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How to Avoid Becoming ‘Credit Invisible’ That Hurts Credit Scores

Dear Liz: I have not been able to resolve the credit card issue and hope you can provide some useful advice. I am a debt free senior. I owe nothing on my house or vehicles and pay off one of my credit cards every month. I have not missed payments on utilities. My credit card lowered my credit limit last year because my credit scores were so low. In fact they have fallen from 800 to 600 in the last year. The bank that issues my business credit card says they use an algorithm that allows no human interaction for adjustments for people like me who are debt free. Any suggestions?

Answer: Many people with once good credit become “credit invisible” if they pay off all their debts and stop using credit cards.

But using a credit card or two regularly is enough to stay visible to credit score algorithms and keep good scores. The problem may be the type of card you are using. Business credit cards typically do not appear on personal credit reports, so your use of the card is not included in credit score calculations. If so, consider applying for a personal card to rebuild your scores.

Another possibility is that you are a victim of identity theft. Please check your credit reports at the three major credit bureaus. You can do so for free by typing AnnualCreditReport.com into your browser window or by calling (877) 322-8228.

Dear Liz: My ex-husband is 13 years younger than me. We have been married for 10 years and he earns more than me. If I start receiving my own Social Security benefit at age 70, can I switch to his benefit when I’m 75 and he’s 62?

Answer: Generally when someone applies for Social Security, they are “deemed” or assumed to be applying for all the benefits to which they are entitled. If you’re eligible for your own retirement benefit and a divorced spouse’s benefit, for example, you’ll get the larger of the two amounts. You will not be able to switch from one to the other later.

There are some exceptions to this rule, but your situation is one of them. You are not entitled to a divorced spouse’s benefit until your ex-spouse reaches the minimum retirement age (62). At that time, you will be entitled to 50% of their primary sum assured, or the check they would receive at their full retirement age, which is currently between 66 and 67. If that amount is greater than what you are receiving, you can switch.

If you’re going to switch, you don’t want to wait until 70 to apply for your own benefit. Delaying makes sense for most people, as they live past the break-even age of their late 70s, when the larger value of the delayed benefit makes up for the smaller checks they pass through in the meantime. If you switch to 75, you won’t receive your own benefits long enough to bypass smaller checks, says Dr. William Reichenstein says.

Deciding when to start claiming Social Security can be tricky even in situations simpler than yours, so consider using a site like Social Security Solutions or Maximize My Social Security for advice on when to claim.

Dear Liz: I have about $16,000 in a Roth IRA that I plan to leave to my daughter. When she collects this on my death, will she pay tax on the withdrawal?

Answer: No. She will have to pay taxes on the withdrawals if the money is in a regular inherited IRA, but not if the money is in a Roth. However, she has to withdraw the money within 10 years. Congress eliminated the so-called “stretch IRA” for most heirs, so that non-spouse beneficiaries could not extend withdrawals during their own lifetimes.

Liz Weston, Certified Financial Planner®, is NerdWallet’s personal finance columnist. 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or questions can be sent to him by using the “Contact” form at askliweston.com.

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