credit history & scores. credit reports 3 credit bureaus receive and maintain information on...

CREDIT HISTORY & SCORES

CREDIT REPORTS 3 Credit Bureaus receive and maintain

information on consumers: Experian

TransUnion

Equifax

Get a copy of your credit report from www.anualcreditreport.com

One free copy per year from each credit bureau.

Reports contain 4 categories of information

Identification and Employment

Payment History Inquiries Public Records

Information stays on your report for 7 years.

What is not in your credit report?

checking or savings accounts bankruptcies that are more than 10 years old, charged-off or debts placed for collection that

are more than seven years old gender, ethnicity, religion, political affiliation,

medical history, or criminal records. your credit score.

Building bad credit history

Look at the sample credit report. Identify 5 items that suggest this person is a high risk borrower.

Building good credit history

What can this person do to improve her credit?

CREDIT SCORES

A credit score = number used by a lender decide if you qualify for credit/loans

• It is used to determine the rates and terms of your loans.

Why is credit scoring used?

• It is fast

• Scores are based on data and statistics

• They are unbiased and nonjudgmental

• It is a reliable tool to indicate risk

Credit Score Range

• Your score ranges from 300 to 850, but the majority of scores fall within the 600s and 700s.

Higher scores indicate a lower credit risk.

The breakdown

How your score impacts your APR

How to improve your score

• Keep account balances low

• Pay bills on time• Don’t open credit

cards/accounts you don’t need

• Have credit cards, but manage them responsibly

• Closing an account doesn’t make it go away

Strategies for Debt

If you have gotten yourself in debt trouble….• Develop a savings of $300 before paying down

debt (continue to make minimum payments)• Make a chart with cards, limits, amounts, and

APR’s• Attack the card w/ highest APR - pay minimum

on others, pay extra on highest APR• Pay it off, close it if applicable, move on to the

next highest APR.

Bankruptcy

Chapter 7 “fresh start”• Wipes out debt (not child support, student

loans, criminal restitution, court fines)• Qualify: must show income less than the

median income of WA. In 2010 it was $49,124.

• Must demonstrate that you can’t pay the debt (file budget sheet)

Bankruptcy

Chapter 13

• Filed by people who can pay back a part of the debt but want to protect their assets

• Make a Good Faith plan that involves payments that last 36 to 60 months.

• Must commit disposable income to pay back debts.