The Nitty-Gritty:
How to Read Credit Reports
Jake Bebar
Chief
Agenda
●
●
●
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What are Credit Reports?
Where do you get Credit Reports?
Common Lingo of Credit Reports
The Four Components of Credit Reports and
Practice
● What is FICO?
● Questions and Wrap Up
What is a Credit Report?
Credit Report: A detailed
report of an individual's
credit history prepared by a
credit bureau and used by a
lender to in determining a
loan applicant's
creditworthiness
A Credit Report Includes:
1. Personal data
2. Summary of credit history (number and type of
accounts that are past-due or in good standing)
3. Detailed account information
4. Inquires into applicant's credit history (number
and type of inquiries into applicant's credit report)
5. Details of any accounts turned over to credit
agency (such as information about liens, wages
garnishments via federal, state or county records)
6. Information on how to dispute any of the above
information.
Where to “Pull Credit Reports” From:
Various Sites Offer Credit
Reports
We have had positive
experience with the
following sites or services:
● Credit Karma
● Credit Builders Alliance
● Annual Credit Report
Credit Karma:
Advantages:
Disadvantages:
Where to “Pull Credit Reports” From:
Credit Builders Alliance
AnnualCreditReport.com:
Advantages:
● LFA Partner
● No Impact on Credit Score
● Allows reporting on loan
repayments to help clients build
credit
Disadvantages:
● Requires 501c3 status and
application to join
● There is a cost to join and pull
each report
Advantages:
● Only site credit reports authorize
to provide fully free credit reports
● Able to Pull Reports from all 3
Credit Bureaus
● No Impact on Credit Score
Disadvantages:
● Sometimes clients struggle with
verification questions
● Does not provide FICO Score
Learn The Lingo
TYPE: Revolving, Installment, Mortgage
Revolving: credit available up to predetermined limit
Installment: set payment schedule and terms for specific amount
Mortgage: debt with set terms secured by real estate property
BALANCE: Balance owed as of date verified or closed
HIGH CREDIT: Highest amount ever owed by the consumer on that account
CREDIT LIMIT: Maximum amount of credit approved by credit grantor
PAST DUE: Amount past due as of date verified or closed
***List Taken from ”Become a Pro at Reading Credit Reports Webinar on Fri, Mar 22, 2013”***
Learn The Lingo (continued)
OPENED DATE: Date the account was opened
VERIFIED DATE: Date of last update on the account
CLOSED DATE: Date account was closed. Closed means person can’t borrow
anymore on it.
PAID DATE: Date account was paid.
TERMS: Number of payments, payment frequency and dollar amount agreed
upon
DELINQUENCY: Indicates the date on which the maximum level of
delinquency for that account occurred and the dollar amount of consumer’s
maximum delinquency
***List Taken from ”Become a Pro at Reading Credit Reports Webinar on Fri, Mar 22, 2013”***
Personal
Information
4 Components of The Credit Report
1. Personal Information
2. Tradelines
3. Public Records
4. Inquiries
Will be on every credit report regardless of
site from which the credit report is ‘pulled’
Personal Information:
● Usually the first section of the
credit part
● Used to verify that the credit
report belongs to you client
● Sometimes the address and
employment may not be
accurate but can be verified by
collecting other documents from
your client (ie photo id, pay stub,
etc.)
● Name
● Social Security Number
(or last 4)
● Birthday Day
● Most Current and
Previous Addresses
● Employment
● Other Names Previously
Used
Personal Information on Credit Karma
Can You Spot the
Following:
● Name
● Previous
Addresses
● Social Security
Number
● Date of Birth
● Employment
History
Personal Information on Credit Karma Answers:
Can You Spot the
Following:
● Name
● Addresses
● Social Security
Number- Will not
appear on Credit
Karma but is used to
set up an account
● Date of Birth- Will not
appear on Credit
Karma
● Employment History
Personal Information Practice:
Can You Spot the
Following:
● Name
● Previous
Addresses
● Social Security
Number
● Date of Birth
● Employment
Answers:
Can You Spot the
Following:
● Name
● Address
● Social Security
Number
● Date of Birth
● Employment
Personal Information Practice:
True of False:
● This credit report
belongs to John Smith
● The last 4 of the social
security number is 9291
● The Date of Birth is
09/02/1991
● The most recent
address was 1398
Kansio Rd
● His current employer is
Marmers Corp.
Answers:
True of False:
● True: This credit report
belongs to John Smith
● False: The last 4 of the
social security number
are 0000
● False: The Date of Birth
is 01/01/1970
● False: The most recent
address was 123 South
St
● False: His current
employer is Canlon Inc.
Tradelines
Tradelines
Tradelines are credit accounts
opened within the last 7 years
that is reported by the lender of
each account
Include Info about:
● Account Type
● The Date Opened
● The High Credit
● The Account Balance
● The Payment History
Types of Tradelines:
1. Revolving Accounts
2. Mortgage Accounts
3. Installment Accounts
Revolving Accounts
●
Charge Accounts Providing Credit up to Predetermined Credit Limit
●
Require Minimum Monthly Payment
●
Often Credit Cards
Example of Revolving Account Tradeline:
Installment Accounts
● Set Payment Schedule and Terms
● Set Payment Amount
● Example: Car Loan
Mortgage Account
●
Debt with set Terms
●
Fixed or Variable Monthly Payments Required
●
Secured by Real Estate Property
Example of Mortgage Account Tradeline:
Tradeline Practice:
Public Records
& Collections
Public Records
● Indicates a debt owed
● Information obtained from county, state and
federal court records
● Types of Public Records on Credit Reports:
Civil Judgement
o Bankruptcy
o Tax Lien
o
Civil Judgements
On The Credit Report for a Civil
Judgment You Can See:
A civil judgment: occurs when
someone sues the person for money
owed as a result of monetary loss or
damages and a court orders the
person to pay a certain amount.
● The Docket Number and Record
Number
● The Original Balance Owed
● The Current Balance Owed
● The Defendant and Plaintiff
● The Date Filed
● The Date of the Judgement
● The Date Paid, if it has been
Bankruptcy
Bankruptcy: A legal proceeding involving a
person or business unable to repay
outstanding debts
Two Types of Bankruptcy:
●
Chap 7: straight bankruptcy liquidation with
no payments
o
●
Debtor must meet income eligibility
Chap 13: creates a payment plan for people
with regular income for 3 to 5 years after
bankruptcy
o
Total unsecured debt must be below
On a Bankruptcy Tradeline:
● The Type
● The Court
● The Docket Number
● The Attorney
● The Date Filed
● The Date Verified
● The Date Paid, if it has been
paid
There will always be a second
Tax Lien
On The Credit Report for a Civil
Judgment You Can See:
● The Docket Number
Tax Lien: Occurs when a person is
in default with the state or federal
government
● The Court
● Liabilities
● The Original Balance
● The Current Balance
● The Date Filed
● The Date Effective
● The Date Paid, if it has been
Public Records Practice:
Jake do you have any
example of credit
karma judgements?
Public Records Practice:
As an analyst, how would you interpret the trade lines above?
Public Records Practice:
The client has a Chapter 13 Bankruptcy which has been
dismissed.
Example from AnnualCreditReport.com
If Client Believes The Debt has Been Paid:
Ask for the letter indicating discharge
of the bankruptcy.
On the letter ensure that the following
match the credit report:
● The Name
● Type of Debt
● Docket Number
On this example, did the client satisfy
their judgement?
If Client Believes The Debt has Been Paid:
If Client states they have paid the
bankruptcy, ask for the letter
indicating discharge of the
bankruptcy.
On the letter ensure that the following
match the credit report:
● The Name
● Type of Debt
● Docket Number
On this example, did the client satisfy
their judgement? NO
Public Records Practice:
As an analyst, how would you interpret the trade lines above?
Public Records Answer:
There was a civil claim of $200 filed on 10/15/12 by “Any
Commissioner O.”, which has been resolved on and there is no
longer any money owed as of 3/4/12.
Public Record Practice:
As an analyst, how would you interpret the trade lines
above?
Public Record Answer:
The Client Filed for Bankruptcy on 5/04. The bankruptcy
was discharged on 7/07.
Inquiries
Inquiries
Displays which companies viewed the consumer’s credit file
Hard Inquiry: for credit decisions
Soft Inquiry: for education, counseling, or marketing purposes
FICO Scores
FICO
The best-known and most widely
used credit score model in the US,
the FICO score is calculated
statistically, with information from a
consumer's credit files.
The score provides a snapshot of risk
to help make lending decisions.
Do not appear on Annual Credit
Report and are estimated on Credit
Karma
What Factors Into a FICO Score
Tips and Resources
Jake’s Tips and Tricks for Success
Katherine’s Tips and Tricks for Success
1. Don’t freak out, take it one tradeline at a time
1. Print out the report and mark up the first few reports (just don’t mark it
up in front of a client and keep the printed report in a safe place)
1. Don’t be afraid to ask the client for more information- as a lender you
have the right to ask for clarification about certain tradelines
1. Look at the Credit Summary and make sure you can find each account
on the summary within the credit report (important for negative or
potentially derogatory accounts)
Bankitis:
Side by Side Comparison
of all Codes by Credit
Agencies
Direct Link:
http://www.bankitis.com/de
coding-your-credit-report/
Questions