Need someone who knows a lot about credit scores - anyone?

daniella2727 · September 2013

Two questions.

1. I have 2 credit cards. One is my own. The other is my mom's and I am on the card as well. I really want to get off her card as her debt is appearing as my debt too when running credit and I want to clean up my credit. But I remember a while ago I heard it can HURT your credit to cancel or get off a card. Would my mom removing me from her card HURT my credit?

2. Having two people on a credit card - I know you can give someone access and then also have them on it as like a official user (like how am I am with mom). If you just give someone access does it show on their credit report?

kyrgyzstan · September 2013

1. It will lower your available credit. But if she has a ton of debt, it's a bit of a wash. You want to aim for >20% debt of your total available credit.

2. If someone is an authorized user, it will show up.

daniella2727 · September 2013

Did some research and answered #2 - there is an authorized user and a joint user.

An authorized user is NOT responsible for the debt. A joint user IS responsible for the debt and the total debt vs. allowable ratio impacts your credit.

As for #1 - why does closing out a credit card or being removed from it, lower your score? Also, how many points is likely to be removed from the card? How long are you impacted by this?

Ducktale · September 2013

1. Having a credit account open for a long time helps your credit, so yes, in that regard, canceling it will hurt your credit. It hurts your credit to frequently open different accounts for short duration. The longer the duration of an account the better...AS LONG as you have good history of paying on time. Which it sounds like this card does not. I would not be on anyone's credit card that I do not have control over for that reason.

2. This varies from state to state. In my state, my credit information shows up as my husband's credit information, but my husband's does not show up on mine. So on his credit report, you see my student loans, but on my credit report, you do not see his. Seems like an outdated law to me, but that's the way it is. We even get letters in the mail informing him when something of mine will be showing up on report. This also applies to credit cards, etc. It varies .

MommyLiberty5013 · September 2013

Regarding authorized users...I was once on a company CC Amex as an authorized user. It DID appear on my credit report. Fortunately it was never a delinquent account, but when we applied for our first mortgage, the lender wondered what it was for. I had left the company in 2005, but the "authorized user" status was still listed well into 2009 when we applied for the loan. It got sorted out. I had to call my old employer, who had to call Amex, and then I had to call the credit agencies.

hoffse · September 2013

Frankly, I would take the small ding to my credit to be off a delinquent card. Yes it lowers your credit score, but it's minimal compared to being on a card that hasn't been paid off for months (years?)

The bigger factor is what percentage of your credit this card makes up - if it's half your credit, then closing it will be pretty bad because suddenly you will be using a much higher percentage of your available credit. Example: say you spend exactly $500 each month (and let's suspend reality for a moment and say that your mother spends $0 each month). You have one card with a $1,000 limit and you have your mom's card with a $1,000 limit. $500/month is 25% of your available credit. If you roll off your mom's card you are suddenly spending 50% of your available credit. That hurts your score. However, let's say your personal card has a $9,000 limit and your mom's card has a $1,000 limit. Now you go from spending 5% of your available credit each month to spending about 5.6% of your available credit each month when you roll off the $1,000 card. That's minimal.

When I close cards that make up a large percentage of my available credit I usually do it at the same time as opening new ones or requesting credit increases on ones I do have to counteract the effect I just described above. All of that activity dings my credit but it's relatively short-term and within a few months I'm back to normal.

I'm not suggesting you open another card or increase your credit limit on the card you do keep - just sharing how I approach it.

I think another question you should be asking is how long that negative activity will remain on your credit report. Removing yourself from your mom's account doesn't magically make the bad spending disappear from your credit report - it's a process that takes a lot of time and patience. I don't know the answer to that question, but it's something you might want to look into before making any decisions.

daniella2727 · September 2013

This is great feedback and to solicit more information, here is more data.

The credit card my mom has that I am listed as a joint user has always been paid on-time, but has carried a balance. She makes at least the mandatory payments due and makes lump sum payments when she can.

Yesterday I called my mom and she said come Jan. 2014 she will be able to make significant payments and within the year the card will be paid off.

I did the math and with what she owes on her card vs. the card limit; and what I owe on my card vs. the limit it is a 32% ratio...if I am removed from her card (removing me from her debt) the ratio becomes 37%.

Long term I need to be removed from the card bc I don't want to inherit her debt if something ever happens to her; but I have been on this card for 14 years so I am worried being removed will hurt me worse! why is this so confusing.

BTW - I do not have awful credit - I have a loan for a home; I had but paid off a loan for a car; i have never missed a payment for my student loans etc. BUT I want to get my score up and I am sure the debt that has occurred over the past 2-3 years has dinged it,

hoffse · September 2013

14 years & 5% vs. being off her card for debt purposes is a hard call. Honestly, I would be inclined to get off of it simply because she has a history of not paying her bill in full. Even if she never misses a payment, carrying a balance from one month to the next does ding your credit in significant ways. And personally, I have difficulty feeling like I actually own stuff until the card has been paid off in full. But I might be weird that way.

The problem with consumer debt is that once you slip down into that hole once, it's a lot easier to do it again, even if you've pulled yourself out. It's sort of like yo-yo dieting. And while I (loudly) applaud people who can pull themselves out and then STAY out, it's the rare person who has that kind of willpower. Because all that credit is just hanging there each month, waiting to be used. So for me, I would be concerned that she would fall back into these habits in the future. But you obviously know her much better than I do and will be able to get a sense of whether she is taking this problem seriously enough.

If you have a house and a car and you don't anticipate having your credit scrutinized for something major like that for a few years, I'd probably just go ahead and move off her card. The longer thetime period between credit activity on your part and another major credit inquiry, the better your credit will be when that inquiry finally occurs. In a weird way, I've always sort of conceptualized it like an investment... do the stuff that lowers it now so that in 3 years my credit will have "grown" when I need it.

I do think that 32-37% spending is pretty high, and unless you can get that ratio down either through more credit or less spending, your score will continue to suffer in that area. Granted, it's not nearly as extreme as 50% in the example I gave you, but I've read that you should try to keep it under 10%. People who know more about this than I do can tell you if that is true.

The problem with the 10% threshold is this... to get there you would have to do one of two things (1) open more credit or (2) go cash/debit. You probably can't cut your spending down by 2/3 in one fell swoop without really feeling miserable... though this might be an opportunity to see where in your spending you can reasonably trim down. It's never bad to re-evaluate your budget once in awhile.

Assuming you always pay off your credit cards in full, credit is a lot more secure way to shop because of various consumer protection laws that apply to credit cards but that don't apply to debit cards. So I'm in the camp that would rather increase credit than move to cash. But the problem with increasing credit is that most people start to spend more when they have more credit available.

I am one of those people who has 12 credit cards and uses 3 of them often. I designate certain cards for certain things (travel, reimbursable expenses, shopping at pottery barn... don't judge, getting 10% back from that card is amazing with all the wedding gifts I've bought recently). But I generally spend the same amount overall each month, despite how many or how few cards I use. As a result, I've never carried a balance on any credit card, and I am very lucky to have a husband who is the same way. FYI: having as many credit cards as I do will lower your credit score a little bit - for me, being able to use the 30% off coupons at Kohl's is worth it. For somebody with shaky credit, not worth it.

So that's a long way to say that if you view credit cards the way I do - pay them off in full each month, every month, and you set your monthly budget based on your bank account rather than your available credit, decreasing your credit usage below 10% is feasible by opening new credit. Then you can take advantage of the rewards and protection that credit cards offer. However, if you're worried about overspending, then decrease your credit usage a la Dave Ramsey - go cash/debit (though do continue to use credit cards for online purchases for security reasons). This lets you spend the same amount each month while lowering your credit usage.

Wulfgar · September 2013

I would say get off of your mom's credit card. Especially if you have your own credit card that has been open for years.

Second, everything that has been suggested effects your credit history. Your credit score is how just one group evaluates your credit history on the day that they run the numbers. It sounds like you have a lot more other loans and lines of credit that you are paying off so removing this credit card should have minimal effect on your credit history in the long run. I would just drop off this card within 6 months of buying a car, a house, or trying to get a large loan for home improvement.

Need someone who knows a lot about credit scores - anyone?

Re: Need someone who knows a lot about credit scores - anyone?

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