Some tips on rebuilding credit after an unemployment stint: Money Matters

October 3, 2018

Some tips on rebuilding credit after an unemployment stint: Money Matters

Q: I was unemployed many years ago and went through all of my savings and retirement funds during that time. I fell behind on several credit accounts. I am now re-employed and have been rebuilding my credit after settling the accounts and paying them off.

Several years ago, I applied for and received a Capital One credit card with an $8,000 limit. I have used the card carefully and have paid my balance off every month. My Capital One CreditWise credit score had hovered around 785 out of 850. I recently had my oldest credit account close, which dropped my score 20 points. Still, according to Capital One CreditWise, this is an excellent score.

Now my oldest open credit line is only four years old and my available credit is listed as average, so I am looking at opening another account to build my credit history. I know that getting a second credit card would be beneficial to rebuilding my credit, but I’m also in need of a newer car which I would like to purchase by the end of this year.

My question is: Should I apply for a car loan, get a car, establish payment history and then apply for a second credit card later on or am I better off to apply for a credit card first (which I don’t have to use) and apply for a car loan after a few months of having the second card?

M.P., Cleveland Heights

A: A 785 out of 850 credit score is indeed an excellent credit score.

However, you should take note that your CreditWise score doesn’t necessarily match your FICO score, which is the most recognized score and the one used by most lenders and credit card issuers. CreditWise uses a different formula and scoring model, known as Vantage. FICO and Vantage give different weight to various issues, such as payment history and recent credit inquiries.

Vantage also differs from FICO in other ways: It ignores paid collection items, dings you more for a late mortgage payment than another types of late payment and gives leniency to consumers affected by natural disasters.

On its website, the company says: “Your CreditWise score won’t be the same one your lender uses since lending decisions consider many different factors and scoring models.”

All of that said, a 785 credit score is great; it’s an A-plus. I would theorize your FICO score is also very good, depending on how many years it’s been since your delinquent accounts were paid off.

That makes me wonder why you’re so focused on rebuilding your credit. If your score is already A-plus or A or A-minus, getting another credit card isn’t going to help your score much. In fact, it will hurt you a bit in the short term, because of the credit inquiry. All scoring models view a credit inquiry -- especially one for a credit card -- as a risky move because it means you want to incur debt today and pay for it tomorrow.

Getting another credit card now could hurt your chances of getting a car loan. Overall, it’s unlikely you wouldn’t qualify for a car loan if your score dropped a bit. But it could affect your interest rate.

If I were you, I’d focus on buying a car and qualifying for the loan. Once that’s done, then you can consider whether to get another credit card. In the mean time, having that car loan with on-time monthly payments will boost your credit history more than another credit card.

Q: I have been attempting to check the credit records for my two minor children. I want to make sure there hasn’t been any activity on them and then place a freeze.The site says you can’t run a credit check for anyone under 18. How can I run a credit report and then freeze their records?

S.R., Mentor

A: You can indeed request a copy of the credit file for your minor children. Most likely, there’s nothing more than their name, address, date of birth and Social Security number. But there is a file. What you want is confirmation that there are no accounts in their file. And then you want to freeze it.

Incidentally, freezing your file doesn’t prevent you from getting a copy of your credit report yourself. Freezing prevents new potential creditors and other identity-verification services from accessing your file.

Since you’re in no rush, I’d request copies of your children’s reports by mail. You can print out this form and fill it out and mail it in. (One for each child.) Or you can write a letter and include your child’s name, address, date of birth and Social Security number. I’d send a separate letter for each. You can mail your form or letter to:

Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

To freeze credit files:By phone:Equifax 800-685-1111 (Press 3 for a freeze)TransUnion 888-909-8872 (Press 3 for a freeze)Experian 888-397-3742 (You have to enter your SSN, ZIP code and date of birth at the very beginning. Then it’s option 1 for fraud issues, then option 2 to order a freeze.)

Online (do not give out your credit or debit card number or any bank information):https://www.transunion.com/credit-freezehttps://www.equifax.com/personal/credit-report-services/https://www.experian.com/freeze/center.html#content-01

To reach Teresa Murray, email moneymatters@plaind.com or call or text 216-316-7064. She cannot respond to all queries or comments.Previous columns: cleveland.com/moneymattersOn Twitter: @TeresaMurray On Facebook: www/facebook.com/MurrayMoneyMatters

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