credit scoring…

Credit Scoring…Protecting Your Future

and your Capital

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What Does it Mean?

What Does The Score Mean?

Determine how much money you can borrow, and how much interest you’ll pay.Each score is specific for each bureauScores range from…– 300 to 850 for Classic FICO– The higher the score the lower the risk

The score is generated by analyzing the information contained in the consumer’s credit report at a particular point in time

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Other names for FICO Score

Equifax – BEACON® Score

Experian – Experian/Fair Isaac Risk Model

TransUnion – EMPIRICA®

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Other Scoring Models

Vantage Scoring Model– Unveiled on march 14 2006– Driven by the Big 3– Score range from 501-990– Scores Combine a letter to the Score:

A: 900–990B: 800–899C: 700–799D: 600–699F: 501–599

In 2013 adopted the 300-850 range

Other Scoring Models

Plus Score– Developed By Experian Decision Analytics– Ranges from 330 – 830– Used primarily for consumer reports

Trans Risk Score– Developed By Transunion– Ranges from 300 – 850– Used primarily for consumer report

Scoring Models

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Consumer Default: What are the Odds?

Odds on Consumers: 90 Days Late

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Score Odds

Above 800 1292 to 1

760 to 799 597 to 1

720 to 759 323 to 1

700 to 719 123 to 1

680 to 699 55 to 1

Odds on Consumers: 90 Days Late

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Score Odds

660 to 679 38 to 1

620 to 659 26 to 1

500 to 600 8 to 1

Below 500…

FORGET IT!

A Low Credit Score Can Cost You BIG!

FICO Score APR Rate Monthly Payment

Interest Paid

720-850 5.3% 2776.52 $499,549

700-719 5.9% 2965.68 $567,647

680-699 6.5% 3160.34 $637,722

620-679 7.6% 3530.37 $770,937

560-619 8.4% 3809.19 $871,305

500-599 9.9% 4350.95 $1,066,352

Compare 30 yr fixed rates on a $500,000 home

Jack & Brad: $500,000/30yr. Fixed

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Jack BradSalary Equal Equal

Credit Score 681 595

Jack & Brad: $500,000/30yr. Fixed

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Jack BradSalary Equal Equal

Credit Score 681 595

Yearly Savings $14,288 0

Jack & Brad: $500,000/30yr. Fixed

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Jack BradSalary Equal Equal

Credit Score 681 595

Yearly Savings $14,288 0Interest Saved over 30 Years $428,630 0

Jack & Brad: $500,000/30yr. Fixed

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Jack BradSalary Equal Equal

Credit Score 681 595

Yearly Savings $14,288 0Interest Saved over 30 Years $428,630 0

10% return on savings compounded total in 30 yrs.

$ 2,476,911 $0

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What are thedetermining factors?

Credit Score Components

1. Payment history2. Amounts Owed3. Length of credit history4. Types of credit in use5. New credit

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1. Payment history…

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35% of Credit Score

Chart Title

1. Payment history:35% of Credit Score

Many types of accounts are considered for payment history

– Credit Cards

– Retail Accounts

– Installment Loans

– Finance company accounts

– Mortgage loans

Public record and collection items are considered quite serious

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1. Payment history:35% of Credit Score

FICO® Score considers this details on the accounts:

– How late they were

– How much was owed

– How recently they occurred

– How many there are

Good track record on credit accounts will increase FICO® Score

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How long dodelinquencies stay?

Delinquencies on Credit Reports

Bankruptcies– Chapter 7, 11 & 12 10 Years from filing date– Chapter 13 7 Years from the date paid, and

10 years if not completed

Paid Tax Liens* 7 Years from date released (paid) (For California State Residents Only: or 10 years from the date file)

Unpaid Tax Liens Remain on file indefinitely (For California State Residents Only:

10 years from the file date)

Late Payments 7 Years

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Delinquencies on Credit Reports

Charge-offs 7 Years from 1st late pay

Judgments 7 Years from the date filed (For NY State Residents only: 5 years from

the date filed)

Collections 7 years from the initial missed payment that led to the collection

(For NY State Residents Only: 5 years from the date of last activity)

Inquiries 2 Years

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2. Amounts owed…

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Chart Title

30%of

Credit Score

2. Amounts owed: 30% of Score

Amount owed on all accounts

Amount owed on specific types, such as credit cards and installment loans.

How many accounts have balances

How much of the total credit line is being used and other “revolving” credit accounts

How much of the installment loan amounts is still owed, compared with the original loan amount

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3. Length of credit history…

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15%of

Credit Score

Chart Title

3. Length of credit history:15% of Score

How long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts

How long specific credit accounts have been established

How long it has been since you used certain accounts.

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4. Types of credit in use…

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10%of

Credit Score

Chart Title

4. Types of credit in use:10% of Credit Score

The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

People with no credit cards tend to be viewed as a higher risk than people who have managed credit cards responsibly.

A closed account will still show up on your credit report, and its history will be considered by your FICO Score.

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5. New credit…

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10%of

Credit Score

Chart Title

5. New credit:10% of Credit Score

It’s OK to request and check your own credit report

Don’t open new accounts to rapidly

How many recent inquiries you have

Length of time since credit report inquiries were made

How long it’s been since you opened a new account

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Credit Score Components

1. Payment history2. Amounts owed3. Length of credit

history4. Types of credit in use5. New credit

1 - 35%

2 - 30%

3 - 15%

4 - 10%

5 - 10%

Chart Title

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Now you know!