Category Archives: Building & Rebuilding Credit

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.

Continue reading

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

Instantly increase your credit age by 15 years

This post originally appeared September 29, 2016 on CreditCards.com as “Being added as an authorized user can boost credit age, score

By Barry Paperno

Dear Speaking of Credit,
I currently have two credit cards open with an age of history of only 1.5 years. My parents have a credit card that’s 15 years old. If they add me as an authorized user, will the age of my credit card history go up to theirs for that card? – Jeanie

Dear Jeanie,
Significant aging isn’t usually something we aspire to, but your credit profile should.

By adding you as an authorized user, you will add length to your card history in your credit report, and that will boost your credit score. Assuming your two existing cards make up your entire credit picture, you will see a significant aging of your credit history the moment that account is added to your credit report.

Here’s how it works. Credit scoring formulas assess risk, and length of credit history is part of that assessment, since someone who has used credit successfully for a long time is a lower risk. All open and closed credit accounts (cards and loans) that appear on a credit report contribute equally to the length of credit history calculations. And that’s true whether the account is held individually, jointly or – importantly to you – as an authorized user.

Continue reading

After a lifetime of using credit, where did my score go?

This post originally appeared September 8, 2016 on CreditCards.com as “If credit score disappears, here’s how to get it back

By Barry Paperno

Dear Speaking of Credit,
How does a credit report disappear? I have used credit for most of my life. I am 75 years old and when I recently applied for a loan, I was told I had no credit score. I had one a few years ago. I needed it for something and it was available. What makes the report go away? – Patricia

Dear Patricia,
Let’s begin by clarifying that often-blurred line between credit reports and credit scores, since it sounds like you probably still have a credit report — just no credit score.

Continue reading

When widowed, having established your own credit helps

This post originally appeared August 25, 2016 on CreditCards.com as “How becoming a widow affects credit

By Barry Paperno

Dear Speaking of Credit,
My mother was an authorized user on my father’s credit card with a 13-year perfect history and a $19,000 limit. My father passed away and my mother had to open a new account. She does have a personal credit history with less than 10 percent balance on several cards with a greater than five-year length and had an 820 credit score prior to this card having to be canceled. How much should she expect her credit score to drop considering there are three significant auto loans and now her credit/debt ratio will significantly and negatively change. – Kristie

Dear Kristie,
The credit effects of becoming a widow or widower will depend largely on the ownership of the couple’s accounts, and the survivor’s individual credit profile.

Continue reading

Debt settlement carries a hefty price tag

This post originally appeared June 23, 2016 on CreditCards.com as “If you settle debt, expect a score drop.”

By Barry Paperno

Dear Speaking of Credit,
I am currently in $60,000 of credit card and loan debt. I am considering a debt negotiation that would close and settle seven accounts. I have never been late and my credit score is only 650. How will settling debt on multiple accounts affect my credit score? And for how long? Thank you. – Jane Doe

Dear Jane Doe,
When you settle debt on multiple accounts, expect to see the description of “settled” or “settled for less than the full amount due” appear on your credit report for each account. Having never been late has helped prop up your credit score, and you are to be commended for your diligence. Yet, regardless of how an account was paid before settlement, the credit scoring formulas treat settled accounts much like charge-offs and other balances not paid according to the original agreement – badly.

Continue reading

Develop a debt elimination plan that will work for you

This post originally appeared February 18, 2016 on CreditCards.com as “Allocating card payments on a limited budget

By Barry Paperno

Dear Speaking of Credit,
I’m several months behind on paying my credit card monthly balances, I did go over my limit once. I did, however, make sure to at least pay the monthly minimums each month. Now that I’m starting to get my money situation back on track, I’m not sure if it is better for me to make a lump payment before my next due date or make several payments.

Also note that this lump payment or several payments will not pay off my entire balance but about half of it. I’m a student and have a job that’s sort of “come when you can” and my parents also give me money. I’m looking for the best way to improve my credit score, though I don’t know what it is right now and am not sure what site I can trust to give advice to me safely and for free. — Greta

Dear Greta,
Generally speaking, the most you can pay and the soonest you can do so will always deliver the highest score as quickly as possible. But what I believe you’re really asking is how best to allocate the payments across your different cards within your limited budget so that your score rises as quickly as possible and stays that way.

Continue reading

Adding new credit to bad history is good…to a point

This post originally appeared December10, 2015 on CreditCards.com as “Rebuilding credit? Go easy on new accounts

By Barry Paperno

Dear Speaking of Credit,
I have a total of four credit card trade lines that show periods of delinquencies of the last four years, but over the past seven months I have paid those credit cards on time and kept my utilization very low. I recently added six credit card trade lines to my credit profile and here’s the question: Will the new credit trade lines help offset some of the negative (delinquencies) on the old credit cards as long as I continuing paying on time with OLD credit cards and pay on time with the new trade lines? If yes, how long would you estimate it would take to see the new cards begin to offset the old ones, which of course are still active accounts. — Clyde

Dear Clyde,
Let me start by saying that managing to open six new accounts so soon following a four-year history of late payments is a pretty impressive feat. However, if rebuilding credit is your goal, it may not have been all that necessary to open so many cards to offset those past delinquencies. In fact, you may have actually tipped the scoring scales more in the other, less-positive, direction — at least temporarily.

Continue reading

New to country, not wasting any time establishing credit

This post originally appeared November 26, 2015 on CreditCards.com as “Immigrant seeks to build good credit faster

By Barry Paperno

Dear Speaking of Credit,
Hello Barry, I hope you are doing well. I have four questions; 1. Will paying off my credit card debt in full every month lead the creditor to close that credit card because they are not making interest money of it? 2. I know that paying off credit card debt in full is theoretically considered positive; however, it is not proven to be a rapid credit score builder at least according to some consumers’ reviews online. But what about revolving a very small amount of money on a credit card as few consumers suggest? (i.e., revolving less than $50 balance on $2,200 credit card) Would that show that I am responsible borrower and so on boost my credit score? 3. I came to the United States in August 2013. Since my arrival, I have one personal loan at $3,000, on which I am paying $50 per month until now a days. A credit card at $2,200 (started in September 2014) which I pay off in full each month. Finally, I just got approved last month for another credit card at $1,000 (15 months, 0 percent APR). My question is why my Equifax is still not showing any information in my credit report? 4. What it takes to have all three bureaus show reports of my credit score? Note: The only one showing right now is TransUnion. — Haydar

Dear Haydar,
You’ve clearly done a great job of establishing credit since arriving in the U.S. a relatively short time ago. This despite some questionable advice regarding what it takes to boost credit scores (question No. 2) and in spite of some serious difficulty obtaining all of your credit reports and scores (Nos. 3 and 4). I hope to help you sort out some of the good advice from the bad and point you in the right direction toward getting access to all of your credit information at the credit bureaus.

Continue reading

Adding 30 points to your score in 6 months can be done

This post originally appeared November 5, 2015 on CreditCards.com as “Raise credit score 30 points in 6 months? Tough, but doable

By Barry Paperno

Dear Speaking of Credit,
I am looking to buy a home within the next half year. But, I have an open collection account ($3,420) on my report, from a debt for dental work. I have payment history and utilization is currently around 32 percent. Credit score is 692 FICO 8 for both Experian and TransUnion. My goal is to reach 720. My question is I would like to resolve the collection account. But I have heard about if you begin negotiating with a collection agency, the account can start “re-aging.” Any suggestions on how to move forward would be very appreciated. Thank you — Michael

Dear Michael,
Raising your credit scores from 692 to 720 and resolving a $3,420 collection within the next six months poses a formidable challenge — but it’s doable! Just be prepared to make some major credit card balance pay-downs to reduce your utilization ratio, and be ready to pay that collection, either in full or by settling with the agency for less than the full amount.

Continue reading