The 60-Minute Guide to Understanding & Raising Your Credit

ScoreBrought to you by:

Ruth Schriefer, Iowa Co. FLEPeggy Olive, Richland Co. FLE

Joint Council of Extension ProfessionalsApril 6, 2011

If winning isn’t everything, why do they keep score?- (the late, great) Vince Lombardi

Who cares about your credit?

• Creditors / Lenders• Insurance Companies• Landlords• Employers• Utility Companies• Government Agencies• YOU!

Credit Reporting Bureaus

•Equifax•Experian•TransUnion

Who’s keeping score?

• Fico Score most widely used• Vantage Score – 3 Bureaus• Many other “score” brands

Credit Scores

Through your credit history found in your credit report:

•How you’ve paid your debts•How much debt you have•Whether you’ve made

payments on time

How do they keep score?

•Identifying information•Credit history•Inquiries•Public record

information

What’s in your credit report?

Credit reports DON’T contain…

• Checking or savings account balances

• Income• Medical history• Purchases made with cash or

checks• Business account information• Race, gender, religion, national

origin• Driving record

Credit CardsDebit CardsPrepaid Debit CardsSecured Credit Cards

What’s in & what’s out?

How to Read Your Credit Report

1. Check to make sure you are aware of all accounts listed and balances are what you expect.

2. Look for anything suspicious in the section that lists who has received copies.

3. Make sure no inquiries have been made about loans or leases you didn’t apply for.

(continued)

How to Read Your Credit Report

4. Check for addresses where you never have lived.

5. Check for typos in your social security number.

6. If incorrect information, contact the creditor and the Credit Bureau. Follow up with a letter. Report the problem quickly and in writing.

FREE Credit Report

• www.annualcreditreport.com

• 1-877-322-8228

• Annual Credit Report Request ServicePO Box 105281Atlanta GA 30348-5281

Order your report from each of 3 bureaus every 12 months.

Keep an eye on your credit report to keep up your

credit score.

What does my score mean?

• What is a good score?– Most lenders consider 720-750+ to

be very good.

• A good credit score doesn’t just mean that you’ll get a loan, it also means you’ll pay less for it.

Source: FICO© Score Trends Service;retrieved from www.myfico.com 4/3/11.

FICO Score

Source: Fair Isaac Corporation, www.myfico.com

Factors That DetermineYour Score

35% - Your Payment HistoryLenders want to know how you have handled credit payments in the past.

Credit CARD Act of 2009

• Grace Periods– 21 calendar days from time of mailing– Bans weekend deadlines, due dates that

change each month, and cut off times earlier than 5:00 pm

• Payments– Bans issuing a charge for paying a bill

by phone or online (except if use a service rep)

• Bans “Universal Default”

Factors That DetermineYour Score

30% - Amount Owed &Available Credit

The amount you owe on a mortgage, car loan, and other outstanding debt, along with your total available credit.

Credit CARD Act of 2009

• Opt-In to Over-Limit Fees– Have to get your permission to process

transactions that would place the account over the limit; can only charge once per bill

• Balance Payments– apply payments to the highest interest

balance first– Bans use of balance in a previous month

to calculate interest charges on the current month ("double-cycle“)

Current Credit Card Balance = $1,715.24

Minimum Payment Due = $18Due Date = 21 days

If you make no additional charges on this card and each month you pay…

You will pay off the balance on this statement in about…

And you will end up paying an estimated total of…

Only the minimum payment

12 years $2,685 (969.76 in interest)

$55 3 years $1,977(Savings = $708)

New “Black Box” Warning

Factors That DetermineYour Score

15% - Length of Credit History

How long you’ve had credit accounts and the average age of your accounts.

Credit CARD Act of 2009

• NO credit cards if you’re under 21 – unless the application is co-signed by

parent– proof of ability to repay the debt

• Cannot raise credit limit without co-signer consent

• No more ‘gifts’ on campus

BUT…

Factors That DetermineYour Score

10% Each – New Credit &Types of Credit Used

How long since you opened up a new credit account and the different types of credit accounts that you have (mortgage, auto loan, student loan, credit cards, etc.).

Credit CARD Act of 2009

• Creditor must consider ability to pay before raising limits or issuing a new card

• First Year Protection: – Terms must be clearly spelled out and

stable for the entire first year. – Firms may continue to offer promotional

rates with new accounts or during the life of an account, must last at least 6 months.

BUT…

As of January 1, 2011

If your credit score and/or report was used for a credit decision about you, you’ll get:

• Credit Score Disclosure (CSD) Notice and / or

• Risk-Base Pricing (RBP) Noticeor else only

• Adverse Action Notice

• To Purchase your Credit Scorewww.myfico.com

• To Estimate your Credit Scorewww.bankrate.com

under “calculators”• For Free Credit Score:

www.creditkarma.comwww.quizzle.com