Category Archives: Speaking of Credit

Good news for consumers with medical & other collections

This post originally appeared August 31, 2017 on CreditCards.com as “‘Q&A: Library fines, parking tickets no longer trash your credit

By Barry Paperno

Dear Speaking of Credit,
If a person in a foreign country receives a fine on the Metro for not buying a ticket, will his or her credit score be affected in his or her home country? – Heather

Dear Heather,
Had you asked this question prior to June 15, 2016, you might have received an answer that, yes, even a foreign transit fine could wind up on your U.S. credit reports and hurt your credit scores. You’ll soon see why this date matters.

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Card activity plays only a minimal role in credit scoring

This post originally appeared August 10, 2017 on CreditCards.com as “‘Q&A: How does credit card activity affect my score?

By Barry Paperno

Dear Speaking of Credit,
I recently opened a credit card for the first time. I have a $300 credit limit and haven’t been spending more than $25 a month on it.

So, let’s say I make a purchase of $10 on July 3 and pay it off on July 6, and my next statement date is July 28. Would it be beneficial to my credit score to make another purchase of $10 on, say, July 10, and pay it off before my next statement date? – Mitchell

Dear Mitchell,
The answer to your question of whether your credit score will reward you for that additional charge and payment during the same billing cycle as the prior activity is clearly a big no. But making an additional $10 charge and paying it off before the statement date won’t hurt your score either. It’s just an unnecessary couple of steps for score-raising purposes.

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Best score-raising plans can also be easiest to implement

This post originally appeared August 3, 2017 on CreditCards.com as “‘Q&A: Best strategy to raise my credit score beyond 750?

By Barry Paperno

Dear Speaking of Credit,
I currently have two credit cards ($5,000 credit limit on each). I’m looking to boost my credit score above the 750 mark, and I’m just a few points shy. I maintain less than a $100 balance combined across the two cards, and I know a low available credit/credit used ratio can help boost your credit score.

Should I apply for a third credit card or ask for a credit limit increase from one of my existing cards? If I ask for a credit increase, how much should I ask for? I am gainfully employed and make over $50,000 a year. I have $18,000 of student loans, but I’ve paid $5,000 off in the past four months. – Bronn

Dear Bronn,
You’ve provided us with a great reminder of how the best strategies for raising credit scores are often the easiest to implement. Particularly in a situation like yours, in which you’re already doing right by your score and have a good one to show for it.

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Adding a second card could help build your credit score

This post originally appeared July 27, 2017 on CreditCards.com as “‘Q&A: Why a recent graduate should get a second credit card

By Barry Paperno

Dear Speaking of Credit,
I am 22 years old and have had a Chase Freedom credit card for about three years now. I always pay my balance on time and have never been late. I try to use the card as often as possible.

I recently graduated from college and am looking for ways to help increase my credit and set me off in the right direction. This past month I accumulated two hard inquiries on my credit for a car lease and for an apartment. I am going to be attending graduate school for the next two years.

I was thinking of applying for a second credit card, but I am not really sure what to do. I guess my questions would be whether I should get a second card, and if so, which card should I look into? – Vin

Dear Vin,
Congratulations on graduating college. Achieving both a diploma and a three-year credit track record by age 22 says you’re already headed in the right direction.

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Carry a balance, skip a payment to build credit? Never.

This post originally appeared July 20, 2017 on CreditCards.com as “‘Q&A: Missing a card payment to build credit is terrible advice

By Barry Paperno

Dear Speaking of Credit,
I am 18 years old and have been approved for a card with a $500 limit. I spoke to an associate with my bank who told me that it would be a good idea to not pay the balance on my credit card for the first month. He said that because I have no credit history, and this is my first billing cycle ever, it would be a good idea to let the balance carry over and then pay it off at the beginning of the next billing cycle. He told me to not even make a minimum payment.

From that point on, he said that I should pay my balance off in full each month, which is what I was planning on doing from the beginning. His reasoning for this was to show the credit bureaus that I at one point had a balance, and then I paid it off, as opposed to always having a zero balance because I’ll pay off the card every month.

I was under the impression that letting a balance carry over would always be a bad idea. Is there any truth to what the associate told me? I only care about what will build the most credit. The interest doesn’t matter to me because I have a 0 percent APR for my first 12 billing cycles. I really appreciate the help. – Zeeshan

Dear Zeeshan,
If that isn’t the worst piece of credit advice I’ve heard in a long time, I don’t know what is. Good for you to be questioning it.

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Closing maxed-card won’t help or hurt now. Could hurt later.

This post originally appeared July 13, 2017 on CreditCards.com as “‘Q&A: Closing maxed-out card won’t lower credit utilization

By Barry Paperno

Dear Speaking of Credit,
I have three credit card accounts with a total credit of $23,000. One account is paid off monthly, the other two are maxed out. Total credit debt is $10,800 between those two. Would it help my utilization ratio if I close one of those maxed-out accounts? – Millie

Dear Millie,
There are some good reasons for closing a credit card. Ending an annual fee and minimizing the chance of fraudulent use are just a couple. Yet, contrary to popular belief, helping your credit score is not a good reason to close a card.

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Are authorized user cards helping or hurting your score?

This post originally appeared July 6, 2017 on CreditCards.com as “‘Q&A: Does being an authorized user on too many cards hurt my score?

By Barry Paperno

Dear Speaking of Credit,
When someone adds you to their card as an authorized user and you already have your own line of credit, will taking yourself off of their cards hurt your credit score? He has good credit, but it makes me look like I have way too many credit cards. – Gail

Dear Gail,
This could be a tough call. If you’re not careful, removing your name from any of those authorized user cards, which then removes them from your credit report, could just as easily have your score heading south as north.

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Score stays low when misreported old lates appear as recent

This post originally appeared June 29, 2017 on CreditCards.com as “‘Wrongly reported old delinquencies can keep credit score low

By Barry Paperno

Dear Speaking of Credit,
My credit score has been hovering around 650 for almost two years and I can’t seem to get it to go back up. A little over three years ago, I started taking control of my finances. Before then I had multiple late payments on my student loans (which stand at $85,000), and had a charge-off looming on my credit report.

However, I haven’t been late on a payment on anything for the past 3.5 years. I keep my credit utilization below 25 percent. And that charge-off is due to fall off my report in six months.

Are those old late payments from six years ago and the charge-off really the culprits? Should I expect a big jump in my credit report once those things fall off?

I’m just a little discouraged because I’ve been doing everything right for a very long time and haven’t seen my score budge at all. – Nick

Dear Nick,
I’d be worried too if my creditworthiness was steadily improving while my score remained stuck in the ditch.

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Multiple strategies for lowering multiple card balances

This post originally appeared June 22, 2017 on CreditCards.com as “‘3 strategies for reducing debt on multiple cards

By Barry Paperno

Dear Speaking of Credit,
Is there a way to pay off cards that does not trigger a credit line reduction by the issuing card company?ards.com/credit-card-ne

Back in 2008, I paid three cards of five I had to $0, and the card issuers immediately reduced the credit line by 50 percent. This hurt my credit score instead of helping it.

I’ve read your “Keep 1 percent” article. Would paying all five cards down to 30 percent be better than paying off three of them to 1 percent while leaving the other two at 75-ish percent? – John

Dear John,
As you saw firsthand, card issuers grew edgy back in 2008, when recession-influenced record-high credit card debt and charge-offs found card companies attempting to stem future losses by lowering credit limits and closing accounts. What you experienced is called “chasing down the balance” in which card issuers would lower credit limits as their customers paid off balances.

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New card limit too low? Learning to live with it is best option.

This post originally appeared June 15, 2017 on CreditCards.com as “‘Approved for a too-low-limit card; better off closing it?

By Barry Paperno

Dear Speaking of Credit,
I was approved for an American Express credit card today with a credit limit of $500. This limit is too low for me. I have several questions for you.

  1. If I were to close this account today, how low would my credit score drop (ballpark estimate)?
  2. How often can I apply for credit cards?
  3. How many cards can I apply for at one time? – Kenneth

Dear Kenneth,
Congratulations on being approved for that American Express card, albeit with just a $500 limit. I understand why you would want to close it, since that only makes common sense when you have no use for a card with such a low limit.

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