Author Archives: Barry Paperno

It’s never too late to fix fraudulent credit reporting errors

This post originally appeared June 14, 2018 on CreditCards.com as “How do I remove old negative items from my credit reports?”

By Barry Paperno

Dear Speaking of Credit,
How can I go about getting negative things removed from my credit reports?

Almost three years ago, I was the victim of identity theft. My bank accounts were emptied. Plus, I got stuck paying it all back.

There are things on my credit reports I have no idea what they relate to. There also is a notationn that says, “Too many inquiries in the last 12 months.” I surely am not responsible for those credit inquiries.

I really never paid attention to the credit reporting agencies, but I am certainly going to monitor my credit reports from now on. – Richard

Dear Richard,
You should be glad to know that despite the three-year time lapse, it’s not too late to set your credit reports straight.

Unfortunately, however, the same cannot be said for your chances of retrieving the money you spent to replenish those hacked bank accounts. You’ll see why.

First, and perhaps more for future reference, we will take a look at some of the actions you could have taken three years ago that may have led to the bank replacing the money fraudulently taken from your bank accounts.

Next, we’ll list some steps you can take now to remove any lingering fraudulent information from your credit reports, lock up your information at the credit bureaus, and effectively monitor your credit going forward.

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When closing card with a balance, score impact occurs later

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This post originally appeared June 7, 2018 on CreditCards.com as “Will closing card with a remaining balance hurt my credit?”

By Barry Paperno

Dear Speaking of Credit,
Chase has notified me that they are raising the interest on my card because, in the words of Chase, my “APRs are below the lowest APRs we currently offer on similar accounts.”

I have the right to reject the changes by next Wednesday. If I do, they say they will close the account and I can continue to make payments until the balance is paid off at the old APR.

My question is, will that hurt my credit? – Lynn

Dear Lynn,
By now, it has become pretty clear to credit score enthusiasts that closing a credit card can lower a score.

What’s not always so clear is when to worry and when not to worry if that will be your experience the next time you close a card.

Let’s start by separating some fact from fiction about scores and closing accounts with a good understanding of some credit scoring forces typically at work when you close a credit card.

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Credit scores measure late payments in multiple ways

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This post originally appeared May 31, 2018 on CreditCards.com as “Late payment? 4 ways it impacts your credit score”

By Barry Paperno

Dear Speaking of Credit,
My credit score was in good shape till one or two weeks ago – 705 points on Equifax and 740 on TransUnion. However, I had one late car payment and my score dropped 40 points!

I am hoping to close on a home with a FICO score goal of 720 points in six or seven months.

Assuming I keep all other payments the same and keep my credit utilization below 10 percent, can I recover my credit score back to 720 in seven months? – Nader

Dear Nader,
Though we don’t know for sure if this was your first late payment, considering that your scores have remained above the average FICO score (over 700 points) despite this recent mishap, we’ll assume that any prior minor delinquencies will have occurred at least a couple of years ago or so.

You are about to learn why knowing the entire history of all past and present late payments can be essential when trying to determine the major negative influences on your current and future scores before setting out on your score rebuilding journey.

When attempting to understand what it will take for your score to recover, it always helps to not only know what has hurt your score, but also knowing how it got there can often provide a roadmap that will eventually help you undo much of the damage and enable you to better prioritize those rebuilding efforts.

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Open a secured card to raise your score? Good or bad idea?

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This post originally appeared May 24, 2018 on CreditCards.com as “Raising score for mortgage purposes? Don’t open new cards!”

By Barry Paperno

Dear Speaking of Credit,
My husband and I are in the process of purchasing a home. Our lender is using a credit simulator to raise our credit score.

He provided an action plan, which included paying off three credit cards each and getting a new secured card. We have completed the action plan provided within 30 days after receiving it.

My question is, can a secured card raise your score at least 40 points in 30 days?

The limit on the card is $200. I was told to use it one time and leave a $10 balance. I spent $25 on it thus far.

We desperately need our score higher in 45 days. Do you have any other suggestions? – Dionne

Dear Dionne,
The first of your two action items – paying off three cards – is a great one. The second one, opening a secured credit card, might just be one of the worst recommendations for someone in your situation I’ve heard in a long time.

So, let’s have a look at both pieces of your action plan, followed by a better way to get as many of those badly needed score points as you can in a short time.

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Bankruptcy can be better for your score than ignoring debt

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This post originally appeared May 17, 2018 on CreditCards.com as “Credit score impact of ignoring card debt while living on Social Security income”

By Barry Paperno

Dear Speaking of Credit,
I’m 70 years old, on Social Security income, and have about six credit cards with about $20,000 charged (medical and living expenses). I don’t care about my credit rating, though I do have a mortgage and have never missed a payment. Someone told me just ignore the credit card debt, since they can’t get you for anything. What should I do? – Ron

Dear Ron,
Yours sounds like a classic case of expenses – medical and otherwise – far exceeding what Social Security alone can cover. It makes perfect sense then to be looking for a way out from under those $20,000 in credit card debt.

Your proposed idea of simply “ignoring” the debt is one of a couple of solutions – the other is filing for bankruptcy.

We’ll examine both alternatives in terms of cost, preserving your assets and impacts to your current and future credit scores.

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How does replacing ITIN with SSN affect your credit?

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This post originally appeared May 3, 2018 on CreditCards.com 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.

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This post originally appeared April 26, 2018 on CreditCards.com 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?

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This post originally appeared April 19, 2018 on CreditCards.com 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

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This post originally appeared April 12, 2018 on CreditCards.com 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

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This post originally appeared March 29, 2018 on CreditCards.com 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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