Return to Transcripts main page
CNN Live Saturday
Dollar Signs: Improving Your Credit Score
Aired May 01, 2004 - 16:31 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BETTY NGUYEN, CNN ANCHOR: Welcome to CNN DOLLAR $IGNS. Today, your credit report and credit score. Just as you check yourself in the mirror before going out, you need to check your credit report and credit score before borrowing money, because just as a mirror shows how you will look to others, your credit report and credit score show you how you will look to lenders.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: A credit report is a reflection of a consumer's accounts payable history. So people with retail cards, gas cards, mortgages, all of that information is reported to the credit reporting agencies on a monthly basis and it will compile your credit report.
NGUYEN (voice-over): Before you start looking for that dream house, before you start test driving that new car, before you make any big ticket purchase that requires a loan, it pays to check out your credit report. The report tells lenders how much money you make, how much you owe and if you've ever been sued or declared bankruptcy.
A bad credit report can mean lenders will charge you a higher interest rate or maybe even deny you the loan. So before applying for credit, get a copy of your credit report to check your score and make sure there are no mistakes.
Here's how. There are three major credit reporting agencies, Equifax, Experian and Transunion. Contact them by mail, by phone or by the Internet. The cost is about $10 each and you should get all three. In addition to your credit report, you will want to know your credit score. It's a figure that represents your current credit worthiness. Credit scores range from 300 to 850. Any score over 700 is good, 500 to 700 is average, and under 500 means you could have problems getting the credit you wanted.
UNIDENTIFIED FEMALE: Someone with 500, that would probably be considered a score that would not be very favorable and might make it a little bit more difficult to obtain very competitive interest rates. In some cases, you definitely will be declined if that score is too low.
(END VIDEOTAPE)
NGUYEN: So how can you raise your credit score? Pay your bills on time and don't build up too much debt. Well, we're going to talk about that. I know it sounds easier said than done. So here's advice from the experts, Todd Mark with the Consumer Credit Counseling Service joins us, and in our Los Angeles bureau, Deborah McNaughton, president of Professional Credit Counselors and author of several books on managing credit.
Thank you both for joining us. Let's talk about that credit report. How often should you check it?
DEBORAH MCNAUGHTON, PROFESSIONAL CREDIT COUNSELORS: I think you should check it at least once every six months if you're looking to purchase, but always at least once a year, a good New Year's resolution is January and check out what needs to be corrected if there's any errors.
NGUYEN: Once every month, Todd, is that too often?
TODD MARK, CONSUMER CREDIT COUNSELING SERVICE: Once every month? Yes, I'd say probably twice a year is a great way to look at it, and especially as Deborah just said, before a big purchase, maybe six to 12 months out, you want to look, because if there are any errors that need to be corrected, or if there's some damage that you can repair in the meanwhile, and when I say repair, do some good habits and increase your score, it's going to be better for you as far as getting approved for a loan or getting good interest rates.
NGUYEN: And speaking of those errors, how accurate are credit reports? Do you need to really check it all the time just to make sure, Todd?
MARK: Well, errors will happen. The three bureaus are run by humans. And obviously, there's millions and millions of creditors out there with transactions that are being reported. So there will be errors. Generally, they are going to be where there's a name change or maybe somebody with a similar Social Security number has an account cross. You obviously want to be checking your credit report, make sure that there's no errors that will lower your score. But more significantly, you want to check your credit report at least twice a year to make sure that you're not the victim of identity theft.
NGUYEN: OK. Deborah, we have a call from Dean in Florida with a question about identity theft. Dean, tell us what your question is.
CALLER: Yes, good afternoon, folks. My question is really a two-part question regarding ID theft. With the increase on the rise, what can customers do as far as protection but also what are credit agencies doing to perhaps protect consumers from having to go through a long drawn out process of getting their credit back into shape?
NGUYEN: Deborah?
MCNAUGHTON: Well, when you obtain a copy of your credit report, many times that's when you're going to find out if somebody has stolen your identity. And it's important as soon as you spot that to notify each of the credit reporting agencies that have the inaccuracies or appearance of the fraud and dispute it. Report it to the fraud department, make a report to the police department. I mean, there are so many things out there now where people are stealing identity from mailboxes, you know, taking mail from you to copies of your receipts. So it's important to really safeguard it.
NGUYEN: OK, Todd, we have an e-mail now from Jorge in Miami, Florida: "Transunion is reporting my FICO at close to 650, but Equifax is reporting my score at over 730. Which is more accurate and is there anything I can do about this?"
MARK: Well, Jorge, it's very important to know that each of the three bureaus, Equifax, Transunion and Experian use slightly different models of the Fair Isaac credit score. So one might be on a range to 900 while another goes to 850. So the fact that there's such a discrepancy between one and another, you might have some sort of error that's just being picked up by one of the bureaus. And you want to pull all three of the reports to see if there's something that's wrong on one that's not on the other two.
And other than that, the real important thing to know is if you're looking for a loan, if you're looking to buy a house or a car, find out who the dealer is using. Are they using one credit report or do they look at all three? It might be that they're using the one that's high and you've got nothing to worry about. And by the way, even if they're using the 750 one, 750 is still pretty darn good.
NGUYEN: Yes, it is. OK. We want to go from a call from Tony in Ohio who is talking about bankruptcy. Tony, what is your question?
CALLER: Hi, my question is actually regarding home buying after bankruptcy. I have recently been discharged from our bankruptcy of this past November and what complicates or actually helps the matter is I'm a veteran. So how long after declaring bankruptcy would you recommend attempting to buy a home? And I do have my credit score of about 610 right now.
NGUYEN: Deborah?
MCNAUGHTON: OK, most lenders want to have at least a two-year period from the time that it was discharged to the time you start qualifying. But during those two years, it is critical and crucial that you go ahead and start establishing new credit. Now not new debt, but new credit, in other words, get a secured credit card, make small purchases, pay it off every month so you start reestablishing a payment history. If during that two-year period after the bankruptcy or any period after and you go to qualify for a mortgage, any ding -- in other words, anything that is negative that happens after the bankruptcy, can disqualify you. So it's important to start reestablishing.
NGUYEN: OK, Todd, we want to go now to an e-mail from Iman (ph) in New Orleans and he says: "How do I establish credit if I currently do not have any?" Your suggestion?
MARK: Well, Iman, if you have no credit history at all, chances are you don't have any credit cards. Sometimes having no credit can be just as bad as having bad credit because there is no history to say, do you use it good or bad. Where do you start, try a secured card. And this is very much like a savings account where you're going to put $500 down onto a card and you'll draw against that and then you'll pay what you've spent every month. Use that for about six to nine months, make sure that the creditor is using -- putting this on your credit bureau showing you're using the credit card responsibly, and your score will improve and then you'll start getting pre-apps from normal credit cards that you don't have to pay application fees or annual fees for.
NGUYEN: All right. Well, we will have more calls and e-mails next on DOLLAR $IGNS. And of course, you can still send your questions to dollarsigns@cnn.com or call in, the number is on your screen, 1-800-807-2620. We'll be right back.
(COMMERCIAL BREAK)
NGUYEN: Today on DOLLAR $IGNS, who scores your credit? How do they do it, and what can you do about it? Our guests, Todd Mark of the Consumer Credit Counseling Service, and Deborah McNaughton, president of Professional Credit Counselors, thanks for joining us today. We want to go now to Ann in Texas, she is on the phone with a question about checking her credit. Ann, what's your question?
CALLER: My question is I've been told by a prospective mortgage lender that I should not check my credit, that every time a credit inquiry is made, including me on my own credit, that it is listed as a credit inquiry, and if you get a lot of those, that your score goes down because it means that people are, you know, investigating your credit and either not giving you credit or you didn't accept it. Is that correct?
NGUYEN: I've heard that too. Deborah, what do you think?
MCNAUGHTON: No, it's not. If you get your own credit report through the major reporting agencies, in other words, you go directly to Transunion, Equifax and Experian, there is no consumer inquiry. It is only your inquiry. Nobody else sees that and there's no rating on that. Now if you decide that you're going to be shopping for a mortgage, what you want to do and be aware of is that there is a window of time, approximately 10 days from the time you start your application, and let's say you shop different lenders, during that time, any inquiries within that 10-day period will only report as one inquiry. So you're safe on that.
NGUYEN: But what if you go through, say, an Internet service that says, oh, I can get your credit report for free?
MCNAUGHTON: Beware, because any time you see anything that is advertised that it's free, it's on the Internet, it's usually a merchant that is a subscriber to the reporting agencies, and it is the subscribers or the merchants that make the inquiry that will then appear on the credit report.
NGUYEN: So that can work against you then.
MCNAUGHTON: Absolutely. And those stay on your report for at least two years from the date that you made the inquiry...
NGUYEN: OK. We want to go now to Howard in Philadelphia who has a question about getting his FICO score. Howard, what's your question?
CALLER: Yes, my question is, you have three credit bureaus and in order to get a FICO score, do you have to call all three? And lastly, I have over 20 credit cards. I haven't had a (UNINTELLIGIBLE) in over 10 years. And I have to cut back on them. The last card I applied for, they told me that I had too many credits. And I explained to him the reason that that is, is because every time I see a lower rate, I get that card and I cancel the other one. And consequently they send me the card. But I would like to know what my FICO score is.
NGUYEN: Todd, it's a two-parter, let's start with you.
MARK: All right, Howard, the first question about your score, if you order your credit reports from the three bureaus, they're not going to give you your credit score. You've got to pay additional money. I always say if you're not going to go from the three bureaus, got from the originator, which is Fair Isaac. You can go to their Web site which is myfico.com, and I think it's $12. And you can get your official credit score, and again that's the engine that feeds all three bureaus. That's truly your official Fair Isaac credit score that all the three bureaus are going after. Use that as the basis of what people are looking at as far as what you are as a credit risk.
NGUYEN: All right, let's go now to Ron in Ohio. Ron, what's your question, I understand it has to do with student loans?
CALLER: Yes, actually, I have about 2000 in consumer debt and 10,000-plus in student loans. They're all in deferment. How does that affect you when you're applying, say, to get financing for a new car?
NGUYEN: Deborah?
MCNAUGHTON: Generally, anything that is in a deferment, they will look at the amount, but if you're not making payments at that particular time, they are not going to be concerned with it. And usually your score is not derived. Most of the time, you've got to remember, when you're getting -- going for a purchase on an automobile or a home, it is FICO-driven, so you need to get that FICO score from all three bureaus.
NGUYEN: All right. And Todd, do you have any other suggestions to him?
MARK: Well, Ron, obviously the most important thing is pay down your consumer debt because the less debt you have, the better you're going to look to lenders as far as if you're looking for additional credit. The less debt you have in ratio to the credit lines and credit limits available to you, the better off you're going to be. So work on paying the debt down. And I wouldn't worry so much about the student debt. I look at that as a really good debt. Student debt is an investment in your future. So it's a good debt to have.
NGUYEN: To both of you, I have a question. What's the biggest mistake people make when it comes to their credit scores? MCNAUGHTON: I think probably owing, in other words, if they have a credit limit of 1000 and they owe $999, that's going to definitely have an impact. The lower the balance to the credit limit, the higher your score is going to be. So it's important that you have a mix in your credit portfolio.
NGUYEN: And Todd?
MARK: Well, obviously the one driver for your credit score is your payment history. If you just pay your bills on time every month, you're like one-third of the way to a perfect score, not exactly a perfect score, but just pay your bills on time, you'll be looking good. The second big factor for your credit scores is how much do you owe? So the less debt you have, the better your credit score is going to be looking. So pay your bills on time, that's one-third of the score. Pay your bills on time and in full, wow, you're going to be looking fantastic.
NGUYEN: And that's what we all want. OK. Stay with us. We'll have more of your calls and e-mails right after this break. We'll be right back.
(COMMERCIAL BREAK)
NGUYEN: Today on DOLLAR $IGNS a topic vital to you if you need a loan, credit reporting and credit scoring. Once again, Todd Mark of the Consumer Credit Counseling Service joins us and Deborah McNaughton, of Professional Credit Counselors. Thank you both. We have Ashley in South Carolina on the phone now. And Ashley, I understand your husband has a very common name and that is causing a problem.
CALLER: Yes, it is. My husband's name is Tony Brown, and every Tony Brown in South Carolina it seems is on his credit report. And the problem is that we're trying to buy a house and we've been trying for about eight months now. And now we're on a month-to-month lease at our apartment. And I was wondering if there's anything that we can do to expedite things. Because it seems that once we find something and then we dispute it, it takes 30 days, and then we find something else, it takes another 30 days. And a lot of times it's automated responses, you can't get through to an actual person and it's really frustrating. So I was wondering if there's anything that we can do to expedite the process.
NGUYEN: Deborah, what can she do?
MCNAUGHTON: Well, if you are in the process of trying to obtain a mortgage or prequalification and there are issues like that, the credit reporting agencies that they will work with have a department called re-scorers. And you can go ahead and submit to them what the issues are. Now they are going to obviously charge you per item per report. But they can usually get everything taken care of so that you can get the -- into the home or the mortgage within 24 to 72 hours. So I would talk to the credit bureau that is handling -- that you're working with -- the mortgage company with.
NGUYEN: We want to go now to John in Chicago. John, what's your question?
CALLER: Well, I've got -- I had a health crisis. So I ran out of money very quickly. All my creditors, all my credit card companies are calling me every five minutes of every day. I don't answer the phone. And I don't have any money left. I ran through all my savings because of it, and I'm just kind of wondering what I do. It seems that any credit insurance that I had on my accounts required me to be up-to-date on payments, and because of my particular disability, you know, like I just didn't have time to make sure that all that was together.
I'm expecting Social Security to approve me and in fact approve me a year retroactive so I'd have plenty of money to pay a lot of them off at that point. But in the meantime, I mean, should I be talking to these people? You know, like the first one, the only one that I talked to said that, well, that's not good enough. We're just going to keep calling you every five minutes.
NGUYEN: OK. Well, Todd, he needs some help, what is your advice.
MARK: Well, it obviously sounds like you need to make a phone call to an NFCC member of Consumer Credit Counseling Service and speak to a counselor about your debts. Once the medical debts have taken over, and obviously you have no more savings, I want you to prioritize your bills every month. Please make sure you're making your mortgage payment first, your car payment and your utilities, insurance and food and only once the necessities are taken care of do you start worrying about the creditors. And chances are you're dealing with collection agencies right now. They're going to use a lot of rough tactics to get as much money out of you as possible. And they're not really interested in the problems or the issues that you've had with your health. They just want their money. So you need to stand up and protect yourself. And I think it would be really good for you to go to nfcc.org and find the consumer credit counseling service in your city.
NGUYEN: All right. Let's go online. We have an e-mail from Abby in Washington, and that e-mail says, my husband is new to the U.S. with a new Social Security number and no credit. He has proven credit from his country of origin but needs to build his credit here. How should he do so and how long does it take to build good credit? Deborah, what's your advice?
MCNAUGHTON: Well, the first thing I would suggest is that he contact the bank that he has his accounts with and get a secured credit card. That is always the best way to start establishing credit. And with that card, maybe get two pieces of credit with a secured card. Make small purchases, pay it back every month, and within a six to, you know, nine-month period, he may be able to qualify to get an unsecured. So the first is to start with a secured.
NGUYEN: Todd, your thoughts on this.
MARK: I couldn't agree more. It was very much like Iman's call in the first segment here. And unfortunately, you can have super credit, but if it's overseas, the lenders here in the United States aren't going to look at your history. So the secured card is the best way to go. Just charge a little bit every month, pay it off on time in full every month, and your score is going to start jumping up within six to nine months.
NGUYEN: All right. We want to get some final thoughts from you both on any advice for folks dealing with credit problems. Deborah, let's go to you.
MCNAUGHTON: Well, anybody that is dealing with credit problems does need to get into a good debt negotiation program. The companies that I recommend is the Debt Relief Clearing House at 888-4-debt-help. And don't be afraid to look at your credit report first so that you know what the problems are. You have to know so that you can go get your help.
NGUYEN: Absolutely, Todd.
MARK: Well, obviously, check your credit reports twice a year. And coming up in December, you're going to be eligible for one free from each credit bureau all across the United States. That's due to the new fact act. So watch your credit and only spend what you can afford to pay off at the end of the month. That's the best way to you're your credit looking good.
NGUYEN: Todd Mark and Deborah McNaughton, we thank you both for joining us and all the good advice.
Well, that is it for us. Next on "PEOPLE IN THE NEWS," profiles of our favorite "Friends."
Then at 6:00 p.m. Eastern on "CNN LIVE SATURDAY," the 50 worst songs of all time. Wonder what those are? See how many them are your favorites.
And at 7:00 Eastern, "THE CAPITAL GANG," Bush and Cheney behind closed doors.
I'll be back after a quick break with another look at that severe weather system in Texas.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired May 1, 2004 - 16:31 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BETTY NGUYEN, CNN ANCHOR: Welcome to CNN DOLLAR $IGNS. Today, your credit report and credit score. Just as you check yourself in the mirror before going out, you need to check your credit report and credit score before borrowing money, because just as a mirror shows how you will look to others, your credit report and credit score show you how you will look to lenders.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: A credit report is a reflection of a consumer's accounts payable history. So people with retail cards, gas cards, mortgages, all of that information is reported to the credit reporting agencies on a monthly basis and it will compile your credit report.
NGUYEN (voice-over): Before you start looking for that dream house, before you start test driving that new car, before you make any big ticket purchase that requires a loan, it pays to check out your credit report. The report tells lenders how much money you make, how much you owe and if you've ever been sued or declared bankruptcy.
A bad credit report can mean lenders will charge you a higher interest rate or maybe even deny you the loan. So before applying for credit, get a copy of your credit report to check your score and make sure there are no mistakes.
Here's how. There are three major credit reporting agencies, Equifax, Experian and Transunion. Contact them by mail, by phone or by the Internet. The cost is about $10 each and you should get all three. In addition to your credit report, you will want to know your credit score. It's a figure that represents your current credit worthiness. Credit scores range from 300 to 850. Any score over 700 is good, 500 to 700 is average, and under 500 means you could have problems getting the credit you wanted.
UNIDENTIFIED FEMALE: Someone with 500, that would probably be considered a score that would not be very favorable and might make it a little bit more difficult to obtain very competitive interest rates. In some cases, you definitely will be declined if that score is too low.
(END VIDEOTAPE)
NGUYEN: So how can you raise your credit score? Pay your bills on time and don't build up too much debt. Well, we're going to talk about that. I know it sounds easier said than done. So here's advice from the experts, Todd Mark with the Consumer Credit Counseling Service joins us, and in our Los Angeles bureau, Deborah McNaughton, president of Professional Credit Counselors and author of several books on managing credit.
Thank you both for joining us. Let's talk about that credit report. How often should you check it?
DEBORAH MCNAUGHTON, PROFESSIONAL CREDIT COUNSELORS: I think you should check it at least once every six months if you're looking to purchase, but always at least once a year, a good New Year's resolution is January and check out what needs to be corrected if there's any errors.
NGUYEN: Once every month, Todd, is that too often?
TODD MARK, CONSUMER CREDIT COUNSELING SERVICE: Once every month? Yes, I'd say probably twice a year is a great way to look at it, and especially as Deborah just said, before a big purchase, maybe six to 12 months out, you want to look, because if there are any errors that need to be corrected, or if there's some damage that you can repair in the meanwhile, and when I say repair, do some good habits and increase your score, it's going to be better for you as far as getting approved for a loan or getting good interest rates.
NGUYEN: And speaking of those errors, how accurate are credit reports? Do you need to really check it all the time just to make sure, Todd?
MARK: Well, errors will happen. The three bureaus are run by humans. And obviously, there's millions and millions of creditors out there with transactions that are being reported. So there will be errors. Generally, they are going to be where there's a name change or maybe somebody with a similar Social Security number has an account cross. You obviously want to be checking your credit report, make sure that there's no errors that will lower your score. But more significantly, you want to check your credit report at least twice a year to make sure that you're not the victim of identity theft.
NGUYEN: OK. Deborah, we have a call from Dean in Florida with a question about identity theft. Dean, tell us what your question is.
CALLER: Yes, good afternoon, folks. My question is really a two-part question regarding ID theft. With the increase on the rise, what can customers do as far as protection but also what are credit agencies doing to perhaps protect consumers from having to go through a long drawn out process of getting their credit back into shape?
NGUYEN: Deborah?
MCNAUGHTON: Well, when you obtain a copy of your credit report, many times that's when you're going to find out if somebody has stolen your identity. And it's important as soon as you spot that to notify each of the credit reporting agencies that have the inaccuracies or appearance of the fraud and dispute it. Report it to the fraud department, make a report to the police department. I mean, there are so many things out there now where people are stealing identity from mailboxes, you know, taking mail from you to copies of your receipts. So it's important to really safeguard it.
NGUYEN: OK, Todd, we have an e-mail now from Jorge in Miami, Florida: "Transunion is reporting my FICO at close to 650, but Equifax is reporting my score at over 730. Which is more accurate and is there anything I can do about this?"
MARK: Well, Jorge, it's very important to know that each of the three bureaus, Equifax, Transunion and Experian use slightly different models of the Fair Isaac credit score. So one might be on a range to 900 while another goes to 850. So the fact that there's such a discrepancy between one and another, you might have some sort of error that's just being picked up by one of the bureaus. And you want to pull all three of the reports to see if there's something that's wrong on one that's not on the other two.
And other than that, the real important thing to know is if you're looking for a loan, if you're looking to buy a house or a car, find out who the dealer is using. Are they using one credit report or do they look at all three? It might be that they're using the one that's high and you've got nothing to worry about. And by the way, even if they're using the 750 one, 750 is still pretty darn good.
NGUYEN: Yes, it is. OK. We want to go from a call from Tony in Ohio who is talking about bankruptcy. Tony, what is your question?
CALLER: Hi, my question is actually regarding home buying after bankruptcy. I have recently been discharged from our bankruptcy of this past November and what complicates or actually helps the matter is I'm a veteran. So how long after declaring bankruptcy would you recommend attempting to buy a home? And I do have my credit score of about 610 right now.
NGUYEN: Deborah?
MCNAUGHTON: OK, most lenders want to have at least a two-year period from the time that it was discharged to the time you start qualifying. But during those two years, it is critical and crucial that you go ahead and start establishing new credit. Now not new debt, but new credit, in other words, get a secured credit card, make small purchases, pay it off every month so you start reestablishing a payment history. If during that two-year period after the bankruptcy or any period after and you go to qualify for a mortgage, any ding -- in other words, anything that is negative that happens after the bankruptcy, can disqualify you. So it's important to start reestablishing.
NGUYEN: OK, Todd, we want to go now to an e-mail from Iman (ph) in New Orleans and he says: "How do I establish credit if I currently do not have any?" Your suggestion?
MARK: Well, Iman, if you have no credit history at all, chances are you don't have any credit cards. Sometimes having no credit can be just as bad as having bad credit because there is no history to say, do you use it good or bad. Where do you start, try a secured card. And this is very much like a savings account where you're going to put $500 down onto a card and you'll draw against that and then you'll pay what you've spent every month. Use that for about six to nine months, make sure that the creditor is using -- putting this on your credit bureau showing you're using the credit card responsibly, and your score will improve and then you'll start getting pre-apps from normal credit cards that you don't have to pay application fees or annual fees for.
NGUYEN: All right. Well, we will have more calls and e-mails next on DOLLAR $IGNS. And of course, you can still send your questions to dollarsigns@cnn.com or call in, the number is on your screen, 1-800-807-2620. We'll be right back.
(COMMERCIAL BREAK)
NGUYEN: Today on DOLLAR $IGNS, who scores your credit? How do they do it, and what can you do about it? Our guests, Todd Mark of the Consumer Credit Counseling Service, and Deborah McNaughton, president of Professional Credit Counselors, thanks for joining us today. We want to go now to Ann in Texas, she is on the phone with a question about checking her credit. Ann, what's your question?
CALLER: My question is I've been told by a prospective mortgage lender that I should not check my credit, that every time a credit inquiry is made, including me on my own credit, that it is listed as a credit inquiry, and if you get a lot of those, that your score goes down because it means that people are, you know, investigating your credit and either not giving you credit or you didn't accept it. Is that correct?
NGUYEN: I've heard that too. Deborah, what do you think?
MCNAUGHTON: No, it's not. If you get your own credit report through the major reporting agencies, in other words, you go directly to Transunion, Equifax and Experian, there is no consumer inquiry. It is only your inquiry. Nobody else sees that and there's no rating on that. Now if you decide that you're going to be shopping for a mortgage, what you want to do and be aware of is that there is a window of time, approximately 10 days from the time you start your application, and let's say you shop different lenders, during that time, any inquiries within that 10-day period will only report as one inquiry. So you're safe on that.
NGUYEN: But what if you go through, say, an Internet service that says, oh, I can get your credit report for free?
MCNAUGHTON: Beware, because any time you see anything that is advertised that it's free, it's on the Internet, it's usually a merchant that is a subscriber to the reporting agencies, and it is the subscribers or the merchants that make the inquiry that will then appear on the credit report.
NGUYEN: So that can work against you then.
MCNAUGHTON: Absolutely. And those stay on your report for at least two years from the date that you made the inquiry...
NGUYEN: OK. We want to go now to Howard in Philadelphia who has a question about getting his FICO score. Howard, what's your question?
CALLER: Yes, my question is, you have three credit bureaus and in order to get a FICO score, do you have to call all three? And lastly, I have over 20 credit cards. I haven't had a (UNINTELLIGIBLE) in over 10 years. And I have to cut back on them. The last card I applied for, they told me that I had too many credits. And I explained to him the reason that that is, is because every time I see a lower rate, I get that card and I cancel the other one. And consequently they send me the card. But I would like to know what my FICO score is.
NGUYEN: Todd, it's a two-parter, let's start with you.
MARK: All right, Howard, the first question about your score, if you order your credit reports from the three bureaus, they're not going to give you your credit score. You've got to pay additional money. I always say if you're not going to go from the three bureaus, got from the originator, which is Fair Isaac. You can go to their Web site which is myfico.com, and I think it's $12. And you can get your official credit score, and again that's the engine that feeds all three bureaus. That's truly your official Fair Isaac credit score that all the three bureaus are going after. Use that as the basis of what people are looking at as far as what you are as a credit risk.
NGUYEN: All right, let's go now to Ron in Ohio. Ron, what's your question, I understand it has to do with student loans?
CALLER: Yes, actually, I have about 2000 in consumer debt and 10,000-plus in student loans. They're all in deferment. How does that affect you when you're applying, say, to get financing for a new car?
NGUYEN: Deborah?
MCNAUGHTON: Generally, anything that is in a deferment, they will look at the amount, but if you're not making payments at that particular time, they are not going to be concerned with it. And usually your score is not derived. Most of the time, you've got to remember, when you're getting -- going for a purchase on an automobile or a home, it is FICO-driven, so you need to get that FICO score from all three bureaus.
NGUYEN: All right. And Todd, do you have any other suggestions to him?
MARK: Well, Ron, obviously the most important thing is pay down your consumer debt because the less debt you have, the better you're going to look to lenders as far as if you're looking for additional credit. The less debt you have in ratio to the credit lines and credit limits available to you, the better off you're going to be. So work on paying the debt down. And I wouldn't worry so much about the student debt. I look at that as a really good debt. Student debt is an investment in your future. So it's a good debt to have.
NGUYEN: To both of you, I have a question. What's the biggest mistake people make when it comes to their credit scores? MCNAUGHTON: I think probably owing, in other words, if they have a credit limit of 1000 and they owe $999, that's going to definitely have an impact. The lower the balance to the credit limit, the higher your score is going to be. So it's important that you have a mix in your credit portfolio.
NGUYEN: And Todd?
MARK: Well, obviously the one driver for your credit score is your payment history. If you just pay your bills on time every month, you're like one-third of the way to a perfect score, not exactly a perfect score, but just pay your bills on time, you'll be looking good. The second big factor for your credit scores is how much do you owe? So the less debt you have, the better your credit score is going to be looking. So pay your bills on time, that's one-third of the score. Pay your bills on time and in full, wow, you're going to be looking fantastic.
NGUYEN: And that's what we all want. OK. Stay with us. We'll have more of your calls and e-mails right after this break. We'll be right back.
(COMMERCIAL BREAK)
NGUYEN: Today on DOLLAR $IGNS a topic vital to you if you need a loan, credit reporting and credit scoring. Once again, Todd Mark of the Consumer Credit Counseling Service joins us and Deborah McNaughton, of Professional Credit Counselors. Thank you both. We have Ashley in South Carolina on the phone now. And Ashley, I understand your husband has a very common name and that is causing a problem.
CALLER: Yes, it is. My husband's name is Tony Brown, and every Tony Brown in South Carolina it seems is on his credit report. And the problem is that we're trying to buy a house and we've been trying for about eight months now. And now we're on a month-to-month lease at our apartment. And I was wondering if there's anything that we can do to expedite things. Because it seems that once we find something and then we dispute it, it takes 30 days, and then we find something else, it takes another 30 days. And a lot of times it's automated responses, you can't get through to an actual person and it's really frustrating. So I was wondering if there's anything that we can do to expedite the process.
NGUYEN: Deborah, what can she do?
MCNAUGHTON: Well, if you are in the process of trying to obtain a mortgage or prequalification and there are issues like that, the credit reporting agencies that they will work with have a department called re-scorers. And you can go ahead and submit to them what the issues are. Now they are going to obviously charge you per item per report. But they can usually get everything taken care of so that you can get the -- into the home or the mortgage within 24 to 72 hours. So I would talk to the credit bureau that is handling -- that you're working with -- the mortgage company with.
NGUYEN: We want to go now to John in Chicago. John, what's your question?
CALLER: Well, I've got -- I had a health crisis. So I ran out of money very quickly. All my creditors, all my credit card companies are calling me every five minutes of every day. I don't answer the phone. And I don't have any money left. I ran through all my savings because of it, and I'm just kind of wondering what I do. It seems that any credit insurance that I had on my accounts required me to be up-to-date on payments, and because of my particular disability, you know, like I just didn't have time to make sure that all that was together.
I'm expecting Social Security to approve me and in fact approve me a year retroactive so I'd have plenty of money to pay a lot of them off at that point. But in the meantime, I mean, should I be talking to these people? You know, like the first one, the only one that I talked to said that, well, that's not good enough. We're just going to keep calling you every five minutes.
NGUYEN: OK. Well, Todd, he needs some help, what is your advice.
MARK: Well, it obviously sounds like you need to make a phone call to an NFCC member of Consumer Credit Counseling Service and speak to a counselor about your debts. Once the medical debts have taken over, and obviously you have no more savings, I want you to prioritize your bills every month. Please make sure you're making your mortgage payment first, your car payment and your utilities, insurance and food and only once the necessities are taken care of do you start worrying about the creditors. And chances are you're dealing with collection agencies right now. They're going to use a lot of rough tactics to get as much money out of you as possible. And they're not really interested in the problems or the issues that you've had with your health. They just want their money. So you need to stand up and protect yourself. And I think it would be really good for you to go to nfcc.org and find the consumer credit counseling service in your city.
NGUYEN: All right. Let's go online. We have an e-mail from Abby in Washington, and that e-mail says, my husband is new to the U.S. with a new Social Security number and no credit. He has proven credit from his country of origin but needs to build his credit here. How should he do so and how long does it take to build good credit? Deborah, what's your advice?
MCNAUGHTON: Well, the first thing I would suggest is that he contact the bank that he has his accounts with and get a secured credit card. That is always the best way to start establishing credit. And with that card, maybe get two pieces of credit with a secured card. Make small purchases, pay it back every month, and within a six to, you know, nine-month period, he may be able to qualify to get an unsecured. So the first is to start with a secured.
NGUYEN: Todd, your thoughts on this.
MARK: I couldn't agree more. It was very much like Iman's call in the first segment here. And unfortunately, you can have super credit, but if it's overseas, the lenders here in the United States aren't going to look at your history. So the secured card is the best way to go. Just charge a little bit every month, pay it off on time in full every month, and your score is going to start jumping up within six to nine months.
NGUYEN: All right. We want to get some final thoughts from you both on any advice for folks dealing with credit problems. Deborah, let's go to you.
MCNAUGHTON: Well, anybody that is dealing with credit problems does need to get into a good debt negotiation program. The companies that I recommend is the Debt Relief Clearing House at 888-4-debt-help. And don't be afraid to look at your credit report first so that you know what the problems are. You have to know so that you can go get your help.
NGUYEN: Absolutely, Todd.
MARK: Well, obviously, check your credit reports twice a year. And coming up in December, you're going to be eligible for one free from each credit bureau all across the United States. That's due to the new fact act. So watch your credit and only spend what you can afford to pay off at the end of the month. That's the best way to you're your credit looking good.
NGUYEN: Todd Mark and Deborah McNaughton, we thank you both for joining us and all the good advice.
Well, that is it for us. Next on "PEOPLE IN THE NEWS," profiles of our favorite "Friends."
Then at 6:00 p.m. Eastern on "CNN LIVE SATURDAY," the 50 worst songs of all time. Wonder what those are? See how many them are your favorites.
And at 7:00 Eastern, "THE CAPITAL GANG," Bush and Cheney behind closed doors.
I'll be back after a quick break with another look at that severe weather system in Texas.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
