Do card issuers remember my very old mistakes?
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
I was wondering if the same
credit card companies that had collection actions against me would remember me
after the collection accounts have been removed from all my credit reports.
Will they still have me in their records as a bad payer or is it solely based
on my current credit reports? -- Tony
Unlike some loved ones, credit card
companies don't hold unnecessary grudges.
Yes, it's possible they have kept records on you and your old bad behavior. That gives them more information than a new issuer, which has only on the information from your application and credit report as a basis on which to judge you. Card issuers can base approval or denial on a number of factors, including internal information. So it's best to assume the old issuer has you in its records. That's the bad news.
The good news is, if you messed up and failed to pay
your bills a long time ago, they tend to forgive and forget. Or, rather, they
don't care because it's irrelevant. What matters is your more current financial
Whether you qualify for a credit
card -- either with the issuers you've had or with new ones -- depends largely on two
factors: your credit history on your consumer credit reports and your
When you apply for a credit card or
loan, the issuer will pull your credit report (a truncated version, anyway) and
check your credit rating. Essentially what they're looking for is a positive
pattern of you borrowing and repaying money, with a strong emphasis on recent
behavior. For example, if you've got a few years of using another credit card
or working down a car loan behind you, haven't missed a payment over the
past 36 months and have constantly kept the debt down (or whittled it away),
you're doing great.
If a negative item is not on your credit
report any longer because it has aged off (seven years for most dings), the
creditor will not see it and it won't be calculated into your score. Nor will
they embark on an investigative mission, attempting to dredge up dusty old
secrets, even if the problem occurred on their territory.
The other primary consideration is your
household income. You'll have to list what it is when you apply. If you're
bringing in enough cash to support the credit line, it will help you qualify.
So if you owe a lot now and don't earn much money, the creditor may reject you
because it would appear that you can't afford another payment. Worse, you could
be in such an unstable position that you can't cover your expenses and are
hoping to charge what you can't pay for in cash. Lenders tend to frown hard on
that, because you start to look risky.
Before starting to appeal to credit
card companies (former or otherwise), make sure your credit rating is high and
job situation secure.
For the credit portion, you can become
attractive to any creditor by following the FICO score guidelines, since FICO is the score most creditors use.
In order of most to least important:
1. Pay all obligations
on time. Late payments will have a big impact,
so always pay by or before the due date. Never default on accounts and let them
go into collections.
2. Keep revolving
balances low or at zero. This is a wise policy for your overall
financial health, too, as the finance charges added to consumer debt are costly.
3. Establish a long
history of using credit products.
Maybe you don't have a card now, but are paying off a student loan or a
mortgage. If so, that's helping.
4. Mix it up. The greater variety of credit products, the better. Again,
if you're paying off some loans, or have a gas or retail card, you're already
covering this base.
5. Keep credit
applications to a minimum. You can't get a card without trying
for one, so it's expected that you'll apply. Just don't go overboard. Focus on
the accounts you want and will most likely get and don't apply for them all at
once. Space out your efforts to get a new card.
Remember, this is business, not
personal. All a lender wants to know is that you have the means to meet a
credit line and proof that you've been a responsible customer. Not 10 or 20
years ago -- lately.
See related: How long does old debt stay on credit reports?, Credit reports now show your credit card bill-paying habits
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: September 25, 2013
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