Credit & Money Management
More Credit Score Answers
Kim Lankford responds to more readers' questions about interpreting and improving their credit scores.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
May 3, 2006
- Comments
- Email This Article
- Print This Article
- Order a Reprint
Advertisement
Worrying about your credit score definitely can keep you up late at night. After one of my Kiplinger's credit score columns was mentioned on AOL Finance, I received 17 credit-score questions from readers between 10 p.m. and 7 a.m. just that one night. It's no surprise that the topic is so popular -- your credit score has a tremendous impact on your finances.
Improving that magic number by just a few points can save you hundreds or thousands of dollars in interest over the life of a loan, and a low score can affect your ability to buy a home, a car, rent an apartment, get a job or qualify for auto insurance. That's why questions about credit scores continue to be some of the most common issues I hear about from readers -- and not just from the insomniacs who are up late surfing the Internet.
RELATED LINKS | |||
 |
Ask Kim Your Credit Score Questions | ||
|
|
Boost Your Score | ||
|
| Estimate Your Credit Score | ||
People continue to wonder about credit scores because the keepers of the score algorithm never reveal all of the ingredients of the secret sauce. If you ask enough questions, though, you can piece together a lot of clues that can teach you how to improve your score. Here are several new questions I've received from readers over the past few weeks:
We recently shopped for a home loan and got a credit analysis form Equifax. We disagree with two factors listed in the report. One showed a delinquency, but we always pay our bills on time and have never had a late fee. How can we get this discrepancy cleared up quickly?
Credit bureaus generally have up to 30 days to investigate disputes with consumers. But we'll let you in on a little secret: Your mortgage lender might be able to get your report fixed in as little as 36 to 72 hours.
Lenders generally work with independent credit-reporting agencies, which gather information from the big-three credit bureaus (Equifax, Experian and TransUnion). Most of these middlemen also offer "rescoring" services -- working with the credit bureaus to fix errors on your report within a few days and rerunning your score to reflect a more accurate risk factor. "Raising your credit score above a certain threshold by as few as ten points can lower your rate and save you thousands of dollars in interest charges," says Gerri Detweiler, credit expert for EverydayWealth.com.
The process is labor intensive, so it's available only for mortgages, not smaller loans. And you can't do it on your own. You need to work through your lender, who will have to pay a rescoring fee -- generally about $120 for two accounts corrected by two bureaus, says Evan Hendricks, author of Credit Scores and Credit Reports: How the System Really Works. As a result, you may have to lobby a reluctant lender to rescore your application.
Rescoring works only with legitimate errors, so you must provide documentation that the information is incorrect. As long as you've kept your payment records, you should be able to fix the delinquency error.
What should I do to get errors on my credit score fixed if I'm not in the midst of shopping for a mortgage?
The quick credit rescoring strategy above only works with mortgages, and only if your lender decides it's worth the time and effort to get your credit score fixed. Otherwise, you're on your own. You can usually get the errors fixed yourself, but it can take much longer.
First, you need to get a copy of your credit report and specify which account includes the inaccurate delinquency (order a free copy of your report from AnnualCreditReport.com). Then contact the credit bureau. Equifax, for example, lets you report mistakes both on the phone and online -- the online version can get you into the system a bit quicker. But the bureau does have up to 30 days to reply to the dispute, which is why it's a good idea to check your credit reports several months before you plan on buying a house.
My husband and I have a credit card that gives airline rewards and another with cash-back rebates. We tend to charge a lot of our bills to these cards, but we do pay them off in full almost every month. Will this affect our credit score?
It could affect your score. The score is based on how much you owe at the time the account is checked -- no matter how much you plan on paying by the due date. Having too high a balance could hurt your score even if you end up paying off the entire balance the following day.
