigrants transition from ITIN to SSN without hurting their credit score?”

By Barry Paperno

Dear Speaking of Credit,
I just received my Social Security number and I have a couple of credit cards where I use my Individual Taxpayer Identification number.

I want to check if calling the credit card companies and updating my information helps, and also if my credit score will transfer or will be affected somehow?

Will the credit card companies accept this or will they ask me to reapply? Thanks. – Carlos

Dear Carlos,
You’re clearly thinking on your feet here, knowing how strongly our Social Security numbers (SSNs) link to the credit information – including balance, credit limit and account age – that directly determines the content of our credit reports – which in turn determine our credit scores.

Let’s look then at whether you have reason to be concerned about any impacts to your credit picture once your Individual Taxpayer Identification number (ITIN) has been converted to your new Social Security number, along with some credit-protecting steps to take.
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Payment in full or debt settlement? A critical credit decision.

This post originally appeared April 26, 2018 on as “Paying off in full vs. settling maxed-out card debt

By Barry Paperno

Dear Speaking of Credit,
I just got lump sum of cash from parents to pay off some credit cards I have maxed out. Should I try and settle with credit card companies, or should I pay in full?

Reason I ask is because my credit has gone down almost 200 points to 498 over a two-year period. Would it hurt even more if I settle debt? – Octaviano

Dear Octaviano,
I’m afraid that, yes, in some situations settling a debt could set your score recovery efforts back a bit.

However, doing so could save you a lot of money that could be put to good use elsewhere.

So let’s look at how these two considerations may sway your decision of whether to pay in full or settle:

  • Cost savings
  • Score recovery

Fortunately for once, we can leave the amount you owe out of this discussion, since both paying in full and settling will eliminate your card debt.

Both options will also get rid of any lingering score damage caused by having card accounts with such a high credit utilization – the amount you have borrowed compared to your credit limits.

Credit utilization is the second most important factor in credit scoring, after making on-time payments.

Now let’s look then at how a negative payment history – recent history, especially – might be affected by either an in-full payoff or a settlement.

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Can balance transfers boost your credit score?

This post originally appeared April 19, 2018 on as “Individual vs. combined utilization: Which one has greater effect on score?

By Barry Paperno

Dear Speaking of Credit,
I recently paid off a number of credit cards, but I still have some with 90 percent utilization. My overall credit utilization is about 48 percent.

Should I transfer some of the balance from the high utilization credit cards to the ones with zero balance?

I was not sure what helps my credit score more – more cards with $0 balances or more with a lower utilization?

Transferring balances won’t impact my overall utilization. Since I paid them down as much as I could, in the end I will still be at 48 percent. – Matthew

Dear Matthew,
It’s always great to hear of credit cards being paid off. And it can be great for your score when they continue to be used and paid in full every month.

Yet there are times when transferring a balance from a “highly utilized” card to one that was recently paid off can make sense, whether money-wise or score-wise.

Credit utilization – the amount you have borrowed compared to your credit limits, where lower is always better – is the second most important factor in credit scoring calculations, after making on-time payments.

For instance, taking advantage of a lower interest rate via a balance transfer can be an effective way to save on interest and pay down the debt faster.

Or if moving balances to optimize your score is the goal, transferring debt from a low-limit card to one with a higher limit can often add a few points to your score, as part of the individual utilization calculations that we will be the focus of this discussion.

It is understandable you would question whether having more cards with $0 balances or more with lower utilization is best for your score. Unfortunately, and as you’ll see, the answer is not an easy one.
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Many cards at a young an age can make for score challenges

This post originally appeared April 12, 2018 on as “Too many new cards hurt my score. Should I cancel them?

By Barry Paperno

Dear Speaking of Credit:
I ran into an issue this past year by opening up too many lines of credit. Previously, I had a pretty decent score for being only 25 years old.

I have a few cards that are not carrying any balance, and I’ve had them for more than six years now. The problem is, this past year I opened too many lines of credit and I think it hurt my score.

I went from an average credit age of around four years to now around two, and there probably were too many hard inquiries.

My score dropped around 35 points, and I’m not sure what I can do to raise it. I am only using around 20 percent of total credit, too.

Would it help to pay off and cancel some of these newer accounts? Or should I just ride the bullet and hope for the best. – Jordan

Dear Jordan,
Good for you at having amassed such an impressive credit history at such a young age. Unfortunately, you now seem to be seeing why credit experts always recommend opening new accounts only when necessary.

Despite not knowing your credit score, just knowing you have been able to obtain multiple new accounts with so little prior history tells us your score must have been a good one – over 700 – before the drop.

And even after having dropped 35 points, your credit score might still qualify you for even more new credit.

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A $200 cable bill collection could cost your score 100 points

This post originally appeared March 29, 2018 on as “Unpaid cable termination fees can seriously hurt your credit

By Barry Paperno

Dear Speaking of Credit,
I have a cable company charging me a $200 early termination fee. The only reason I’m terminating them is that the price of my bill keeps hiking up and up. If I don’t pay that fee, can they turn it into collections and hurt my credit? – Taylor

Dear Taylor,
Fortunately for many consumers, collections for such odd debts as parking tickets, court fees and library fines can no longer appear on credit reports.

For this we can thank the portion of the National Consumer Assistance Plan adopted by the credit bureaus in 2017, prohibiting collections on credit reports that don’t arise from a contract or agreement to pay.

Unfortunately for you, however, that early termination fee remains something you agreed to, though undoubtedly embedded deep within the microscopic font of the cable TV service contract.

Now that you are apparently terminating that service earlier than the contract called for, the cable company can indeed come after you for that early termination and other related fees.

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3 best ways to build & rebuild your FICO credit score

This post originally appeared March 22, 2018 on as “Can decades of excellent credit disappear from my report?

By Barry Paperno

Dear Speaking of Credit,
I’m 57. I’ve had credit since I was 18. Car loans. Mortgage. Credit cards. Personal loans. Business loans. Always had excellent credit.

About 10 years ago I paid everything in full. Stopped using credit cards, and pay cash for everything. I have no debt.

I recently went to get a new vehicle and they said I have a zero score. They then showed me my credit reports, and all three had nothing on them. It was like my entire credit history had been erased.

So now I’m debt free, need a loan, and no one will touch me. What happened to 40 years of credit? How do I fix this as quickly as possible?

I see offers of secured cards – but is that the best route, and is it safe? I would greatly appreciate any info or help you could give me on this subject. Even my home loan paid off early is gone. Very perplexing. Thank you. – Robert

Dear Robert,
Perplexing is as good a way as any to describe the feeling of waking up one day to find that 40 years of credit history have gone missing.

And though it might feel like your credit just suddenly disappeared when you weren’t looking, what you’re witnessing is the most likely result of a gradual process in which “old” information is removed from credit bureau files little by little over time.

To help you work your way out of this jam, let’s take a look at how long cards and loans remain on credit reports, how long they continue to affect credit scores once paid off and closed, and lastly, what you can do to once again be able to obtain financing when you need it.

But there’s a catch. The remedies to your dilemma all require returning to that world of creditors and credit bureaus you left behind more than 10 years ago.

There’s simply no other way, since few lenders will loan to you without some track record. So, if you’re willing to jump back in the water, read on.

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How does the credit scoring formula look at charge cards?

This post originally appeared March 15, 2018 on as “Can adding authorized user to charge card help them build credit?

By Barry Paperno

Dear Speaking of Credit:
I’m adding an authorized user to my American Express Gold to help this person rebuild credit – and for me to earn rewards.

However, this card does not have a preset limit. Does this even help improve this person’s FICO credit score? Or will it hurt the authorized user’s credit because there will not be a debt-to-credit ratio?

There will only be a high balance indication. And this person does not have any other credit line out there.

Dear Megan,
Good question. And good idea adding an authorized user whose additional card use can help generate enough additional rewards points to make that American Express Premier Rewards Gold card worth the $195 annual fee (after a free first year).

Yet, while helping you accumulate those points, I understand your concern over the card’s impact on the authorized user’s credit score, especially since this authorized user doesn’t have any other open “revolving” credit.

We’ll focus on why this lack of available credit matters and how this American Express Premier Rewards Gold card, and other “charge” cards, do and do not help authorized users’ credit scores.

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Should you stay away from Cap One over 3-bureau pulls?

This post originally appeared March 8, 2018 on as “Should I avoid applying for a card that pulls all three bureaus?

By Barry Paperno

Dear Speaking of Credit,
I read recently in a Million Mile Secrets story that says some folks avoid Capital One cards because they pull three main credit bureaus when they process your application.

Is that true? If so, does that mean that the credit ding from applying for a Capital One card or loan would lower my credit score more than it does when I apply for cards through other issuers? Thanks! – Jeff

Dear Jeff,
It’s true. I was able to confirm with Capital One that it does indeed pull credit scores from all three big credit bureaus – Equifax, Experian and TransUnion – before approving a credit card application.

What makes this rather extensive credit checking process unusual is that card companies traditionally rely on just a single bureau’s information when making a card-issuing decision.

Why does the number of bureau pulls matter? As you’ve pointed out, scores can be impacted by whether the bank pulls one, two or three inquiry-generating credit pulls for the same applicant.

Thus it is the savvy consumer in you that questions whether pulling three scores for a credit card application is a good idea.

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Harder to raise score from 832 to 850 than you might think

This post originally appeared March 1, 2018 on as “Why can’t I reach a perfect credit score of 850 points?

By Barry Paperno

Dear Speaking of Credit,
My credit scores generally run from 825 to 832, but appear to ding from the utilization percentage on my cards.

I carry no balance forward ever, using and paying my primary reward card in full every month. I also use a couple other cards and always pay in full just to keep active.

I have 40-plus years of never missing a payment on anything, two mortgages paid in full, auto loans always paid off early, and I still can’t seem to get it any higher than 832. Am I doing anything wrong?  – Mike

Dear Mike,
Yours is a good problem to have. Should you be successful at raising your score above 832, that’s great.

If not, and you’re forced to live with scores in the 825-to-832 range – well, that’s great, too. In fact, with scores that high, why even care, let alone obsess, about a perfect score?

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What causes your card company to cut your credit limit?

This post originally appeared February 22, 2018 on as “‘When paying off multiple credit card balances backfires

By Barry Paperno

Dear Speaking of Credit,
I recently had 16 unsecured/revolving credit cards. I paid off/closed six in December 2017. I carry a low/zero balance on 10.

Recently, I received letters from three accounts that my limit was greatly lowered. Two of these were at a zero balance and one has a balance that was paid down to only 10 percent of the limit. I am steadily (within the first quarter of 2018) going to zero out the 10 cards I still owe on.

I thought paying off and either leaving open or closing would show responsibility, but it seems like a punishment. My main goal is to get my score up.

My question is, should I close the accounts that have been involuntarily lowered? Should I just keep expecting letters of lower limits? – Shannon

Dear Shannon,
With those recently lowered credit limits, you seem to have suffered the consequences of a common card company practice called “account review.”

Based on a combination of credit bureau information, credit scores and a card company’s own track record with a customer, the account review process helps lenders:

  • Recognize excellent low-risk customers by raising credit limits and making promotional offers, such as 0-percent balance transfers.
  • Stay a step ahead of cardholders heading for financial trouble by closing credit cards, lowering credit limits and allowing cards in poor standing to expire without renewing.

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