Author Archives: Barry Paperno

Add a card or loan to a young credit report for a better score

This post originally appeared Mrch 2, 2017 on CreditCards.com as “‘A two-step plan for building young credit

By Barry Paperno

Dear Speaking of Credit,
Hello! So I have had a credit card for about seven months now and wasn’t exactly using it how I should have and now have a low credit score. Since I found this out, the card has been paid off.

I just opened another account thinking I can use both and keep them under 30 percent of their limit and pay them off monthly to help. Is this a good idea or not? I have already been approved for the new card and it is on its way. Afterward I read that having two cards with a low balance can actually hurt your credit. If so what should I do? Neither of them have fees and both have low interest. Thank you! – Alyssa

Dear Alyssa,
When saying you weren’t “exactly using it how I should have,” let’s assume you were 1) late on at least one card payment, and 2) running a high balance, as late payments and high credit utilization tend to go hand-in-hand. This is especially true when the credit file is thin and the length of history short.

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Leave 1% balance on 1 card, $0 on all others for higher score

This post originally appeared February 23, 2017 on CreditCards.com as “‘Tips for getting a big score boost when paying maxed-out cards

By Barry Paperno

Dear Speaking of Credit,
Hello! I have a question that I’ve searched for an answer, but I cannot get clear direction. I have four cards that are all maxed out: Discover ($200), Amazon ($730), Bank of America ($1,000) and Capital One ($500). I have one installment loan with $725 of $1,000 remaining. My FICO is at 649, and I am trying to get to 670 for top tier rate at a credit union for auto purchase.

Today I paid off three of four cards, so at statement time they will show $0. I will also do the same for the installment loan and remaining card. Therefore, cards and installments will all show $0. My question is will this be effective for a decent boost this month? Or should I leave small balances on them to show activity?

I have read I should use them and pay them off in small amounts, but I also understand that the trigger is what’s reported to the bureau at statement closing each month. So I am not certain whether the $0 balance has a greater impact for a score boost or do I need to charge $20 or so on the cards before statement closing? Thanks. – Jeff

Dear Jeff,
What’s best: a $0 or small balance left on that last remaining unpaid card? Regardless of how you apply those last payments, which we will discuss, going from 100 percent credit utilization to 0 percent or so on those cards, your score should easily see that 21-point boost you’re looking for. And you should see it within the 30 days or so it takes for new balances to report to the credit bureaus.

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Think twice before voluntarily lowering card limits

This post originally appeared February 16, 2017 on CreditCards.com as “‘How lowering your card limit hurts your credit score

By Barry Paperno

Dear Speaking of Credit,
If I want to lower my credit card limit voluntarily, will it have a negative effect on my credit score? – Carolyn

Dear Carolyn,
I’ll start with a question for you: Why? Why lower your credit limit when, as you’ll see, the good arguments are only against – not for – voluntarily lowering a card limit?

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Debt buyer/collection agency doing right by consumers

This post originally appeared February 9, 2017 on CreditCards.com as “‘Pay-for-delete’ debt settlement comes out of the shadows

By Barry Paperno

Heard of Encore Capital Group? Or maybe, like millions of consumers, you’ve seen the names of its subsidiaries, Midland Credit Management or Asset Management? They’re big players in the world of debt-buying, where some very big credit reporting and scoring changes affecting millions of consumers are in the works.Encore Capital Group, the huge (more than $1 billion in revenue annually) debt-buyer known to millions of debtors by its subsidiaries – Midland Credit Management, Midland Funding, Asset Management and Atlantic Credit & Finance – announced in January 2017 it has imposed a new credit reporting policy that has already affected more than 1 million of their debt-holders:

  • If more than two years have passed since the debt became delinquent, a collection account will be removed entirely from a consumer’s credit report once paid in full or settled for less than the total due.
  • For newer debts not yet appearing on credit reports, the debt will be kept off the credit report if payments begin within three months of the initial collection notice mailing, or as long as payments are made each calendar month until the account is paid in full or settled.

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Make your credit score excellent again!

This post originally appeared February 2, 2017 on CreditCards.com as “Canceling new card won’t restore credit score

By Barry Paperno

Dear Speaking of Credit,
I have three credit cards with average age of 15 months. My credit score was excellent. I applied for a new credit card from at a store four days ago. I got the approval, but it has impacted my credit score negatively. Regardless of the hard inquiry, I want to cancel it to regain the age of my credit history and higher credit score. If I close it, will I regain my previous score? What’s your suggestion? – Hanna

Dear Hanna,
One of the great things about having an excellent credit score is that for the most part you can just continue to manage your credit as you’ve always done, often without even giving it much thought. Another great thing about an excellent score is that as long as payments continue being made on time and credit utilization (card balances/credit limits ratio) is kept as low as possible, the score can recover relatively quickly – typically within six months – from some of the lesser “offenses,” such as opening new accounts.

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Let excessive inquiries fade into the distance

This post originally appeared January 19, 2017 on CreditCards.com as “Credit pulls hurt score, but only once

By Barry Paperno

Dear Speaking of Credit,
I recently went to a dealer, with a finance certificate in hand, to purchase a vehicle. I was advised that they needed my information for their records, but they would not pull my credit. They not only pulled my credit, but they did so seven times. I know my credit score and know that I am not eligible for standard financing at this time as I filed bankruptcy three years ago. This is why I went to the dealership with financing. I had been shopping around for the right car for about 16 days. They pulled my credit. What can I do? I have a 10-point decrease on my score as a result. – Natasha

Dear Natasha,
You were clearly right to prepare yourself with a finance certificate, knowing you wouldn’t be eligible for the better rates with a low post-bankruptcy credit score. The car dealership was clearly wrong to check your credit score after promising it wouldn’t.

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Left country for 6 months & forgot about card payments

This post originally appeared January 12, 2017 on CreditCards.com as “Your 6-months-with-no-payment credit score comeback plan

By Barry Paperno

Dear Speaking of Credit,
I went to travel to India for six months. Forgot a credit card payment for that long and the communications sent to my home were not accessible. In spite of 30 years of an excellent score, it went down from 830 to 640. How can I revert to my good score? The credit card company responsible for lowering my score refused to correct it. What should I do now? – Rajagoapalan

Dear Rajagoapalan,
If it hasn’t happened yet, you’re about to learn from the school of hard knocks just how hard it can be for a credit score to recover following six months of late payments on a single account. As the strongest predictors of future credit risk, missed payments are the hardest mistakes for your score to overcome, particularly when compared to the damage from high card balances, new accounts, inquiries and other red flags to future trouble.

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7 quick ways to a better credit score

This post originally appeared January 5, 2017 on CreditCards.com as “7 steps: Clean up your credit by spring

By Barry Paperno

New home or other major purchase coming up this spring? If so, the time to start shaping up your credit score is now. Unlike slimming down at the gym, a buffed score doesn’t have to cost anything or even require getting up from the sofa.

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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.

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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.

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