 Rebuilding
your credit
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 Dear
Dr. Don,
My score with Equifax was lowered from 532 to the low 400's (I think
by mistake) because last year I paid off $600 to $700 worth of hospital
bills that were on my credit report for years. TransUnion and Experian
have me between 620 and 638, and the only other credit I have is
my car payment, which I've never been late on.
Also, I am an authorized user on my mom and dad's credit cards.
Does that help or hurt me?
Also, my main question for writing is; will it hurt to apply for
a secured credit card? If that application is denied, will it lower
my FICO score? I have no other credit besides my truck payment,
the hospital bills that were on my credit report are paid off. I've
been renting my apartment for five years and been employed at the
same job for four years. Thanks.
-- Kimberly Credit
 Dear
Kimberly,
Paying off the hospital bills doesn't remove the payment history
from your credit report. That negative information stays on your
credit report for seven years from the initial report of that delinquency.
If those bills have been on your credit report for years, they should
be coming off sooner rather than later.
Creditors aren't obligated to report your payment history to all
three credit bureaus. That by itself could explain the difference
between the credit scores from the three bureaus. A credit score
is based on the information in your credit report. Since the information
is different, your credit scores can be different.
On this front, the big three credit bureaus -- Experian, Equifax
and TransUnion -- are partnering to provide a new credit score,
called a Vantage score. Initially available only to lenders, this
score considers the information on your credit report for all three
firms. It won't correct erroneous information in your credit reports,
but it will look at the payment histories on all three credit reports
in arriving at a Vantage score for each credit bureau. What's new
is that unlike current credit scoring models, Vantage scores will
differ between credit bureaus solely based on the different information
in the credit reports.
Being an authorized user on your parent's credit cards can help
your credit history if they keep up with their bills and the payment
history is reported on your credit report. Credit card companies
have to report the payment history for an authorized user when that
user is a spouse. They aren't obligated to do so when the authorized
user is a child.
Since you can get one free credit report from each of the credit
bureaus once each year, there's no reason to guess about whether
the payment history for these credit cards is on your credit report.
Bankrate provides the contact
information to obtain your free credit reports.
Don't be shy. Call the nice people at Equifax and ask what's up
with the difference in your credit score between the three providers.
Bankrate has that contact
information as well.
Even though a secured credit card typically has a credit line equal
to the amount of money you have on deposit, you can be turned down
for a secured credit card. The application for a secured credit
card may show as a credit inquiry on your credit report.
I spoke with Rod Griffin, the manager of public education at Experian,
and he explained it to me this way, "If a lender reviews a
person's credit report as part of the application process for the
secured credit card, an inquiry would be added to the credit history
to show a record of that access."
An inquiry stays on your credit report for two years, but is used
in calculating your FICO score for only one year. The Bankrate feature,
"Baby-step
your way to credit with a secured credit card," has more
about using a secured credit card to improve your credit history.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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