Credit Scores
How They Impact Your Financial Success
Presented by: Lynne A. Coverdale, MBA
Salin Bank & Trust Company
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The FICO stands for Fair Isaac and Co., a company
founded in 1956 by Bill Fair, an engineer, and Earl
Isaac, a mathematician
The company philosophy was that data can improve
business decisions when applied intelligently.
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In 1957, Conrad Hilton hired FICO to develop and install a
billing system for Carte Blanche, one of the first credit card
companies.
In 1958- Fair Isaac began creating credit score systems
 FICO sent letters to 50 biggest American credit grantors asking
for opportunity to explain a new concept – credit scoring
 FICO builds its first credit scoring system for American
Investments (the only respondent out of the 50 companies)
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In 1963- FICO builds credit scoring system for Montgomery
Ward – beginning of a very long term relationship
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In 1981 – FICO introduced the first credit
bureau risk score
By 1991 all three credit bureaus were using the
FICO credit bureau scores as their standard
procedure
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The three bureaus: Experian, TransUnion and
Equifax
 Experian score: FICO® (Experian)
 Transunion score: Classic Score formerly called
Emperica
 Equifax score: Beacon
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In 1993 – the first insurance bureau score is
introduced for the insurance industry
Early 90s – mortgage lenders and banks are
using credit scores for lending decisions in
some cases
In 1995 – Fannie Mae and Freddie Mac
recommend use of “FICO” scores for evaluating
US mortgage loans
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2001 to today – credit score usage expands into
a variety of industries, credit score education is
prevalent
The range of scores for each of the bureaus is
roughly 300 – 850
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Equifax: 334 – 818
Experian: 320 – 844
Transunion: 309 - 839
The higher the score - the better
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Examples: better rate, lower insurance cost, obtain a
job offer
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Identifying information
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Requestor’s identifying information
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Your name, and previous names
Address history
Social security number
Date of birth
Employment information
Name
Address
Contact
Tradelines
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Current accounts open with or without a balance
Closed accounts
Paid-off accounts
History of tradelines
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Public records
Judgments
 Bankruptcies
 Foreclosures
 Liens such as tax liens
 Satisfactions
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Inquiries
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Typically for the last 90 – 120 days
Credit Scores
 Score from each bureau ordered
 Key 4 -5 factors that adversely affected the score
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Specific to Mortgage Credit Reports
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ID Cross Check
 Compares social security number provided to social
security number on record for each bureau, also
compares to SSA issuance date and SSA death master
 Compares current address provided to address history
for each bureau
 Checks birthdate of record
 Identity index provided
 The higher the index, the better – the more the consumer’s
identity was verified
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Consumer Lenders
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Banks
Credit unions
Auto finance companies
Mortgage Bankers, Mortgage Brokers
Commercial and Business Lenders
Other Companies
Insurance companies
 Prospective employers
 Landlords
 US Government
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Credit reports and credit scores are accessed
and evaluated to aid in decisions such as:
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Consumer Lenders
 Auto loans
 RV loans
 Personal loans
 Lines of credit
 Credit cards
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Mortgage Bankers, Mortgage Brokers
 First mortgages
 Second mortgages
 Home equity lines of credit
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Credit reports and credit scores are accessed and
evaluated to aid in decisions such as:
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Commercial and Business Lenders
 Small business loans
 Commercial loans
 Lines of credit
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Other Companies
 Insurance companies
 Insurance for autos, homes, businesses, personal property
 Prospective employers
 Possible employment opportunities
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Landlords
 Apartment or home rentals
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US Government – background checks
 Special projects
 Employment
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The number and types of accounts you have
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Credit cards, auto loans, mortgages, other
installment loans
Credit payment history
Paid on time?
 Paid late?
 Not paid?
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Percentage of available credit you are using
versus available credit
Age of accounts
Derogatory accounts/ history
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Payment history (35%)
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Amounts owed (30%)
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Amount owed versus amount available
Length of credit history (15%)
The number and types of accounts (10%)
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Paid on time?
Paid late?
Not paid?
Credit cards, auto loans, mortgages, other
installment loans
Inquiries/new credit (10%)
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Source: myFICO
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Credit score detail
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A person has a score of 700 which consists of:
 35% = 245 points for Payment history
 30% = 210 points for Amounts owed
 $4,000 balance on a $5,000 credit card
 15% = 105 points for Length of credit history
 Had old history but just closed out the oldest accounts
 10% = 70 points for Types of credit
 10% = 70 points for New credit/ inquiries
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Credit score detail
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A person has a score of 740which consists of:
 35% = 259 points for Payment history
 30% = 222 points for Amounts owed
 $450 balance on a $5,000 credit card
 15% = 111 points for Length of credit history
 Did not close out any old accounts
 10% = 74 points for Types of credit
 10% = 74 points for New credit/ inquiries
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Loan Level Price Adjustment Chart Fannie Mae
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Mortgage Example 95% LTV (5% down) purchase:
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Credit score 700
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) 1.0%
 Rate: 4.50%
 PMI: .89% ($148.33)
 Principal and interest and Mortgage Insurance: $1,161.70
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Credit score 720
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) .50%
 Rate: 4.375%
 PMI: .67% ($111.67)
 Principal and interest: $1,110.24
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Credit score 740
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) .25%
 Rate: 4.25%
 PMI: .54% ($90.00)
 Principal and interest: $1,073.88
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Mortgage Example 80% LTV (20% down) purchase:
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Credit score 700
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) 1.0%
 Rate: 4.50%
 Principal and interest: $1,013.37
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Credit score 720
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) .50%
 Rate: 4.375%
 Principal and interest: $998.57
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Credit score 740
 $200,000 loan on 30 year fixed
 Loan Level Pricing Adjustment (LLPA) .25%
 Rate: 4.25%
 Principal and interest: $983.88
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Fact or Myth: Not having credit is the
best strategy for credit scores?
 Fact or Myth: Credit Scores are fixed
for a year?
 Fact or Myth: Opening a new account
does not affect your score?
 Fact or Myth: Using the majority of
your credit line is a great strategy to
build your credit?
 Fact or Myth: Not having revolving
credit will insure your credit score is
the highest?
 Fact or Myth: You should always close
out accounts that you don’t use?
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Fact or Myth: Each creditor sends
payment information to each of the 3
bureaus?
Fact or Myth: Having no more than 30%
of your credit lines outstanding is a good
strategy to maximize credit scores?
Fact or Myth: Opening a credit card is a
good idea to establish credit?
Fact or Myth: Being added on as an
authorized user to a persons credit card is
all one needs to do to establish credit?
Fact or Myth: Inquiries into your credit
make a huge impact on your credit
scores?
Fact or Myth: Scores are the same for
each credit bureau?
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Shred Shred Shred
Opt-out of unwanted mail and solicitations
Get on do not call list
Don’t give passwords or personal information over the
phone
 Protect your passwords
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 Change them
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Keep personal information secure and offline
If online – make sure it is safe, secure, encrypted,
password protected
Vacation hold for mail or mail picked up by trustworthy
neighbor or family member, friend
Trash receptacles back from front of house in timely
manner
Use the blue box
Don’t overshare on social media sites
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Lock up your laptop
Be careful when you use Wi-Fi in public areas
 Perhaps use your own personal hotspot
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Avoid phishing emails
 Example annual credit search
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What is the difference between a soft credit
pull and a hard credit pull?
How do I obtain a copy of my credit report?
How can I stop the junk mail solicitations
How do I dispute inaccurate information on my
credit report?
Why are my credit scores different?
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www.annualcreditreport.com
 www.optoutprescreen.com or 1-888-5-optout
 www.donotcall.gov
 www.dmachoice.org
 http://www.ftc.gov/faq/consumer-protection
 www.experian.com
 www.equifax.com
 www.transunion.com
 www.myfico.com
 https://salin.mortgagewebcenter.com/Resources
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My contact information:
Lynne Coverdale
Salin Bank and Trust
8455 Keystone Crossing Dr.
Indianapolis, IN 46240
317-452-8125 – direct
317-370-0016 – cell
l.coverdale@salin.com
www.Salin.mortgagewebcenter.com
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