With late payments, what you’ve done lately matters most

This post originally appeared December 29, 2016 on CreditCards.com as “Late payments’ recency, frequency, severity dictate score damage

By Barry Paperno

Dear Speaking of Credit,
We have huge amounts of credit card debt, but yet to date we have never been late on a single one. It is getting harder and harder to make those payments. What if I quit paying one but continued to pay all the others on time? How does that affect credit scores? – Jim

Dear Jim,
I hope you’re not seeing this scenario – letting one card go unpaid while paying the others – as a true solution to your debt problem. Unless you can soon find a way to begin paying at least the minimum amount required on each card, I’m afraid you’re going to lose this battle.

Continue reading

Credit score is more crystal ball than report card

This post originally appeared December 15, 2016 on CreditCards.com as “How credit scores attempt to predict the future

By Barry Paperno

Dear Speaking of Credit,
Barry, not a question. A comment. I read your explanation as to why “hard pulls” lower your credit score. What I think I boiled it down to is this: it is based on statistical trending, not on me. Now, my score is 825, so I am not particularly worried, except that I do NOT dip in my likelihood of paying on time because of, say, a new loan for a (used) car. So I take exception to the assumption that I will perform like the statistical masses and start paying with lower consistency.

This feeling is further exacerbated because they know enough intimate detail about my history to be 99.9 percent certain that there will be no fluctuation, since there never is. So, in the end I take exception to the practice as unnecessary on such a broad scale and with so much INDIVIDUAL historical information available. – Christopher

Dear Christopher,
Considering the abundance of historical credit information on file at the credit bureaus, I agree that your 825 credit score – out of a maximum of 850 – should leave no doubt that over the years you have managed your credit exceptionally.

Continue reading

Maxing-out credit limit for balance transfer can hurt score

This post originally appeared December 8, 2016 on CreditCards.com as “With balance transfers, watch your individual card utilization

By Barry Paperno

Dear Speaking of Credit,
One of my older cards is offering me a 0 percent interest rate until May 2018. I’m tempted to transfer my Wells Fargo card balance of $4,750 at 9.5 percent to it. It will be the second time this year that I’ve moved money to take advantage of a 0 percent offer. Will my score take a hit or not? Note that these two cards in question are already on my credit report. – Heather

Dear Heather,
Whether your score takes a hit will likely hinge on a seldom discussed set of card utilization (balance/credit limit percentage) calculations within the “credit utilization” scoring category – the individual card calculation.

Continue reading

Lower utilization, higher score, thanks to paying early

This post originally appeared December 1, 2016 on CreditCards.com as “Small credit line? Pay early to boost your score

By Barry Paperno

Dear Speaking of Credit,
I have a credit card that has two late payments on it from two years ago. I only have two credit cards in total (and no other open loans or other credit). This card has been open the same amount of time as my other card (in fact, two months less than my other card). I usually carry a zero balance on both cards (using them only for small amounts, and clearing them each month). Problem is, the two old missed payments are bringing my payment history down to “poor” (97%) and as I don’t have a lot of credit, it’s taking years to get it up. Would I be better off closing this card? It wouldn’t alter my “age of credit” at this time (unless I took out a new loan/card – which I’m not planning on). Thank you. – Charlie

Dear Charlie,
There are times when the best thing you can do is simply more of the same. You’re about to find out how that might just be true for your situation.

Continue reading

Beware of mixed credit files when SSN & DOB are not used

This post originally appeared November 24, 2016 on CreditCards.com as “Mixed credit files: how to avoid them, fix them

By Barry Paperno

Dear Speaking of Credit,
I noticed when I was added to my spouse’s credit card as an authorized user, information such as my Social Security number was not requested. How does my spouse’s credit card history appear on my credit reports without pertinent info such as my Social Security number not being asked of me? Thank you. – Rey

Dear Rey,
As you have learned, it doesn’t take very much identifying information for an account to appear on your credit report. It has happened to you as an authorized user, and it happens to many others. In your case, it’s benign. You wanted to be added as an authorized user, and without fuss, it happened. But for others, it’s a big problem.

Continue reading

Overcharged! What if I refuse to pay?

This post originally appeared November 17, 2016 on CreditCards.com as “Witholding payment after dispute goes against you

By Barry Paperno

Dear Speaking of Credit,
I was overcharged on my credit card by a merchant who used his brother to distract me while signing the credit card slip. If I refuse to pay the amount on my credit card bill because the credit card company sided with the merchant and is holding me liable, how much damage will that cause to my credit? How do I best get out of this situation without long-lasting effects? I am sick over this whole transaction. He overcharged me $3,000. Any help or advice will be greatly appreciated. – Diana

Dear Diana,
It’s unfortunate that you weren’t able to work this out with the merchant. It also doesn’t help that the card company took the merchant’s side in your dispute. Having been left without much in the way of options, you are right to be asking about the consequences to your credit of simply refusing to pay the bill.

Continue reading

Look to score factors for culprit in 100-point loss

This post originally appeared November 10, 2016 on CreditCards.com as “Find the reason for a sudden 100-point credit score drop

By Barry Paperno

Dear Speaking of Credit,
My TransUnion score dropped by almost 100 points because of a credit inquiry and a collection that was removed. I’m confused. I thought it would rise because of the removal and I know one inquiry wouldn’t drop it that much. Help me understand what’s going on please? – Tanika

Dear Tanika,
I can see why you are puzzled. You’re right that an inquiry alone won’t lower a score by that much. On average, an inquiry tends to ding your score by about 5 points. But 100 points? Wow. Something else is going on. Let’s try to figure it out.

Continue reading

Paid off student loan, score dropped 40+ points

This post originally appeared November 3, 2016 on CreditCards.com as “How to restore your good credit score to great

By Barry Paperno

Dear Speaking of Credit,
Hi. I had a credit score of 789 back in July, but now it’s down to 746. I just ran my credit report from Experian, and the only thing that’s not very good is the length of my credit history. I did pay off my student loan debt a few months ago (this is one of the three accounts showing “closed”), which correlates to when my score started going down. The other two accounts are a MasterCard that I closed right away and another duplicate of my student loan for some reason. What can I do to get my credit score back up? Thanks in advance for your help. – Katherine

Dear Katherine,
If it makes you feel any better, despite the 43-point drop, a 749 score is actually quite good. For instance, a 740+ score will get you approved for most credit at good rates. Still, I get that 749 is not 789, and don’t blame you for being concerned.

Continue reading

New card numbers make for not-so-autopay

This post originally appeared October 27, 2016 on CreditCards.com as “Autopayments, though convenient, can backfire

By Barry Paperno

Dear Speaking of Credit,
We set up autopay with a credit card for several of our bills. A growing problem is our credit card number gets automatically changed by the bank frequently, like three to four times a year, because of some breach or suspicious activity. I appreciate the diligence of the bank, though we sometimes don’t get the card number changed in time with some of the companies we have autopay with. We change the credit card number as soon as we are notified of the nonpayment. Will these late payments due to the credit card number issue affect our credit score? Is there a better and safer way to set up autopayments? Thank you. – Roderick

Dear Roderick,
Three to four times a year sounds like a lot of breaches and suspicious activity! Hopefully, those problems are now behind you, and you can continue to autopay as you have in the past. Should the frequent card number changes continue, however, you’ll want to know that:

  • Late payments resulting from card number confusion can affect your credit score.
  • Yes, there is a better way to make payments under such circumstances.

Continue reading

When to be concerned over credit report & score differences

This post originally appeared October 20, 2016 on CreditCards.com as “Yes, worry about a 30-point discrepancy in your credit scores

By Barry Paperno

Dear Speaking of Credit,
Could you explain to me why my TransUnion score is 592, but the Equifax score is 562? That is a 30-point difference. – Russell

Dear Russell,
There are two main reasons why credit scores for the same consumer can vary by more than a few points:

  • Differences in the information on file at the three major credit bureaus – Equifax, Experian and TransUnion.
  • Differences in credit scoring formulas.

Continue reading