What’s a Credit Report?

From age 18 on, agencies collect data about your spending habits.

Monitor your ability to handle risks (i.e. loans I installment and revolving)

Impacts: amount you can borrow and the interest rates on that loan.

Who Can Access Your Report? Creditors Collection agencies Insurance companies Employers Landlords. Many others!!!

www.howmanyofme.com

What is in a Credit Report? Personal Data

Employment History

Public Records (liens, judgments, secured loans, foreclosures, bankruptcies, etc.)

Collection Accounts (defaults and lateness)

Credit Information (open accounts, date account was opened, payment status)

Inquiries (approved requests and others seeking credit information)

How Long Does the Information Remain On A

Credit Report? TYPE LIMITATIONSuits & Judgments 7 years Tax Liens – Paid 7 years from

paymentTax Liens – Unpaid No limitationCharged to Profit & Loss 7 yearsCriminal Record Limitations No limitations Other adverse information 7 Years Late Payments 7 YearsDebt Collections 7 YearsBankruptcy 10 Years

Annual Credit Report

The Fair Credit Reporting Act guarantees you access to a free credit report from each of the 3 nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months.

To get your free Credit Report By Internet: www.annualcreditreport.com By phone: 1-877-3222-8228 By mail: Annual Credit Report Request

Service P.O. Box 105281, Atlanta, GA

30348-5281

Improving Your FICO Credit

Score

http://www.whatsmyscore.org/estimator/

6

• What is a “Credit Score”?• Why you need a credit score?• How are these scores created?• Why are there different types of

scores?• What hurts your score?• Tips to improve your score. 6

Credit Score

What is a Credit Score?

A tool created from your credit report which can assess your financial status, history, and debt repayment record.

Credit rating is determined by three bureaus that all banks, employers,

companies you deal with check to see if you are a good risk

Two most commonly used credit scores is the: FICO (Fair Isaac Corp.) which ranges from 300 – 850. Vantage (Experian) scores go from 501 - 990.

There are hundreds of credit scores which are used by mortgage lenders, and companies that sell auto, homeowners and health insurance policies.

What doesn’t Count in a Score.

• age• race• sex• income• education• marital status• job or length of employment at your job• whether you've been turned down for

credit• length of time at your current address• whether you own a home or rent• information not contained in your credit

report

The scoring model doesn't look at:

Why is a Credit Score

Important? A poor credit score can affect a person’s ability to:

Obtain credit cards, car loans and mortgages Receive favorable interest rates and preferred credit limits on

cars and credit cards Qualify for utility and cell phone services with no down

paymentor substantial security deposit

Rent or lease a house or apartment Obtain government sponsored student loans Obtain private student loans with low rates

It might also affect: Your car insurance rate Life insurance rates Health insurance premium Possible job offers

Distribution of FICO

Credit score Percentage

499 and below 2 percent

500-549 5 percent

550-599 8 percent

600-649 12 percent

650-699 15 percent

700-749 18 percent

750-799 27 percent

800 and above 13 percent

Fair Isaac reports that the American public's credit scores break out along these lines:

The key credit score elements

Payment history32%

Utilization23%

Balances15%

Depth of credit13%

Recent credit10%

Available credit7%

Payment history

Repayment behavior (satisfactory, delinquency, derogatory)

Utilization

Percentage of credit amount used/owed on accounts

Balances Amount of recently reported balances (current and delinquent)

Depth of credit

Length of credit history and types of credit

Recent credit

Number of recently opened credit accounts and credit inquiries

Available credit

Amount of credit available

To compare your Vantage Score to a FICO Score:

Multiply your Vantage Score by 0.86

Vantage Score of 800 times 0.86 =

FICO Score of 688

How Much Will My FICO Score Drop?Alex

BlancaCurrent FICO Score 680 780Score after one of these is added to the credit report

One inquiry for a new credit card 675 (5) 775 (5)

A new charge card (additional hit) 665 (15) 760 (20)

Maxing out credit card 660 (20) 745 (35)

A 30-day delinquency 610 (70) 680 (100)

Settling a debt 625 (55) 665 (115)

Foreclosure 585 (95) 630 (150)

Bankruptcy 540 (140) 550 (230)

CREDIT BUREAU RISK SCORE REASON CODES

EQUIFAX

TRANS

UNION

EXPERIAN

Amount owed on accounts is too high 1

1 1

Level of delinquency on accounts 2 2 2

Too few bank revolving accounts 3 3 3

Too many bank or national revolving accounts 4 4 4

Too many accounts with balances 5 5 5

Too many consumer finance company accounts 6 6 6

Account payment history is too new to rate

7 7 7

Too many recent inquiries last 12 months 8 8 8

Too many accounts recently opened

9 9 9

Proportion of balances to credit limits is too high on bank revolving or other revolving accounts

10 10 10

Amount owed on revolving accounts is too high 11 11 11

Length of time revolving accounts have been established 12 12 12

Time since delinquency is too recent or unknown 13 13 13

Length of time accounts have been established 14 14 14

Lack of recent bank revolving information 15 15 15

Lack of recent revolving account information 16 16 16

No recent non-mortgage balance information 17 17 17

Number of accounts with delinquency 18 18 18

Too few accounts currently paid as agreed 19 19 19

Length of time since derogatory public record or collection is too short 20 20 20

What Rate Will Your Score Get You?

FICOScore

30-yearfixed-rate mortgage

36-monthnew auto loan

15-yearhomeequity loan

CreditCard APR

740 5.0% 6.4% 8.1% 7.3%

720 5.2% 6.4% 8.4% 10.0%

700 5.2% 7.9% 8.9% 15.0%

680 5.4% 9.9% 9.7% 15.0%

660 5.6% 9.9% 11.2% 18.0%

What is APR? APR is the Annual Percentage Rate on a loan or a credit card.

It is interest rate that will determine how much you pay in interest each year.

How much will you pay?

A home theater system for $1,000, when purchased on credit card and each month you

pay minimum payment will actually cost

FICOScore

CreditCard APR

You will pay off the balance in about

You will end up paying an interest of

You will end up paying an estimated total of

740 7.3% 5 years $196 $1,196680 15.0% 7 years $580 $1,580660 18.0% 8 years $863 $1,863

Credit Scores and Interest Rates

2010 Ford Focus 5 yrs. 4 yrs. 3 yrs.

5% $377.42 $22,645

$460.59

$22,108

$599.42 $21,579

4% $368.33 $22,100

$451.58

$21,676

590.48 $21,257

3% $359.37 $21,562

$442.69

$21,249

$581.62 $20,938

0% $333.34 $20,000

$417.66

$20,000

$556.00 $20,000

Credit Score Mistakes

1. Paying bills late2. Closing old credit cards3. Maxing out . Watch the “Utilization Rate” (35%)4. Using cash over credit5. Applying for extra cards6. Not shopping around for lower rates7. Not checking your credit reports.