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!!!
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
Suits & Judgments
Tax Liens – Paid
Tax Liens – Unpaid
Charged to Profit & Loss
Criminal Record Limitations
Other adverse information
Late Payments
Debt Collections
Bankruptcy
LIMITATION
7 years
7 years from payment
No limitation
7 years
No limitations
7 Years
7 Years
7 Years
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:
 By phone:
 By mail:
www.annualcreditreport.com
1-877-3222-8228
Annual Credit Report Request Service
P.O. Box 105281, Atlanta, GA 30348-5281
Improving Your
FICO Credit Score
Credit Score
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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.
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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.
 Credit scores are used by mortgage lenders, and companies that
sell auto, homeowners and health insurance policies.
What doesn’t Count in a Score.
The scoring model doesn't look at:
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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
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 payment
or 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:
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Your car insurance rate
Life insurance rates
Health insurance premium
Possible job offers
Distribution of FICO
Fair Isaac reports that the American public's credit
scores break out along these lines:
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
TWO DIFFERENT
BORROWERS
Alex has a FICO score
of 680 and:
Blanca has a FICO
score of 780 and:
Has six credit accounts, including several active credit
cards, an active auto loan, a mortgage, and a student
loan
Has ten credit accounts, including several active credit
cards, an active auto loan, a mortgage and a student
loan
An eight-year credit history
A fifteen-year credit history
Moderate utilization on his credit card accounts (his
balances are 40-50% of his limits)
Low utilization on her credit card accounts (her balances
are 15-25% of her limits)
Two reported delinquencies: a 90-day delinquency two
years ago on a credit card account, and an isolated 30day delinquency on his auto loan a year ago
Never has missed a payment on any credit obligation
Has no accounts in collections and no adverse public
records on file
Has no adverse public records on file
How Much Will Their FICO Scores Drop?
Current FICO Score
Alex
Blanca
680
780
Score 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)
What Rate Will Your Score Get You?
FICO
Score
30-year
fixed-rate
mortgage
36-month
new auto
loan
15-year
home
equity loan
Credit
Card
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
FICO
Score
Credit
Card
APR
You will
pay off
the
balance
in about
740
7.3%
680
15.0%
660
18.0%
5 years $196
7 years $580
8 years $863
You will
end up
paying
an
interest
of
You will
end up
paying an
estimated
total of
$1,196
$1,580
$1,863
Credit Scores and Interest
Rates
2015 Ford Focus
5 yrs.
5%
4%
3%
0%
4 yrs.
3 yrs.
$377.42
$22,645
$460.59
$599.42
$21,579
$368.33
$22,100
$451.58
$359.37
$21,562
$442.69
$333.34
$20,000
$417.66
$22,108
$21,676
$21,249
$20,000
590.48
$21,257
$581.62
$20,938
$556.00
$20,000
Credit Score Mistakes
1. Paying bills late
2. Closing old credit cards
3. Maxing out . Watch the
“Utilization Rate” (35%)
4. Using cash over credit
5. Applying for extra cards
6. Not shopping around for
lower rates
7. Not checking your credit
reports.