Vexed by a couple of MSN credit card articles
September 21st, 2005 | by mbhunter |Liz Pulliam Weston’s When paying bills can hurt your credit on MSN Money vexed me.
(Which is good, because I haven’t had a good vexing in a while.)
According to the article, if you have old debts and try to repay them, it can hurt your credit score. This is where the vexing begins.
The negative triggers deal mainly with changes in the effective date of the delinquency caused by your repayment — an old, and therefore less important, bad debt suddenly becomes a current, and more important, bad debt.
The vexing continues: Some of the “negotiating” points that you can use with collection agencies is getting them to lie on your behalf, saying that your debt was “paid in full” rather than “settled” — a big no-no. Or, in some cases it may be better for your credit rating to wait until the old debt falls off of the credit report instead of trying to repay.
How screwed up is that?
I don’t understand why certain things are important for credit scores and others aren’t. I would think that effort to repay the debt would be rewarded — that’s just common sense. But instead, it may be better to just ignore the old debt rather than make good on it. Strange system.
The very last part of the article does advise to pay if you can, though. But after all of the talk about not paying your debts under some circumstances, the mention seems like they’re covering their backside. Wishy-washy.
And quite vexing, I might add. That point should have been given a lot more emphasis than it was — that it’s a good idea to repay your debts!
The other credit card article is a little less vexing, thankfully, but it still has some vexing elements in it. Bankrate.com’s contribution, How that huge credit limit can hurt you, talks about the practice of credit card issuers to “reward” their good credit risks with higher limits. These raises usually come with on-time payments — not necessarily payments in full. If you can keep up with the minimum, they’ll give you a little more rope.
And you don’t even have to ask for it! It’s often automatic!
The limit on my primary credit card, the Chase PerfectCard™, has more than doubled since I got it a few years ago. Not once did I ask for an increase.
The bad things about having a huge limit? Aside from getting into deep trouble with debt, it can hurt your chances of getting a car loan or a mortgage. Why? Because you could charge through the roof and not be able to pay the other loans. But — I told you I was vexed! — if you cancel some of these cards with the high limits, that hurts your rating too, because you have newer accounts on average and a short history is not as good as a long history. Go figure.
(Oh well. I’m all vexed out. Time to think about something easier, like integral calculus.)
4 Responses to “Vexed by a couple of MSN credit card articles”
By fivecentnickel.com on Sep 21, 2005 | Reply
Getting rid of cards can actually hurt you credit score in other ways, too. One of the big factors in determining credit scores is ‘utilization’ — i.e., the proportion of your total available credit that is currently in use. Lower is better, and there’s two ways to decrease it. One is to minimize the amount that you owe. The other is to increase your available credit (or at least to not cancel existing, but unused lines). Either approach has pretty much the same impact on your utilization, so either approach can help your credit score. How’s that for vexing?
By mbhunter on Sep 22, 2005 | Reply
Yes, quite vexing. I suppose that if you’re paying your bills all the time and don’t have a need for anyone to check your credit rating, it really doesn’t matter. And if the worst thing that the credit bureaus can say is that I haven’t had my accounts open long enough or that my utilization is high, then I’m in pretty good shape.
By Sam on Sep 26, 2005 | Reply
Rather than be vexed and worry about your credit score, why not just pay down your debts, save some money for emergencies, close most of the credit accounts, and discover financial peace?
By mbhunter on Sep 26, 2005 | Reply
Hi Sam, thanks for the comment! Actually, I don’t even know what my credit score is these days. I probably won’t be looking for any loans or changing jobs, so no need for anyone to peek at my numbers. I don’t owe anything except my mortgage. I was vicariously vexed, if that makes sense
The vexing-est part for me was that people could end up better off (according to their credit scores) by not paying down their old debts. That made no sense to me.