credit scores and reports

Credit Scores & Reports

Wise Use of CreditO It’s about behavior, not dollars!O To purchase assets

O HomeO Education

O For convenienceO To take advantage of salesO Emergencies (convenience)O “Big Ticket” items

Unwise Use of CreditO To purchase consumablesO Impulse buyingO Spending for statusO Retaliatory spending (couples)O Spending to feel goodO Everyday living expenses

Credit ScoresOWhat Is A Credit Score?

O The score given to an individual to determine their credit worthiness. FICO and Vantage.

OWho checks your credit score?O Credit Card CompaniesO LendersO Insurance CompaniesO EmployersO Cell Phone and Utility Companies

How Your Score Is Calculated

FICO® scores are calculated based on your rating in five general categories:

1)Payment History2)Amounts Owed3)Length Of Credit History4)New Credit5)Types Of Credit Used

What’s A Good Score?

OFICO Scores Range From 300 – 850

O Recent changes in the economy have changed what lenders view as a very good score.

O In the eyes of most lenders, FICO credit scores above 760 receive the best rates. 700-759 are considered very good.

Your Credit Report

OA credit report is a report containing a detailed credit history of an individual.

O What’s On Your Credit Report?O Personal Information (Name, SSN, Etc.)O Public Records & Collection Accounts (Bankruptcies,

Foreclosures, Etc.)O Your Credit History & Current ObligationsO Credit Inquiries

How To Check Your Credit Report & Score

O You are entitled to 1 free credit report a year from each of the 3 major credit bureaus.

O To request your free credit report visit www.annualcreditreport.com

O You can also request your credit score. A small fee may apply.

Credit ReportsO Accurate Negative Information

O Pay up and waitO Two years for inquiries and paymentsO Seven years for most informationO Ten years for bankruptciesO Criminal Convictions—no limit

O The seven-year period starts from the date that the event took place

Credit Reports

O Correcting Wrong Information1. Inform one of the Credit Reporting Agencies: Equifax,

Transunion, or Experian in writing. Dispute forms included on websites.

2. Credit Reporting Agency investigates, usually within 30 days.3. Credit Reporting Agency provides you with written results

and a copy of Credit Report.4. Credit Reporting Agency sends notices to the other two

Agencies.5. If not resolved, you can have a statement of dispute included

in your file. Also, tell creditor that you disputed an item.*You have the right to put a statement of*You have the right to put a statement of up to 100 words on your Credit Report*up to 100 words on your Credit Report*

Debt to Income Ratio Handout

Debt: How Much is Too Much?

Calculate your debt-to-income

ratio

Warning SignsO Not paying off each monthO Making only minimum paymentsO Gradually more income committed to debt

repaymentsO Falling behind on paymentsO Using cash advances to meet monthly living

expenses

Other Indicators

O Little or no money in savingsO Dependent on second job to make ends meetO Paying over 20% of net income per month to

creditorsO At or near credit limits most of the time

Critical PointO Rotating bills

(paying some this month, some next month)O Using credit to pay creditO Being denied additional creditO Dishonesty with spouse about debtsO Use of consolidation loans to reduce payments

Recovering from Debt

O Take Charge! Construct a budget and spending plan, prioritize debts

O Construct a “power payment” planO Talk to Your Creditors

Improving Credit Scores

O Pay Bills On Time (Get current, stay current)

O Pay Off Debt – Don’t Move It Around

O Don’t Close Unused Credit Cards As A Short-Term Strategy To Raise Your Score

O Don’t Open New Credit You Don’t Need.

SummaryO Keep your budget up-to-dateO Calculate your Debt-to-Income

RatioO Plan purchasesO Shop for creditO Check credit report annuallyO Build wealth, not debt