Q&A: Auto dealers must abide by credit check limits

Dear Liz: I have loans and have paid my credit cards in full for over 30 years. My FICO score is 829. I don’t really care as I don’t plan to borrow in the future. I check my score and reports occasionally to check for a possible error or scam. Other than this, is there any reason at all that I should care?

I did notice a car dealership checked my score when recently I submitted a down payment check to order a car for which I would pay in full. I don’t believe they would refuse to sell me the car for cash if I had a lousy credit score, so they probably wanted some measure of reassurance about whether I have a lifestyle that could afford completing the deal.

Answer: You have many FICO scores, not just one, but if any one of them is 829, then the rest of them are probably pretty good, too.

Credit scores are used for more than borrowing decisions. In most states (but not California), insurance companies can use credit information to set premiums. Cellphone companies, landlords and utilities use them as well.

Car dealerships, however, aren’t supposed to pull your credit scores without your permission. That’s a violation of the federal Fair Credit Reporting Act.

If the dealership got your permission by telling you a credit check was necessary for a down payment (or an all-cash deal, for that matter), then it misled you.

To prevent money laundering, dealerships are required to ask for identification and a Social Security or Tax ID number from buyers who are purchasing a car for more than $10,000 in cash. That’s it.

But some dealers pretend the anti-terrorism Patriot Act requires them to check your credit when you pay cash, which is nonsense. Typically, dealerships run credit checks to see if they can make an extra buck by financing the deal. Those checks are coded as hard inquiries that can damage people’s credit scores. (That’s in contrast to what happens when you check your own credit, which creates “soft” inquiries that don’t affect scores.)

Your scores are high, so the credit check probably didn’t ding them much. But the dealership was accessing information about you that it didn’t need to have. Plus, the more outfits that have your credit information, the greater your risk of identity theft.

If you didn’t give your OK, you could file a Fair Credit Reporting Act lawsuit to collect up to $1,000 from the dealership. If you did give your permission, strongly consider withholding it the next time if you’re not interested in financing your vehicle.

Wednesday’s need-to-know money news

Today’s top story: Home loans with 3% down. Also in the news: How one man paid off nearly $100K in debt, a travel rewards bucket list, and the possibilities of postal banking.

HomeReady and Home Possible: Loans With 3% Down for 2018
You’ll need a good credit score.

How I Ditched Debt: Smart Solutions for ‘Stupidest Decision’
How one man paid off nearly $100K in five years.

Travel Rewards Bucket List: Showering on a Plane
Hope the water pressure is good.

What Is Postal Banking?
New legislation could add banking services to your local post office.

Q&A: Do credit scores punish you for not carrying debt?

Dear Liz: I am fortunate to be able to afford homeownership without having to obtain a mortgage. The same is true of owning cars without a car loan. I pay my credit card bills in full each month. In short, I do not carry any debt.

However, it seems to me that I am being “punished” by not carrying a load of debt. My credit score is reduced by this lack of debt and I am wondering why this is.

Answer: The most commonly used credit scores don’t “know” if you’re carrying credit card debt or not. The balances used in credit score calculations are the balances the card issuers report to the bureaus on a given day (often your statement balances). You could pay the balance off the next day, or carry it for the next month, and it would have no impact on your scores.

A small part of credit scoring formulas measure your mix of credit, or whether you have both revolving accounts (such as credit cards) and installment loans (mortgages, car loans, student loans, etc.) You may get higher scores if you added an installment loan to your mix. If your scores are low, it can be worth adding a small personal loan to boost them. If your scores are good, though, it may not be worth the effort and interest expense.

Friday’s need-to-know money news

Today’s top story: Managing debt in retirement takes some planning. Also in the news: Why your credit score means both everything and nothing, 5 ways to save on energy during the dog days of summer, and what the Dept. of Ed’s proposed new rules on debt forgiveness requirements means.

Managing Debt in Retirement Takes Some Planning
What you can do to still retire comfortably.

Your Credit Score Means Everything — and Nothing
Don’t be afraid to look.

5 Ways to Save Energy During the Dog Days of Summer
Baby, it’s hot outside.

What the Department of Ed’s Proposed New Rules on Debt Forgiveness Requirements Mean for You
Rules are tightening up.

Tuesday’s need-to-know money news

Today’s top story: This could be the biggest blow to your retirement. Also in the news: How one couple ditched their debt, why good credit is essential when remodeling a home, and how to apply for a credit card with no credit.

This Could Be the Biggest Blow to Your Retirement
The battle with healthcare costs.

How I Ditched Debt: ‘It Became Like a Game to Us’
One couple’s story.

Remodeling Your Home? Good Credit Offers a Strong Foundation
The better the credit, the better the offers.

How to Apply for a Credit Card With No Credit Score
Exploring the options.

Monday’s need-to-know money news

Today’s top story: The benefits of a just-for-debt credit card. Also in the news: July’s stock market outlook, bogus organic fruit, and how long it takes your credit score to recover from a drastic drop.

Just-for-Debt Credit Card: It Has One Job
Use this card for only one thing.

Stock Market Outlook: A Market That Giveth and Taketh Away
Buckle your seat belts.

$6 Million in Bogus Organic Fruit Sold to U.S., Costa Rican Report Finds
Bogus pineapples fill the shelves.

How Long It Takes Your Credit Score to Recover from a Drastic Drop
Be prepared to wait.

Tuesday’s need-to-know money news

Today’s top story: How to save money by thinking like a college student. Also in the news: What an average retirement costs, how soon should you worry about your credit, and how to budget for your kids’ summer vacation.

Save Money by Thinking Like a College Student
You can skip the ramen.

Let’s Get Real: What an Average Retirement Costs
Breaking down the numbers.

Ask Brianna: I’m 18. Should I Worry About My Credit Yet?
It’s never too soon.

How to Budget for Your Kids’ Summer Vacation
Summer can get very pricey.

Don’t let your credit die of neglect

Certified financial planner David Rae says he used to think that “anyone who could draw breath” could get an auto loan. Then one of his millionaire clients tried to buy a car — and failed.

The 42-year-old client was turned down for a loan because he had no credit scores , says Rae, who is based in Los Angeles.

Nineteen million American adults are “unscoreable,” lacking enough recent credit history to generate credit scores, according to the Consumer Financial Protection Bureau. They either have “thin” files, with too few accounts, or “stale” ones that haven’t been updated in a while. In my latest for the Associated Press, find out how having no scores can cost you.

Friday’s need-to-know money news

Today’s top story: Seeking smart, funny – and a credit score above 700. Also in the news: Wellness travel helps you tune up or tune out, what you need to know about investing in IPOs, and a major tax mistake to avoid if you have student loans.

Seeking Smart, Funny — and a Credit Score Above 700
Your credit score could impact your dating options.

Wellness Travel Helps You Tune Up or Tune Out
Getting in touch with what matters.

What You Need to Know About Investing in IPOs
Proceed with caution.

Got student loans? Don’t make this major tax mistake
Don’t forget to deduct your interest.

Q&A: Credit scores come in many forms

Dear Liz: I am now getting my credit score from three different places: my bank, one of my credit cards and a free online site. Why are all three of the scores always different?

Answer: You don’t have one credit score, you have many and they change all the time. Furthermore, you’re probably looking at scores created with different formulas that may be using information from different credit bureaus.

The FICO 8 is the most commonly used score, but the number you see may vary depending on whether the data is drawn from Equifax, Experian or TransUnion credit bureau and when the score was created. Your scores will change as lenders update the information in your credit report. FICO scores may also be tweaked for different industries, such as credit cards or auto loans, and be on a 250-to-900 scale rather than the 300-to-850 scale of other FICO scores. FICO scores also come in different generations, so your FICO Bankcard Score 2 may be different from your FICO Bankcard Score 5.

Free sites typically offer VantageScores, created by the three bureaus to be a rival to FICO. These scores are also used by lenders, but not to the same extent as FICO scores.