The Truth About Credit Scores

Leamy reader question

It's time to once again answer your questions. As you know, every few weeks I answer questions from you, my readers. This week's crop of questions cover credit scores, mortgage modification programs, auto loans and more. Thanks for helping me tap into the consumer pulse -- and keep them coming.

Question: I recently got my credit score from all three companies. The first two were 740 or more.

The other was 647. They gave me a BS answer on the reasons. How can they do this to people? And how can they do this to hard working people?

-- B.R., Stanley, N.C.

Answer: They didn't really "do" anything to you. A credit score is just a mathematical formula calculated based on the information in your credit bureau file. Each of the three bureaus keeps its own, separate records on people.

We can deduce that the third credit bureau that gave you the lower score either has fewer flattering entries about you in its file or more unflattering ones. What you need to do is order your credit report from that bureau and dispute any inaccuracies that are dragging your score down. You could order your reports from the other two at the same time, because since they are so consistent with each other, that may give you an indication of what in the third report is dragging your score down. Best part is, you can order your reports free by going to

Click Here to Ask Elisabeth Your Consumer Questions About This Topic or Any Other Consumer Issue

Question: If my credit score took a tumble due to late payments on a few bills, but I have since paid them off, when should I see my score improve?

-- R.M., Waterloo, N.Y.

Answer: I can't tell you a firm time or even a time frame for when your score will improve because credit scoring formulas take so many hundreds of variables into account that they are very hard to predict. I can tell you that late payments are one of the very worst demerits that causes your score to drop.

Your history of paying on time or late accounts for 35 percent of your score, more than any other factor. So the bad news is the fact you had late payments is a real strike against you. But the good news is that you have since taken care of those payments, so that will dramatically help you. It just may take a few months or years.

Home Underwater

Question: I bought my house high. It's now upside down by, I guess, $120,000. I have an adjustable mortgage plus a second loan. The average of my loan interest rates is about 9 percent. I've lived in the house for 3.5 years and have made all my payments and don't think I've been late once. Money is tight. I need a loan modification.

I contacted my lender and they sent me some paperwork with information for considering a loan modification. I'm scared of being duped. I heard they jerk you around and take forever (It takes a lot of work and persistence).

I guess my question is this. Are there any Federal Housing Administration programs that can help me to get info or do I have to pay someone to get me out of this bad loan?

-- A.C., Las Vegas

Answer: You are right to be worried and skeptical. One of my own co-workers has been trying for months to get her bank to modify her loan and has made zero progress. But I'm happy to say that there are a couple of free resources you can take advantage of.

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