Money Rehab with Nicole Lapin - "My Credit Score Went Down Randomly. How Can I Get It Back Up?” (Listener Intervention)

Episode Date: November 11, 2021

Has your credit score ever dipped seemingly out-of-the-blue? That happened to today’s listener, Caree. Now she wants to know: WTF? Nicole calls up Caree to talk it through, and to unpack which credit score updates are worth paying attention to.

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I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself.

Find a co-host at Airbnb.com slash host. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. Are you ready for some money rehab? Wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Today we have a listener intervention with a money rehabber who wrote in because she saw that her credit score dipped for seemingly no reason. She was hoping to

understand why it dropped and how to pick it back up. We did go over some tips to boost her credit score, but our conversation turned into a bigger conversation about when your credit score matters and when it should take a backseat to other things in your financial life. Here's our conversation. So tell me a little bit about what's going on. So I'm not in any kind of financial struggles and my credit score is pretty good. It's in the higher, better area. However, there's a lot of misconceptions about how credit works and how to properly use your credit card and all that stuff. And, um, essentially, you know, I, I track my credit score, you know, through the app and it tells me all the time that I don't have enough credit lines open,

but then it tells me that my credit lines that are open are immature. And, you know, and it's one of those things, like I want to build my credit score and like make it work for me essentially. Yeah. And, um, and I'm just curious, like, is it worth it to open another credit card, even though you're going to hit it, you know, get a hit on your credit score, stuff like that. So a few questions. What is your credit score? It is in the seven high seven sixties. Okay. How often are you checking your credit score? Probably once a month. Why are you checking it once a month? Because the app kind of notifies me if there's any changes. And you're concerned about little changes like 5, 10 points, 20 points, stuff like that. Well, there was a random 14-point hit recently. So it went down 14 points and I was really

confused. I couldn't quite figure out what it was. And then it went back up 10 points and I couldn't quite figure out what it was. And then it went back up 10 points and I was really confused by that whole thing. And so that's kind of what piqued my interest into figuring out what the deal is with credit. Yeah, it's definitely a complicated thing. Is there a reason that you need a higher credit score than like 760? Are you looking into a big purchase in the future? Or is it just like you want to be an A student?

Kind of both. Definitely want to be an A student. I mean, I strive to be, you know, like to keep my adult, you know, things in order and do the best that I can. Obviously, most of us strive for that. But, you know, eventually... I don't think it's hard. It is. It's so hard. Yeah, it's so hard. But eventually, we, you know, we went to build our dream home when my husband retires from military. So it would be nice to make sure that, you know, all of our ducks are in a row before that time comes. I mean, we have a while, but... you know, all of our ducks are in a row before that time comes. I mean, we have a while, but that's very responsible of you. I am so proud of you. I too was the kind of student that

did my term paper the day it was assigned, not the night before. I am a card carrying nerd for sure. And I fully get this. And when I started getting into credit, I would compulsively check my credit all the time. The thing about that is you don't necessarily need to do that, especially if you are far out from a big purchase. So when is your husband going to retire? He will be retiring in about 10 years, but that doesn't necessarily mean that we won't be buying a house within that time period. It's just, you know, by the time he retires, we want to actually like build our dream home, kind of, you know, settle down.

So I love this plan. This is a fantastic idea. I would like to come to the housewarming, please. And thank you. Building a house. I've been through this before is always over time and over budget. So it's really and thank you. Building a house, I've been through this before, is always over time and over budget. So it's really smart of you to get a jumpstart on it and to have all of your credit ducks in a row. Before I give you some credit hacks,

and I definitely have some for you, I just want to let you know this is not a criticism at all. I know this is coming from a good place. You don't need to check your score as much right now, and you don't have to freak out about a 10-point increase or decrease randomly. If you were telling me that you're going to buy a home in six months, this would be a different conversation. And there are some ways in the short term, right before you're about to make a big purchase, that you can do to boost your credit score. We don't even need to get into that because we're not in that time right now. Like right before you're about to make a big purchase, you don't want to make other big

purchases. There are different things that you can do with your credit to boost it. You can get a boosting thing from like Experian or whatever. But that's not your scenario, correct? Correct. Okay. So I just want to caveat all of this by saying you're doing great. Thanks. And I think that this is the better extreme to go to than the other side of not caring and not ever checking. Right. But I think that there's a balance here from what I'm hearing from you. Right. And don't be so hard on yourself.

Hold on to your wallets, boys and girls. Money Rehab will be right back. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start or even too complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high-quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my

house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host, so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. Now for some more money rehab.

So how many credit cards do you have? I currently have two. Okay. Why don't you want another one? Just because, you know, I don't know. I just... Points and keeping track of all these different accounts and when they're due and which one that I should use. It all gets a little bit for me because I'm a mom,

I'm a wife, I work full time. I got a lot of things going on already. And just the thought of having to manage more accounts is a little overwhelming at times. I totally get that. So is there a credit card that you're an authorized user for? Yes. Oh. Is that one of the two? Or is that separate? It's one of the two.

Okay. So you're the authorized user on your husband's Amex? Yes. And then you have your own Amex. Okay. I have my own Amex. Okay. I have my own, uh, visa. Yeah. How much are those credit limits? Do you know? I don't know off the top of my head. Roughly 20,000, 10,000, 5,000. I'd say my visa is probably closer to between 15 to 20,000.

to between $15,000 to $20,000. And then I think it's about the same for the Amex. The Amex might be closer to like $10,000 because it's fairly new. It's only a couple years old. And how much are you guys approximately spending on those cards? I know you pay them off every month, but still, how much are you using of the credit? I mean, definitely below 30%. Oh, good. Yeah. Okay. So you know of the credit? I mean, definitely below 30%. Oh, good. Yeah. Okay. So you know about the utilization. Yes.

For folks who are new to this credit optimizing game, can you explain credit utilization? from my understanding is that if, as long as you're using below 30% of your credit, um, it is, it just looks better to, um, creditors, um, in the long run. Yes, absolutely. Absolutely. It is so important for you to not max out your credit card and if possible, keep it below 30% or 25%. But if you're trying for a perfect score, do you want to know the percentage you should keep it below? Yeah.

Seven. Seven? Okay. Yeah. And I know that's tricky. And there are a couple ways to do that. One way to do that is to increase your limit. So then the percentage gets lower.

Have you tried to increase your limit recently? Recently, no. A couple of years ago, I did try to ask this bank to raise my credit limit for my visa. And they told me something along the lines of, we don't do that. I don't know. They randomly increase it. I get random emails that they've increased my credit, but maybe I just talked to the wrong person. That could very well be. I would suggest trying again and asking for a credit limit, but also showing your credit report or at least telling them

that you have increased your credit score since opening the account. Right. Because that's what they would be looking for. Or if you got a raise. I don't know if you did or if your husband did. Okay. Technically, a new job is a raise, right? Perfect.

Love it. So I would go back armed with that information and ask for a credit increase. Never say no to a credit increase if you're responsible enough to not go crazy with it. Right, right. Because that means you have more available credit. And so then it just makes your utilization score smaller and smaller. There is no science, Carrie, to how many credit cards you should have. The jury is out on this one.

It's kind of a mystery as far as credit reporting agencies go. I don't think there is a magic number. The general consensus is about three credit cards are the sweet spot for your credit score. I would suggest if you can handle it to open up one more and put a recurring bill on it. So you're in military housing, right? No, we are not anymore. Okay. So you're paying like cable and electric and stuff like that.

Right. Okay. What I would do is I would just set direct deposit to that other credit card and just leave the recurring stuff on there. So you're not even using it for other things. You're just having something open with consistent low charges on it. And I think your credit score will love you later on for that. Great. Truly. Have you received your credit report? I have. Yes.

What's going on in there? Not a whole lot. Is there any funkiness like is there any mistake or is there a collections thing that you paid off is there anything to dispute to be honest no um i actually don't have anything negative and i've actually helped my husband fix a few things in his credit. Amazing. How did you do that? Well, I happened to work for a mortgage company a while back and we were buying a house. And so I got to see what was on his credit report. And there was something that was about, I don't know, $1,500 in collections. And someone told him that after 10 years, it just magically disappears. And I told them, no, you just need to pay it off. And then,

you know, your credit will start to build because his credit was not very great at the time. Yeah. Unfortunately, there's not a lot of magic with finances or your credit score. I wish there was. I would be here for that. If there is a dispute, though, for folks listening who might not even have their credit reports, you need to get the actual report, not the score from Experian, Equifax, and TransUnion. And if there is an issue or if there was something funky that you need to dispute or something you paid off already through collections that's still appearing, you need to write a letter to all the three credit bureaus if there's some negative information. There is an act, FYI, it's called the Fair Credit Reporting Act, that requires all credit bureaus to report only accurate information on your credit report. So

if it's erroneous, you need to be responsible and tell them. If they don't do that, or if it is kind of your fault, you can also write a goodwill letter. And you can basically say, I'm amazing, which is essentially what it is. You can say, here's my situation. Oftentimes, this stuff happens because, God forbid, people go through medical debt or have an emergency or an issue. So there are some goodwill templates that you can find online. And, you know, it seems kind of like a Hail Mary or a long shot, but you'll be surprised how often creditors actually make goodwill adjustments. You'll be surprised how often creditors actually make goodwill adjustments. So I'm glad that you've looked at those.

And I'm also glad that you've helped the hubs. I hope he is too. Yes, he is. So do you have any secured debt? Right. Like as far as debt, we both just bought new vehicles recently. I had my car for like 10 years and it was at that point where it was costing more to fix than to, um, you know, just buy a new vehicle. So, um, but that's pretty much it for me. I know when you get married, you kind of like marry into your spouse's debt. So my husband does have student loan that he's still paying off,

but we've done kind of like the snowball effect with all of that. So we've been able to pay off quite a bit of his debt and we should be able to have it paid off by the end of the next year, year and a half. Okay. And then that's, I mean, other than the vehicles, that's really the only other thing we have going on. So do you know what a secured credit card or a secured loan is? If you don't, don't worry about it. No. Yeah. So there are actual credit builder loans where you're essentially lending money to yourself and then paying it back. So you can make monthly payments into essentially a CD. You know what a CD is? You keep the money in there. Yeah, so you can get it at a bank. They

give you different interest depending on how long you leave it in there. And then you don't touch it and then you get it back. So if there is an amount of money that you can do without for a while, the bank then reports your payments to the credit bureaus. And so when the loan ends, you receive the CD minus some administrative fees or whatever. But this is another way to increase your credit score. You can also do a secured credit card, which is essentially the same thing. You're backing it with cash. You got to tell you, Carrie, this is normally stuff for people with crappy credit scores. stuff for people with crappy credit scores. Okay. This is not for you. In fact, if you're trying to get your credit score into the 800s, which is like A-plus territory, then oftentimes the advice is to close secured loans or credit cards. Gotcha. Because those are like training wheels to get people into the, you know, 600, 700 region.

So my biggest suggestion to you is just to not panic over an imperfect score. Honestly, most banks are going to offer someone with 760 or higher the best published interest rates there are. So the reason you want a higher credit score is to get lower interest rates, period, end of story, for credit cards, which it sounds like you're paying off anyway, for mortgages, for car notes, whatever. But you're basically getting the same rate as a very stellar credit student with a 760 as someone with an 850, which would be a perfect score, is getting. So my suggestion, and you know this is maybe not what you want to hear, but I can tell you all this stuff for folks that actually need to increase their credit score.

But, you know, you can, you're doing great. Like, try not to micromanage your credit. You don't need to stress about it. I know this is not what you want to hear. And I do not mean to sound at all patronizing at all, but you're doing great. And you know what? Just be aware of what it is. Keep up these good habits that you've already cultivated. And don't panic if you haven't achieved perfection. It sounds like you know to check the reports and how to dispute those. Maybe now you know a couple of other little hacks. Now you know to always accept a credit increase. So that decreases your utilization score. Are you saying that 10 times fast? And maybe open up another credit card that you can

just set and forget. Keep a bill on there. You have another line of credit open. Gotcha. I mean, that's super helpful because it's always nice having someone kind of reassure you that you're doing a good job. And I was just curious if there was anything extra that I could be doing to make it better. anything extra that I could be doing to, you know, make it better. I am here to give you the money rehab, Nicole Lappin, rich bitch stamp of approval. Carrie, you're doing great. There are a couple little tweaks that I could suggest. And over the next 10 years, if you have consistency, you'll keep your score around the same level. I guess my biggest question is what's your husband's score?

Because if you guys are going to buy a house together, how's he doing? He actually is a few points ahead of me now. Okay, good. Yeah. So he's our breadwinner, as we say, because we move frequently with the military. So I'm usually having to switch jobs and I you know I don't have a job for a couple of months when we move a lot of the time so he pays most of the bills so of course you know the person who pays is the one who gets the

recognition so I get it I it's my Halloween costume I'm gonna be a breadwinner for Halloween I bought a bread dress and I got a bunch of medals. So if you want to borrow that idea, I have all the financial puns. For today's tip, you can dig straight to the bank. I'm always down for a little credit score hygiene. But there are some times when it makes sense to look at your credit score super duper closely and other times when it may just be a distraction. If your credit score isn't where you want it to be and you're taking active steps to improve it, then go ahead.

Stock your credit score like it's golden range of 750 and up, you don't need to be checking your credit score obsessively unless you're approaching some event where you know your credit score is about to be checked and you need it to be in tip-top shape, like buying a house, for instance. Otherwise, my advice to you is just pat yourself on the freaking back for acing your credit score full stop. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team,

Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.