DEAR MR. MYERS: We are hoping to refinance our home while rates are still low, and our credit record is almost perfect. We have four credit cards and have never missed a payment, but we recently received a letter from the bank that issued our oldest card stating that they are closing the account due to "non-use." It's true that we have not used the card in two years, but that's because it has the highest interest rate of our four cards and we have only kept it in case we run into big bills for unexpected expenses. Will the bank's decision to cancel the card lower our credit score and keep us from getting the best loan terms when we refinance?ANSWER: It's generally best to keep your oldest and highest-limit credit accounts open, in part because payments on your accounts and the length of your personal credit history typically account for about one-half of your total score. The bank's decision to close the account for nonuse could indeed trigger a slight decline in your rating, but it should rebound within a few months if you continue meeting all of your other payment deadlines.
Several banks are now closing unused accounts to trim their expenses. Banks and other creditors say that it takes a lot of money to send out monthly statements to each of their customers, or even to operate Web sites for those who choose to pay their bills electronically.
Perhaps the best way to keep your credit score intact, and maybe even improve it, is to put minor charges on each of your remaining credit cards every month and then pay the bills when they become due.
To reduce the time and hassle of writing checks to each of those credit-card issuers, consider enrolling in the free "auto pay" systems that most banks now offer to their customers. Such plans automatically debit your checking or savings account when a payment is needed and can help to ensure that your bills are paid on time.
DEAR MR. MYERS: I recently moved to another state and am looking for a home to buy. I have seen several newspaper advertisements for "catslide" homes, but I have no idea what they are. Can you explain?
ANSWER: Sure. Most cat-slide homes - sometimes called "saltboxes" - have two or three stories and a gabled roof. The roof is longer at the back of the house than it is at the front, so you'll see two or three distinct stories as you approach the front door but only one if you look at it from the back.
No one is sure why the homes are called catslides, but some say it's because even a tree-climbing cat couldn't hang on to the steeply pitched roof on the rear of the home.
DEAR MR. MYERS: Last month, my husband and I signed a contract to buy a house and made a $7,500 good-faith deposit. We have since found a home that we like even more, but my sister would like to assume the purchase contract we signed with the seller of the first house that we originally agreed to buy. The seller, though, does not want to sell the home to my sister and is threatening to cancel the deal and keep our $7,500 deposit. Can he [the seller] do that?
ANSWER: Maybe he can, but maybe he can't. The answer depends on the wording of the contract you signed to purchase his house.
In most cases, buyers like you can transfer your contracted right to purchase a property to someone else unless the contract specifically prohibits such a transfer or if it has a "personal service element."
There are several types of personal service elements. For example, if the seller agreed to take back a second mortgage based on your credit-rating and income, he can probably cancel the deal and keep your deposit if your sister doesn't have the same (or greater) credit rating and income that you do.
The seller may also be able to prevent the assignment and keep your $7,500 deposit if the contract calls for the deal to close in 30 days, but your sister would need several more weeks to complete the transaction. Consult a real estate lawyer for details.
Our booklet "Straight Talk About Living Trusts" explains how middleclass homeowners can now reap the same benefits that forming an inexpensive trust once provided only to wealthy families. For a copy, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960. Send questions to that same address and we'll try to respond in a future column.