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Closing Unused Accounts May Boost Your Credit Score but Can Be Tricky

March 19, 2000|LIZ PULLIAM WESTON

Q: My wife and I are trying to close unused credit card accounts to reduce the chances of fraud and to make sure we don't have too many open credit lines, which we understand can hurt our credit score. But we've read conflicting advice about exactly how to go about closing these accounts. What's the right way?

A: Once upon a time, most issuers would let you close an account with a phone call (although they were notoriously stubborn about reporting the closure to the credit bureaus).

Today, though, credit card companies are all over the map. Some want a letter requesting the closure; others are still fine with a phone call. Most don't want you to return the cut-up credit card, since fraudsters can intercept the pieces (unlikely, but apparently it's happened). On the other hand, a reader told me recently that an issuer had refused to close her account because she didn't send back the card.

Many will refuse to close the account if you've still got a balance. Some obviously want to make the process as difficult as possible, hoping you'll change your mind (or that they can ding you with a few more fees before you go).

The best way to find out what your company prefers is to call the toll-free number on the back of the card and ask. Generally, though, it's best to send a written letter (by certified mail, return receipt requested) asking that the account be closed. Include a line that asks the issuer to report to the credit bureaus that the account was closed by you, the customer. That looks better on your credit report than a closure that was initiated by the company.

Allow at least a month for this information to be processed by the credit card companies, then follow up by purchasing your credit report from one of the major credit bureaus. Experian's toll-free number is (888) 397-3742; its fee is $8. If the account hasn't been properly closed, you can repeat the request and ask Experian to investigate. That should take care of it.

You're right that having fewer cards reduces your chances of being a victim of identity fraud, where someone uses your good name and credit to rack up fraudulent charges.

You're also correct that having too many open credit lines can be a negative. But, paradoxically, trying to fix the problem can cause even more damage.

Don't, for example, cancel your oldest credit cards--like the one you got right after college graduation. The length of your credit relationships is important to your credit score. So even if you don't use the card anymore, hang onto it.

Also, don't close a bunch of accounts right before you apply for a big loan like a mortgage. Credit rating systems look at the difference between your total credit limit and the debt you're carrying. A sudden change in the "headroom" between your limit and your balance can make it look as though you're closer to being maxed out.

In Search of Mouse-Free Software

Q: Your column on tax software was very good, but there's one small facet you haven't mentioned: The available tax software is not disabled-friendly. It runs only on Windows or other operating systems that require a pointing device such as a mouse. I have a hand tremor, so I can't use a mouse. Comments, suggestions?

A: I'm hoping my readers can offer some, because I'm at a loss. Windows 98 offers some accessibility options, such as the ability to use the pointers on the numeric keypad instead of a mouse; that may or may not help you. If anyone out there knows of tax software that runs on DOS, this reader and I would love to hear about it.

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Last week I informed a woman that she could not receive benefits based on her ex-husband's work record because she had remarried.

Although I was referring to this woman's specific situation, some readers interpreted that to mean that no one who remarries could receive Social Security benefits based on an ex-spouse's work record.

In fact, benefits can continue in certain cases. People who receive benefits themselves as a widow or widower, for example, including divorced widows and widowers, also may continue to receive benefits if they remarry after age 60.

The rules are complex, which means anyone who is divorced or widowed and who is contemplating remarriage before the age of 60 should first call the Social Security Administration to see how it will affect potential retirement benefits.

A reader also pointed out that Social Security can replace considerably more than one-third of a person's income, which I said was about the maximum; indeed, people with very low incomes may have more than 80% of their pre-retirement salaries replaced by Social Security. My answer showed my bias in dealing largely with higher-income readers.

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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the financial planner training program at UC Irvine. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, visit The Times' Web site at http://www.latimes.com/moneytalk.

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