Dear Liz: Our mortgage is due on the first day of each month. A late fee is due if the payment is received by the mortgage company after the 16th. The mortgage company calls me if they have not received the payment by the fourth. I hung up on them the last time they did it. They followed up with a letter about getting debt crisis counseling (which didn't go over real well in my household). Are they allowed to harass me if they don't get their payment in four days? What about the grace period? Can they report my payment as late?
Answer: Let's tackle that last question first. Most creditors don't report a late payment to the credit bureaus until the account is 30 days or more overdue. If you make a mortgage payment within the grace period, you shouldn't have to worry about damage to your credit scores.
You may, however, have to put up with the calls and suggestions about credit counseling. Many lenders and loan servicers these days are using various software programs to gauge the ongoing risk a borrower may default and are trying to step in early when red flags pop up. Your mortgage company could be singling you out for special attention for a variety of reasons. Perhaps you're underwater on your home, owing more than the property is worth, and the lender is afraid you'll walk away. Other factors that could trigger a call include a history of late payments, rising debt on other credit accounts or a drop in your credit scores.
It's also possible that your mortgage servicer is just being paranoid and harangues every borrower who doesn't pay on or before the due date.
You have a few choices. You can write to the servicer and ask it to stop contacting you during the grace period, but there's no assurance the calls will stop. You can ignore the calls. Or you can move up your payment to land on or before the first of the month.
Dear Liz: When we look at our credit reports, it shows we have 20 open accounts with a possible $190,000 of available credit. There are no outstanding balances — every account is paid off each month and has been for the last 27 years. Our FICO scores, depending on the reporting agencies, range from 775 to 802. We would like to close 13 or 14 of these accounts at one time. Can we do this without material damage to our credit scores? If we do, should we print our reports and FICO score beforehand, so that if we need credit for some reason in the near future we could show that to a new creditor?
Answer: You can't close any accounts without risking damage to your credit scores, and shutting down that many accounts at once could cause your excellent scores to plummet.
Having so much available credit is actually a positive contributor to your scores. The FICO credit scoring formula is extremely sensitive to the gaps between your available credit limits and the amount you're using — the wider the gap, the better. Shutting down accounts reduces that gap, which is bad for your scores.
That's why credit experts recommend keeping accounts open if you possibly can, and closing only one or two at a time if absolutely necessary. Avoid closing your oldest or highest-limit accounts, since those are contributing the most to your scores.
If you're tired of keeping track of so many accounts, consider signing up for an online financial aggregation site such as Mint.com. Monitoring all the accounts in one place can help you make sure you're not missing a payment, and the sites typically alert you to due dates and fees.
Printing out copies of previous scores will do you absolutely no good with lenders. They don't care what your past scores were — only what your current scores are. Almost any time you apply for credit, the lender will pull your freshest credit scores to get the most up-to-date estimates on the likelihood you'll default.
Liz Weston is the author of the upcoming book "The 10 Commandments of Money: Survive and Thrive in the New Economy." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via the "Contact Liz" form at asklizweston.com. Distributed by No More Red Inc.