Monday, September 7th, 2009
Reader’s Question
Dear Ryan,
I had a credit card that that the bank closed because of late payments. I know I have been paying on time and paid the credit card off 6 months later. The bank has offered to open the account again, but I am curious if this is a good or bad thing. On my report it says closed by creditor, if it is reopened will it just show opened?
My Response
Hi [name removed],
Generally, open credit card accounts look better on your credit report than closed accounts because open accounts show you have used the card responsibly –the card hasn’t been “closed by creditor“. Before doing anything, I would ask the creditor if they are going to open a new account or simply reopen the account they closed. If they are just going to open a new account, the “closed by creditor” entry on your credit report will remain and a new entry for the new account will be reported –this won’t do you any good. However, if they are actually reopening the closed account, this could possibly improve your credit because the “closed by creditor” entry will be changed to “open”. I would ask this before making a decision.
Hope this helps,
Ryan
Take Home Point
Credit card accounts marked as “open” on your credit report are generally better for your credit score than a closed account. This is due to a couple of things: First of all, an open account is building payment history. Payment history has a big impact on your credit score –the more history (positive of course), the better your score will be. Secondly, an open account indicates that you haven’t screwed up so bad that the creditor closed (or charged off) the account. Therefore, if given the opportunity, it’s wise to ask the creditors of any closed accounts on your credit report to consider reopening the account.
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Posted in Reader Questions | 2 Comments »
Friday, May 22nd, 2009
Reader’s Question
Hi,
I read your blog and thought that it was interesting regarding secured credit for people with imperfect credit. I am currently in the process of repairing my own personal credit from a student loan default and they are in the rehabilitation process. I am extremely interested in located a secured card that doesn’t report as secured on my credit report. Can you please suggest some to look at?
Thanks!
[name removed]
My Response
Dear [name removed],
Absolutely. I recommend that you check out some of cards offered on Credit.com. Most of these cards will not show up as secured on your credit report. Here is a direct link to their secured cards.
Hope this helps,
Ryan
Take Home Point
If you have ever said to yourself, “How am I suppose to build (or repair) my credit when no one will issue me a credit card”, the answer is a secured credit card.
Secured simply means that the credit line is secured by you (i.e., you have to deposit the money before they will issue the card and when you close the account, the money is returned to you). Thus, the credit card companies will issue the card to people with poor credit because it doesn’t represent any risk. The advantage to you is that they (in most cases) report monthly as simply a credit card on your credit report.
I used a secured card as my first “credit repair card” and kept it open for two years to accrue some age on the account. This is a great way to start the credit repair process.
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Posted in Credit Cards | 5 Comments »
Wednesday, February 11th, 2009
Reader’s Question
Hi Ryan,
What is the best letter I can send to the credit card company to request my name to be removed from an account to where I am the Main cardholder, but due to an divorce and the agreement signed and documented in the courts that my spouse said he would pay for this debt as we divided the debt equally? Please advise.
Thanks
Response
Hi [name removed],
Unfortunately there isn’t one. The reason why is that divorce decrees (or any other verbal or written agreement made during the divorce) don’t mean squat when it comes to the credit card company’s ability to sue you for an unpaid debt. The truth is, if your name is on the account, you are liable for it. The divorce decree will not hold up if your ex-husband decides not to pay the account and they sue you.
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Posted in Reader Questions | 2 Comments »
Sunday, February 8th, 2009
Reader’s Question
Hi. So my situation is I’ve just checked my credit report for the first time about a few months ago and I have two credit cards open under my name, LUCKILY with zero balances which was open two years ago. But the thing is, I’m not exactly sure If I have applied for one of the cards or not. There was a stupid promotion so I signed up for a card to get a free sandwich (I didn’t know any better at that time). I don’t know if I was accepted for that or not, but I’ve only applied for one credit card, which was a year ago that I am sure of, which I am currently using. So I’m very positive that one of those open credit cards, I have never applied for, but I’m uncertain about the promotion one..I’m still in college and learning more about this stuff. How should I handle this situation for my credit and also the credit cards? Thanks!
Response
Hi [named removed],
First you need to call both credit card companies and verify that you actually have the accounts. If they verify that you do have the accounts, do yourself a favor and close them. If they have no record of you, contact the credit agencies and dispute the accounts as “not mine”.
Have you ever heard the quote, “there is no such thing as a free lunch”? It’s true.
Also, read my article regarding college campuses and credit card companies
Hope this helps,
Ryan
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Posted in Reader Questions | 1 Comment »
Wednesday, December 3rd, 2008
Reader’s Question
Hi -
I have several credit cards in varying stages of delinquency. How far behind does one typically have to fall, before a creditor is ready to accept a reduced settlement? And when do creditors typically give up and send the account to a collection agency?
Response
Hi there -
In my experience, credit card companies usually do not accept a settlement before the account has been handed over to a collection agency. This is particularly true for credit card companies. However, with that said, it’s not a bad idea to ask them if they’d be willing to work something out. Your number one goal ought to be to keep these accounts out of collections. Dealing with collection agencies is not a pleasant experience. Plus, you run the real risk of adding yet another bad entry on your credit report. Basically, creditors can send the account to collections whenever they see fit. I would, however, expect to see the account go to collections after it has been between 120 days and 150 days late.
Hope this helps,
Ryan
Posted in Reader Questions | No Comments »
