Keller Real Estate--Century 21 Worldwide

Managing credit cards is more complicated than managing a mortgage or auto loan because you have multiple debts rather than just one. The number of cards can vary, balances can be increased or paid down, balances can be shifted between cards, new cards can be opened, and existing cards can be closed.

Any such change may affect your credit score. Whether it reduces or increases the score depends on whether the genie who scores credit believes that the change will increase or decrease the probability that you will default on future loans. The rules applied by the genie are as follows, in order of importance.

Payment History: Payments made on time raise the credit score, while delinquent payments reduce it. That is the most important rule by far.

Most cardholders understand this, but many also believe that the reduction in credit score caused by a delinquency is reversed when the card becomes current. This is not the case. Eliminating the delinquency merely prevents a further hit to the score. Delinquencies stay on your record for seven years, although their force will weaken over time as on-time payments come in.

Ratio of Card Balance to Maximum Balance: This is the second most important component of your credit score, and if your credit history is short, it can be the most important.

The genie compares the outstanding debt on each of your cards with the maximum amount of debt that the credit grantor has set on that card. For example, if the balance on a card is $2,000 and the maximum balance is $5,000, the utilization rate is 40 percent. The lower the utilization rate, the higher your credit score. The genie interprets high ratios to mean that the borrower is living closer to the edge.

Some experts advise that it is better to have about the same utilization ratio across all your cards, rather than have some high and some low. This would prevent borrowers from minimizing interest cost by concentrating balances in the card(s) with the lowest interest rates.

I don't know whether the genie favors an even distribution of balances across cards or not. I suspect not, since the genie is logical and there is no logical reason why the distribution of balances across different cards should matter.

A cardholder can reduce his/her utilization ratio by reducing his/her balance, and also by increasing the maximum balance. If a borrower has had a good payment record, the maximum can often be increased simply by asking.

Make sure that your card issuer reports a maximum. If no maximum is reported, the genie assumes that the highest balance ever reached in that account is the maximum, when in fact it could be well below the maximum. This raises your utilization rate for no good reason.

If a card has no reported limit, you can either request that the limit be reported, or terminate the relationship. Alternatively, you can shift all your balances into this account temporarily so that the highest balance comes closer to the unreported maximum.

Age of Cards: The genie likes old credit cards much more than new ones. The card you have been using for 15 years is evidence of your financial stability, whereas the card you took out last week could mean you are in trouble. If you took out three cards last week, it could be big trouble.

To receive credit for old cards, they have to be active. If you don't use a card for six months, it is classified as inactive and the genie ignores it.

Number of Cards: The scoring genie prefers that you have no more than four or five active cards, but if you have 12, don't worry about it. If you reduce the number from 12 to 5, the genie will reward you for the reduction in numbers but might penalize you for the increase in utilization that goes with it.

Of course, there might be other reasons for reducing the number of your cards, such as simplifying your life. If you do it, retain the older cards and cancel the newer ones.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

A pre-hung door is simply a door that is already attached to the jambs, which removes all the hassles of having to mortise the hinges into the jamb and into the edge of the door. This ensures complete accuracy in how the door is set up, which in turn translates into a much easier installation process.

Virtually any type of door is available as a pre-hung unit, including doors made of wood, metal, and fiberglass. Many common sizes and styles can be found in stock in home centers, door shops, and larger lumber yards, and special sizes, styles, and materials can be special ordered, typically within just a few days. 

To select an interior pre-hung door, all you need to know is the door size, the jamb size, and the swing. Although a door can be cut and then pre-hung in just about any size to accommodate odd openings, commonly available stock sizes range from 2 feet to 3 feet in width in 2-inch increments, and 6 feet 8 inches in height. These sizes refer to the door itself, without the frame.

Jamb size refers to the width of the jamb, which needs to be the same as the overall distance between the face of the wall on one side of the door, and the face of the wall on the other size. For interior doors, there are two common jamb widths, 4 9/16 inches and 6 9/16 inches. A 4 9/16 jamb fits a wall constructed with 2x4 studs and 1/2-inch drywall on each side – 3 1/2 inches for the 2x4, 1 inch for the two drywall layers, and 1/16 inch of play. A 6 9/16 jamb is for walls with 2x6 studs.

Swing refers to which way a door swings open, and can be the subject of lots of confusion. However, determining a door's swing is actually quite easy. Stand in front of the door, so that the door is swinging open away from you. If the hinges are on your left, it's a left-hand swinging door; on the right, it's a right-hand door.

INSTALLATION

To install a pre-hung door you need a 2-foot level, a 4- or 6-foot level, wooden shims (available wherever you buy the door), and finish nails.

Prehung doors are shipped fully assembled, with the door and all the hinges mounted to the jamb. To keep the door from moving, it is typically secured to the jambs either with a couple of small nails driven through the jamb into the edge of the door, or with a disposable plastic lock that screws through the doorknob opening. Remove the nails or the plastic lock, remove the pins from the hinges, remove the door from the frame, and set the frame into the opening.

You will notice that the width of the opening is greater than the width of the door unit. That creates a space between the back of the jambs and the face of the studs, which allows you to insert shims as needed to get the side jambs plumb and the top jamb level. 

Installation begins by getting the jamb on the hinge side plumb and set at the proper height. First, set your short level on the face of the top jamb. If the top jamb is level, or if it is low on the knob side of the door, no shimming is needed at the moment. If the top jamb is low on the hinge side, however, you will need to slip a shim between the floor and the bottom of the hinge-side jamb in order to level it.

Next, push the hinge-side jamb against the stud on that side, and then place your long level on the face of the jamb. Insert shims as needed to get the jamb plumb, then tack the frame in place with four finish nails – one on either side of the door stop up near the top of the jamb, and one on either side of the stop down near the bottom. 

Reinstall the door on the hinges, and swing it closed. Add shims as needed to keep the jamb straight and plumb on the hinge side, and add a shim under the bottom of the knob-side jamb if necessary to level out the top jamb.

Next, start at the top of the knob-side jamb and add shims as needed to get an equal reveal between the jamb and the door edge all the way down. You will typically want to shim the jamb in at least four spots – near the top and bottom of the jamb, and a few inches above and below where the knob will be. Add more shims as needed to ensure the jamb is plumb and straight. Finally, complete the installation by adding finish nails in both side jambs as needed to secure the frame.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.