Will pay-for-delete raise score when original debt remains?

This post originally appeared January 11, 2018 on CreditCards.com as “‘Pay for delete: When it helps credit score, and when it doesn’t

By Barry Paperno

Dear Speaking of Credit,
Regarding Midland Funding and other “pay-for-delete” practices – will it raise your credit score to pay for delete if the original creditor is still reporting the debt?

When Midland deletes, does the original creditor delete also, or do they still report? – Bridget

Dear Bridget,
Rather than assume, as many do, that whenever something negative disappears from your credit report your score automatically increases, you’re correctly questioning whether that will indeed be the case with a “pay-for-delete.”

pay-for-delete is an agreement between a collection agency and a consumer to remove a collection account from the consumer’s credit report in exchange for payment in full or a settlement for less than the full amount.

Continue reading

Don’t expect much score change with Chapter 13 discharge

This post originally appeared January 4, 2018 on CreditCards.com as “‘Is bankruptcy discharge a credit scoring factor?

By Barry Paperno

Dear Speaking of Credit,
I was wondering by how many points I might expect to see my credit score increase when my Chapter 13 debt is discharged next month.

The terms of my Chapter 13 agreement allowed for me to open up to $2,000 in new credit, which I did, and my score has improved some.

Unfortunately, I now have two hard inquiries and a short average age of credit that are keeping the score down.

Can I expect to see a decent rise in my score just due to achieving discharge, or is that not really a factor? – Denise

Dear Denise,
As you reach the discharge milestone of your Chapter 13 bankruptcy, you have good reason to breathe a sigh of relief at finally being free of any remaining debt following the required three- or five-year repayment plan.

As usual, the best way to know where your score is going is to understand how it got to where it is.

Fortunately, that direction has been upward, thanks largely to a couple of important sets of scoring calculations working in your favor:

  • Adding new positive credit, as noted in your question.
  • The length of time since your most recent “derogatory” item – something you may or may not already be aware of.

Continue reading

Some good credit news and advice for apartment hunters

This post originally appeared December 28, 2017 on CreditCards.com as “‘How multiple apartment rental credit checks affect your score

By Barry Paperno

Dear Speaking of Credit,
If I need to run multiple credit checks for new apartment rental approval applications, will this affect my credit?

Also, if I get declined by one or two or more complexes before I find one I want, and then get accepted to move in, will the declines from the prior applications affect my credit? – Robert

Dear Robert,
The topic of how inquiries influence credit scores can be an interesting one. Despite inquiries typically making up less than 10 percent of a credit score, they tend to attract a disproportionate amount of attention from consumers, maybe because of the mysterious and nonintuitive nature of inquiries.

Mysterious, since different kinds of inquiries are not always clearly identified on a credit report.

Nonintuitive, because unlike the more obvious measurements of creditworthiness – payment history and how much you owe, for example – it can be hard to see why your score should drop simply because a creditor or landlord checked your credit.

Continue reading

Break off that personal trainer contract with score intact

This post originally appeared December 21, 2017 on CreditCards.com as “‘How to cancel a gym contract without hurting your credit

By Barry Paperno

Dear Speaking of Credit,
Hi! I have an awful personal training “contract” with a well-known fitness gym. They haven’t kept any of their promises and all of the trainers are nowhere near qualified. I’m totally done with it. I know it’s not a real contract as far as credit goes, and they can’t report me to collections.

I recently opened two new credit cards to strengthen my credit, which is already pretty good, around 730. I no longer need to use the credit card that I have this account tied to.

If Bank of America will continue to allow the transaction through even if I change the card, my question is, should I close the account or will it hurt my credit since it happens to be my longest-standing card? It’s currently empty, and I have had it for about 11 years, and the other two only this month.

I read somewhere that when you close accounts they are still on your history, and you will only notice a difference if there is a significant difference in the amount of time that your cards have been opened. It may make your credit history look half as long.

This doesn’t really make sense to me. Is this true? Do they divide your time after your close an account? Will it significantly affect my credit if I close this one? Thank you so much for your advice! – Amanda

Dear Amanda,
When a business fails to deliver on its promises or simply doesn’t satisfy you, it can be easy to make a well-intentioned but foolish move that can demolish a good credit score. Considering your excellent 730 score, it’s good that you’re asking these questions.

Continue reading

Is your score always better when it includes a paid-off loan?

This post originally appeared December 14, 2017 on CreditCards.com as “‘Adding paid-off credit account to my report; is it worth it?

By Barry Paperno

Dear Speaking of Credit,
I purchased a vehicle from a dealership and paid off that vehicle. How can I add that payment history to my credit report and credit score? – Groanis

Dear Groanis,
It sounds like the dealership provided you with financing that wasn’t reported to the credit bureaus.

The loan’s omission from your credit report most likely resulted either from a reporting error or the lender simply choosing not to report loans to the credit bureaus.

Continue reading

Why do you never seem to see the same FICO score twice?

This post originally appeared December 7, 2017 on CreditCards.com as “‘Q&A: ‘Why is there a difference between my credit scores?

By Barry Paperno

Dear Speaking of Credit,
I have been working on my credit for about seven months. All of my FICO 8 scores are around 700, but my mortgage scores are Experian v2 at 612, and TransUnion 4 at 645.

How can I raise these scores? Why is there such a difference? – Charles

Dear Charles,
Whatever depths your credit scores have risen from over the past seven months, you should feel good about those FICO 8 scores reaching the 700 mark.

But then, with those TransUnion 4 and Experian v2 scores so much lower – about a 78-point spread from highest to lowest – you may have good reason to feel like something isn’t right.

Yet there may be nothing wrong with your scores. You may simply be seeing your scores just doing what scores do, as part of a complicated credit reporting and scoring system made up of many moving parts.

Continue reading

Can the ‘high balance’ for a card or loan affect your score?

This post originally appeared November 30, 2017 on CreditCards.com as “‘Q&A: ‘High balance:’ What it is, how it impacts credit score

By Barry Paperno

Dear Speaking of Credit,
How is the “high balance” amount on my credit report calculated? Does it affect my credit score in any way? – Patrick

Dear Patrick,
The “high balance” (also called “high credit” or “original amount”) is an oftentimes overlooked item on a credit report trade line that reflects the highest amount owed on that account over a set period of time.

The few score calculations that rely on this information fall within the “amounts owed” credit scoring category, which makes up 30 percent of your score.

For most consumers, these “high amounts” have little effect on their scores. Yet, as you’ll see, there are occasions, particularly with credit cards, when this high amount can seriously affect your score via one of the most influential sets of score calculations – revolving utilization.

Continue reading

Balance transfer will save money; what will it do to my score?

This post originally appeared November 23, 2017 on CreditCards.com as “‘How a balance transfer to 0 percent card affects score

By Barry Paperno

Dear Speaking of Credit,
My wife and I have recently gotten our scores into the 700s again. We both got new cards. Mine is 0 percent APR for 21 months. Hers has great flight miles (she has higher-interest cards she would like to transfer to hers as well).

But when I use Capital One’s credit score simulator, it says I would kill my score by 40 points if I transfer balances to the new card. The same thing happens to my wife’s score.

My old cards have high interest. Everywhere I read, it says balance transfers should not hurt.

I’m very concerned about this. What gives? Thanks in advance for your time. – Scott

Dear Scott,
It’s good to hear of your successful credit rebuilding results. You’re now experiencing at least one of the perks of a higher score: qualifying for a 0 percent balance transfer card. Good work!

So, why if your score is supposedly on the upswing should it then drop by 40 points, as the simulator predicted, when all you’ve done is move existing high-interest balances to a new lower interest rate card?

Continue reading

Despite 90% utilization, Dad’s cards can still help your score

This post originally appeared November 16, 2017 on CreditCards.com as “‘I’m an authorized user on high-balance cards; what to do?

By Barry Paperno

Dear Speaking of Credit,
I am an authorized user on six of my dad’s credit cards, but his credit utilization is well over 90 percent on all cards. I am a freshman in college and this is affecting my credit score. Should I ask him to remove me, or will this hurt my score even more?

I have a Discover card in my name now, which I am paying perfectly. I usually pay my small balance off each month or every two weeks.

What should I do to improve my score? The simulator shows that if he pays down his cards $10,000 plus, my score will go up drastically. Should I be patient or not? – Cole

Dear Cole,
When you consider that having your name removed as an authorized user can be as simple as you or your dad making a phone call to the card company, why even wait to drop those 90 percentage points off of your credit utilization?

Continue reading

How does your credit score measure your oldest account?

By Barry Paperno

Dear Speaking of Credit,
I came across an article you wrote and thought I’d ask you a question I can’t seem to find an answer to – hoping you might know.

I know the age of your credit history matters, but I’m confused… is it the length of age since you’ve opened your first credit card account or is it the length of age of the oldest credit card account you currently have opened? Or is it both?!

I have a card that’s relatively new but still a few years older than other cards that I have, but I want to close this account. But not if the fact that its a couple years older than my others keeps my credit score higher. Thanks! -Jim

Dear Jim,
Along with your newest account and average credit age, it’s the age of the oldest account on your credit report that matters to your score. This is regardless of whether not it was truly your first credit account.

Continue reading