Dear Liz! My husband has a lower credit rating than me. Every month he gives me a check from his personal checking account, which I put into our family account so that I can pay with our credit cards. He thinks he needs to pay some cards directly to improve his score. He loves to mail checks in the old fashioned way (which drives me crazy!). Do you think this practice will improve his performance?
Answer: The short answer is no. Credit scoring formulas don’t care who pays the bills if they are paid on time.
Explaining some of the basics of credit scoring may help you.
People don’t have one credit rating. There are many because there are many different scoring formulas used.
The most commonly used credit rating currently is FICO 8. There are many other versions of the FICO scoring formula, including some that are adapted for various industries such as credit cards and car loans. In addition, there is VantageScores, a competing formula created by three major credit bureaus: Equifax, Experian, and TransUnion.
Credit ratings are based on information on your credit reports with these bureaus, which are private companies that do not usually share information. Since the information may differ from bureau to bureau, your credit ratings may differ from each bureau.
There is no such thing as a joint credit report or a joint credit rating, so couples will usually have different grades, even if they have multiple joint accounts. How long a person has had a loan, how many credit accounts they have, and the combination of loan types can vary, resulting in different estimates.
Your husband may have lower grades than you currently have, but this is not a problem to be addressed. If his scores are usually above 760 on a typical scale of 300 to 850, he will receive a better rating and conditions when applying for a loan.
If his grades need improvement, he should start by checking his credit reports with each of the three bureaus at: www.annualcreditreport.com. (Previously, these reports were provided free of charge only once a year, but now you can receive them for free every week until April 2022.) He must dispute any inaccurate information, such as accounts that do not belong to him, or accounts showing missed payments. if all payments were made on time.
He can improve his scores by reducing the used portion of the available credit or by adding one or two accounts. Opening accounts can temporarily reduce his score, but usually a new account will add points over time if used responsibly.
And try to convince him to stop sending checks in the mail. A faulty check can result in a missed payment, which can lower your credit score by 100 or more points. Electronic payments much safer and more efficient.
Liz Weston, a certified financial planner, is a personal finance columnist at NerdWallet. Questions can be sent to her by calling 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or using the Contact form at asklizweston.com.