Letters: Raising Credit Scores

Personal finance columnist Liz Pulliam-Weston answers e-mail questions about ways to improve credit scores.

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NEAL CONAN, host:

It's Tuesday, the day we read from your emails. Last week we discussed a new system that credit bureaus will use to calculate credit scores. We received so many questions from listeners on how to improve their credit scores that we've invited Liz Pulliam-Weston back to answer a few of them. She's a personal finance columnist for MSN Money and the author of Your Credit Score: How to Fix, Improve, and Protect the Three Digit Number that Shapes Your Financial Future. She joins us now from her home office in San Fernando Valley, in California. Nice to have you back on the show.

Ms. LIZ PULLIAM-WESTON (Financial Columnist, Author of "Your Credit Score: How to Fix, Improve, and Protect the Three Digit Number that Shapes Your Financial Future"): Thanks, Neal.

CONAN: Our first email question is from Larry Fox in Phoenix, Arizona. He writes, Many years ago I was told that the most credit-worthy people are those that pay late, but pay. The rationale given for this was those who pay late pay more in late charges and that drives the profit margin higher. Is that true, and does paying late help or hurt your credit score?

Ms. PULLIAM-WESTON: I don't think this has ever been true, that it would help your credit score. Late payments are a sign that you are in over your financial head. They really devastate your credit score. One late payment can knock 100 points off. So, don't let the credit card companies profit, pay your bills on time all the time.

CONAN: And 100 points is a lot.

Ms. PULLIAM-WESTON: That's a lot. It can drop you quite a bit in terms of what lenders think of in terms of what kind of interest rate you get, what kind of terms you get on a loan. You just don't want to do it.

CONAN: Richard Klinsky, in Ann Arbor, Michigan, has this concern. I recently refinanced my home. My lender told me my credit score was 700 and my wife's credit score was 770. All our bank accounts, loans, and utilities are under both our names. We're both in our 40's, we've been married for 21 years. Why the discrepancy?

Ms. PULLIAM-WESTON: I feel his pain. My husband's credit scores are higher than mine, too, and I just hate it. Check out the underlying credit reports. There's something different on the husband's that's not on the wife's. It might be as simple as a small collection account from a medical bill that was in his name. Something is different between those two accounts, and that's what's making the difference in their scores.

CONAN: Renee, who's also from Ann Arbor, Michigan, has a question about the process of background checks. She wrote, My mother is a hospital worker, was recently asked to sign a form that would allow them to check her credit. She doesn't work with money. She has very good credit, but she refused to sign the release. They haven't refused to have her as a volunteer, but why would they want to check her credit?

Ms. PULLIAM-WESTON: The hospital might want to reassure itself that your mother doesn't have money problems that could cause her to rob the patients. Now whether a credit report is a good way to find that out or not, I don't know. If the hospital insists, your mother should find out what the HR Department is going to do with this report once it gets it. You don't want it to just be stuck in the drawer somewhere where anybody can find it. She might try to insist that her social security and account numbers are disguised somehow so that it's not some tool that an identity thief could use.

CONAN: Hmm. This next question comes from Dee(ph), in San Raphael, California. I get a lot of solicitations in the mail stating that I've been pre-approved for credit cards. Does that mean the company has checked my credit score, and does it mean my score is now going to be lowered because of the inquiry that I didn't request?

Ms. PULLIAM-WESTON: No, the credit card issuer probably bought a pre-screened list of potential customers from the credit bureaus, and they might have asked, we want to see all the people with credit scores of 720 or above. But that request alone didn't affect your score. Only if you actually apply for the credit will you temporarily ding your score by maybe 5 points.

CONAN: And we all know that there've been rabbits and other, goldfish, that have gotten pre-approved credit cards.

Ms. PULLIAM-WESTON: Pets, and 2-year-old children, yeah, just about anybody can get a pre-approved offer.

CONAN: Rachel, in San Antonio, Texas, asks, My friend and I bought a house together, then I moved to another city for school. She stayed behind. She was late with the mortgage a couple of times, now my credit is bad. The house is in both our names. Is there any way to fix this?

Ms. PULLIAM-WESTON: You really can't undo the damage that's already been done. That was in both of your names, and what she did with those payments does affect you. You can start to recover from the damage by taking over the payments, so she can't continue to go late, or insist that she refinance the house in her name alone.

CONAN: And finally, Michael in Overland Park, Kansas, wants to know, How do you keep your credit score active if you live overseas for three or four years?

Ms. PULLIAM-WESTON: It's really tough, because you don't want your creditors to close your accounts. If you don't have an account that's been updated at least in the past six months, you won't have any credit score. So I would say, call your creditors, ask that they not close your accounts while you're away. If there's any doubt, bring the card with you, use it occasionally, and pay it off promptly.

CONAN: Liz, thanks very much.

Ms. PULLIAM-WESON: Any time, Neal.

CONAN: Liz Pulliam-Weston is a personal finance columnist for MSN Money, the author of Your Credit Score: How to Fix, Improve, and Protect the Three Digit Number that Shapes Your Financial Future. She joined us from her home in the San Fernando Valley of California. If you have comments, questions, or corrections for us, the best way to reach us is by email. The address is how to pronounce your name.

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