The unlikely reason your credit could take a hit if you have the new Costco card

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The unlikely reason your credit could take a hit if you have the new Costco card
Image Credit: Mike Mozart/Flickr
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Back in June, reports of a bumpy transition emerged as Costco switched away from American Express and to Citi for the Costco Anywhere Visa Card.

Well, now things are getting worse for at least some cardholders because of an unexpected gap in the way Citi is reporting to the credit bureaus.

Read more: 5 things you should never do with your credit card

The latest Costco card debacle

A full 15% of your credit score depends on length of credit history. American Express stopped reporting their Costco card portfolio to the three main credit bureaus at an indeterminate time after June 20, which is when Citi officially took over the Costco account. 

The problem now is that Citi hasn’t begun reporting to the bureaus yet. That may take up to 90 days from the June 20 switch.

‘To ensure that credit bureau reporting is accurate and does not reflect any disruption in the transition, Citi will begin reporting to the credit bureau in September,’ Liz Fogarty of Citi told Team Clark.

‘This will allow time for the American Express account to be reported as closed and transferred as well as ensure that customers have an opportunity to make payments to Citi.’

At least one listener we heard from on the Clark Howard Show saw his credit score plummet by 80 points as a result of the changeover. He apparently didn’t have very many lines of available credit and is in a no man’s land as he waits for Citi to start reporting now that American Express has stopped.

Worse yet, this happened at a time when he was shopping around for a mortgage. Unfortunately, a lower credit score will negatively impact the interest rate you get when you go for a mortgage.

If you’re in the same boat, there’s not a lot you can do — except bide your time until Citi begins sending info about your payment status to the credit reporting agencies in the coming weeks.

How to improve your credit score

If you’re suffering from poor credit, there are several surefire ways to get it healthy again. Follow these tips and you’ll be well on your way:

Always pay your bills on time and pay down the total amount you owe (35%)

Payment history accounts for 35% of your score. Be sure to pay each bill on time each month. No exceptions!

Keep a low credit utilization rate (30%)

The amount you owe accounts for 30% of your score.

Let’s say you have a credit card with a $10,000 limit. If you’re carrying a balance month-to-month of $3,000, you’re only using 30% of the total limit.

But if your credit limit is suddenly dropped to $3,000, then suddenly you’re using 100% of what’s available to you. That’s yet another reason to always pay down credit card debt as quickly as possible.

You always want to stay at a credit utilization rate of 30% or less. Aim for 10% or lower if you want a truly outstanding credit score.

When you pay off a credit card, don’t close the account (15%)

The length of your credit history accounts for 15% of your score.

That means you should never close a card down when you pay it off. Doing so only reduces your available credit and drives your score down.

You want to have between four to six lines of credit. Be sure to use them twice a year — even if it’s just for a dollar store purchase — and pay them off right away. That will keep them active in your credit mix.

If you’re facing a huge new annual fee on a card that has a zero balance, use the 45-day window you have before any new terms of service go into effect to shop around. If you find a better card, apply for it. Then once you get your new no-fee card, you can go ahead and shut down the original one that wanted to spring a fee on you.

Pay attention to your credit mix (10%)

The types of credit you have account for 10% of your score. Here’s a general rule of thumb: Don’t open store cards!

Be careful of new credit (10%)

How much new credit you have in your life and how quickly you took it on account for the final 10% of your score.

Read more: 9 things you can do this week to drastically improve your finances

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Theo Thimou About the author:
Theo has co-written several books with Clark Howard, including the New York Times #1 bestseller Living Large in Lean Times. As a single widowed parent of two young children, he strives to bring unique savings tips to men and women like him who must face life without their spouses. He can be reached at [email protected]
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