Not All Lenders Report To Credit Bureaus

Dear Liz: I’m in the middle of reading your book, “Your Credit Score,” and really wish that someone had told me about this book when my financial problems began. In brief, a tax problem snowballed and I solved my immediate problems with "cash advance" loans from payday lenders. Pretty quickly my hefty salary was diminished by the service costs on those loans. Four-plus years later, (most of them working two jobs), I am almost out of the forest, but with pretty thrashed credit scores.

When I pull my credit reports, though, I don’t see either of the two remaining installment loans I took from payday lenders to pay my debt. When I called the lenders, they said that they only report defaults and payments that bounce. I have a perfect payment history with each loan, and was hoping that despite the nature of these loans, the fact that I was a good payer would help rebuild my credit.

Can I get these loans to reflect on my credit report? Will they help increase my score?

Answer: You can’t force a lender to report to the credit bureaus, and these particular types of lenders have little incentive to do so – at least with on-time payers, like you.

If your loans were reported, they probably would improve your credit scores. And if you had good credit, you would have access to other, much lower-cost options for borrowing money.

The best way to recover from this debacle and rebuild your credit is to first make sure you’ve built up at least a small cushion of cash for emergencies. Then search for a good secured credit card; sites such as CardRatings.com can help you find one.

Secured credit cards offer a line of credit equal to a deposit you make at the issuing bank. You’ll want one that reports to all three credit bureaus and that converts to a regular, unsecured card after 12 to 18 months of on-time payments.

Use the card lightly but regularly and pay it off in full every month. In time, your scores will begin to recover.

Dear Liz: I have been in a credit counseling debt-repayment plan for the last four years. The money for my debt is automatically transferred from my bank account to the agency, which is supposed to pay my credit cards. The problem is that the agency pays one of my credit card accounts late or not at all. When I write or talk with the agency the responses I get are unfriendly and imply the problem is my fault, although I've made my payments on time. I am trying to do the right thing and pay my bills off. I think it was a bad idea to join this agency. How can I fix this problem?

Answer: It appears the credit counselor you chose is not affiliated with the National Foundation for Credit Counseling, the oldest and most respected of the groups representing credit counselors. If it had been, you would have been assured the credit counseling agency was truly nonprofit (rather than a for-profit corporation masquerading as nonprofit) and you would have had recourse with the foundation if your payments had been misapplied.

You might consider contacting a foundation-affiliated agency (you can find one at www.nfcc.org) for a review of your situation.

Dear Liz: A financial planner recently suggested that we refinance our fixed-rate first mortgage (a $120,000 loan with 10 years left at 4.865 percent) and our second (a $90,000 loan with 12 years left at 6.75 percent) and get a 30-year fixed rate loan for $100,000 more than the combined total of the debt. That extra money would be spread in a variety of investments. We plan to be in our house for about 10 more years. Does our planner's strategy make sense?

Answer: For the planner, certainly. For you, not so much.

It rarely makes sense to borrow against your primary residence to speculate. And it's a rare fee-only planner who would suggest such a scheme, so you're probably dealing with a stockbroker, insurance agent or someone else who's being paid on commission to sell you that "variety of investments."

If you're still not sure, run the idea past a true, fee-only financial planner. You can get referrals from the National Assn. of Personal Financial Advisors at www.napfa.org or the Garrett Planning Network at www.garrettplanningnetwork.com.

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© 2008, No More Red Inc. Liz Pulliam Weston is author of the new book “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” She regrets that she cannot respond personally to inquiries, but questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., #238, Studio City, CA 91604, or use the “Contact Liz” form at her website, www.lizweston.com.

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