This post originally appeared February 22, 2018 on CreditCards.com as “‘When paying off multiple credit card balances backfires”

By Barry Paperno

Dear Speaking of Credit,
I recently had 16 unsecured/revolving credit cards. I paid off/closed six in December 2017. I carry a low/zero balance on 10.

Recently, I received letters from three accounts that my limit was greatly lowered. Two of these were at a zero balance and one has a balance that was paid down to only 10 percent of the limit. I am steadily (within the first quarter of 2018) going to zero out the 10 cards I still owe on.

I thought paying off and either leaving open or closing would show responsibility, but it seems like a punishment. My main goal is to get my score up.

My question is, should I close the accounts that have been involuntarily lowered? Should I just keep expecting letters of lower limits? – Shannon

Dear Shannon,
With those recently lowered credit limits, you seem to have suffered the consequences of a common card company practice called “account review.”

Based on a combination of credit bureau information, credit scores and a card company’s own track record with a customer, the account review process helps lenders:

• Recognize excellent low-risk customers by raising credit limits and making promotional offers, such as 0-percent balance transfers.
• Stay a step ahead of cardholders heading for financial trouble by closing credit cards, lowering credit limits and allowing cards in poor standing to expire without renewing.

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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.

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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.

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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.

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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.

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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.

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This post originally appeared November 9, 2017 on CreditCards.com as “‘Q&A: How cardholder behavior can impact your credit”

By Barry Paperno

Dear Speaking of Credit,
I have a question about credit scores and how they might be affected by a declined charge.

Here is what happened that prompts my question: I recently had to buy new tires for my vehicle, and it was over $500. My credit line is $500 and I tried multiple times to pay using my credit card, until I remembered my credit limit is only $500.

Now it shows up in my recent transactions as declined. My question is, will this affect my credit score?

I have tried searching this on many sites and even asked my credit card company. I have been finding different answers to my question. Some say I will not be affected, and others say I will.

Any clarification on this matter would be great. Thank you. – Tom

Dear Tom,
Multiple rejections for a charge that would have exceeded your credit limit may or may not affect your credit score. It depends on the type of credit score.

Usually when we speak of credit scores, we mean the “credit bureau risk scores” that rely entirely on credit information from your credit reports at the three national credit bureaus – Equifax, Experian and TransUnion.

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This post originally appeared October 5, 2017 on CreditCards.com as “‘Q&A: How credit utilization is calculated in a married couple’s scores”

By Barry Paperno

Dear Speaking of Credit,
How is the credit utilization part of a credit score calculated when a married couple has some credit cards in both names and some in individual names? – Dorothy

Dear Dorothy,
Without realizing it, you’ve provided me with the opportunity to explain not only how a married couple’s credit information makes its way to each spouse’s credit reports and impacts their credit scores, but also to show how easy it can be to raise one or both credit scores when credit card accounts aren’t currently being reported in both spouses’ names.

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This post originally appeared September 28, 2017 on CreditCards.com as “‘Q&A: Sudden spike in credit utilization can cause major score drop”

By Barry Paperno

Dear Speaking of Credit,
I have always had a 0 percent credit utilization on my credit card. This month it was at 92 percent because the payment cleared the day after it was reported. My credit score dropped about 100 points.

My question is, when the credit card company reports again and my card is back to 0 percent utilization, will my credit score rebound by about 100 points, or will it slowly creep back up? – Amanda

Dear Amanda,
Hats off to you for being willing and able to pay your card in full (almost) every month. There is nothing better for your credit score and your bank balance.

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