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
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
http://www.whatsmyscore.org/estimator/
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.
 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.
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
The key credit score elements
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)
Available credit
7%
Recent credit
10%
Payment history
32%
Depth of credit
13%
Balances
15%
Utilization
23%
Depth of
credit
Length of credit history
and types of credit
Recent
credit
Number of recently
opened credit accounts
and credit inquiries
To compare your Vantage Score to a FICO Score:
Available
credit
Amount of credit
available
Vantage Score of 800 times 0.86 =
Multiply your Vantage Score by 0.86
FICO Score of 688
How Much Will My FICO Score 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)
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?
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
2010 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.