Learn to Fix Your Credit Score

Consumer correspondent Elisabeth Leamy answers questions on scores and loans.

May 11, 2009 — -- It's time, once again, for me to answer your questions. I'm struck by the fact that the bulk of them are about credit and debt. That is certainly a grassroots measure of the times we are living in. I hope my answers are a help.

Question: Can I hold an auction, and if I can do I have to charge tax?

-- L.S., Pembroke Pines Fla.

Answer: This reader must have seen my "Good Morning America" story last week about people raising spending money by selling extra belongings at auctions. You will need to check with your state and your county to see if they require auctioneers to be licensed or registered.

Some jurisdictions have extensive requirements, others require nothing. And yes, you probably will have to charge sales tax. Alternatively, search here to see if there is an auctioneer in your area that auctions off general merchandise for the public.

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

Question: How do I go about getting my credit score and not having to pay for it ? I am now a single mom and have to start all over again.

-- S., Hot Springs, Ark.

Answer: The government has guaranteed every American one free credit report a year from each of the big three credit bureaus, but you still have to pay for your score. The best source is myfico.com, because that is a genuine FICO score.

Be sure to choose the most basic option, which costs about $16. If you are applying for a car loan or a mortgage, then you can get your score for free, simply by asking the loan officer what it is.

Improving Credit Scores

Question: We are trying to build our credit score up, and I was told that if I make 18 months of car payments on time and then refinance, my score should go up 70 to 110 points. Is that right? Can that help my score that much?

-- D.G., Casper Wyo.

Answer: I've never heard this scheme before but it sounds like a bunch of bunk to me.

First of all, the FICO scoring model (developed by the Fair Isaac Corporation) is a cross-your-heart-and-hope-to-die kind of secret, so nobody can tell you what any single move will do to your score. Second, the age of your accounts is a significant factor in your score, so it would not make sense to refinance an existing loan into a new account, because the older loan ought to be more beneficial to you.

The one glimmer of truth here is that paying on time for 18 months will help you. Credit scores change with every payment you make, and paying on time is the No. 1 step you can take to improve. To get a rough idea how you can raise your score, buy your score at myfico.com. Then use the tool provided on the Web site that allows you to plug in different moves and see the impact. For example, you could try paying off your car loan and see what that does.

Question: I recently got my credit score from all three companies, The first two were 740 or more. The third was 647. They gave me a BS answer on the reasons. How can they do this to people?

-- B.G., Stanley, N.C.

Answer: Your score at each of the big three credit bureaus will probably vary slightly because each bureau bases your score on the actual data in its files: how many accounts you have, your payment history, etc. Obviously, the third bureau either has negative information in its file that the others do not or is missing positive information that the others have on file.

You need to order your actual credit reports -- not scores -- from all three and analyze them to see what the discrepancy is. You can then dispute inaccurate information. If it's any comfort, typically when you apply for a mortgage, the lender uses the middle credit score, so the lower one may not hurt you.

Cutting Car Insurance

Question: I want to cut my cost down on my car insurance. I am in the process of buying homeowners' insurance with the same company. Shouldn't I get a discount?

-- D., St. Petersburg, Fla.

Answer: Yes, you should. Discounts for buying more than one form of insurance from the same company are pretty standard in the industry. If the insurance agent you are dealing with won't do this for you, shop around. A good way to do that is by working with an independent insurance agent who represents several different insurance companies. You can find one here.

Question: If a husband goes out and buys a boat and goes to Sears and buys fishing equipment, then fails to make the payments on time and also writes several bad checks, should his bad credit be held against his wife who has had a clean and positive credit record?

-- S.B., Houston Texas

Answer: If the husband paid with credit cards or other accounts that are held jointly with the wife, then her credit will be dinged. If he paid with an account that is in his name only, she should be in the clear. If his separate accounts tarnish her, she can file a dispute with each credit bureau to get his items removed from her file.