fact, fiction & ficos · 2017. 3. 7. · co-signer/guarantor a co-signer or guarantor is a...

Fact, Fiction

& FICOs:

Presented by:

Vance Edwards, CMB

Certified FICO Professional

MGIC Marketing Program Director

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Agenda

• What makes up a credit score (and what doesn’t)

• What causes that score to move (for good and bad)

• Fact or Fiction: Some common beliefs about credit scores

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The information presented in this presentation is for general information only, and is based on guidelines and practices generally accepted within the mortgage finance industry and is not intended to be all-inclusive. MGIC makes no representations or warranties of any kind with respect to the accuracy, completeness or suitability for any purpose of the information contained in this presentation. MGIC expressly disclaims any and all warranties, express or implied, including without limitation warranties of merchantability and fitness for a particular purpose regarding these materials and this presentation. In no event will MGIC be liable for any direct, indirect, incidental, punitive or consequential damages of any kind with respect to the presentation or materials provided. All examples are hypothetical and are for illustrative purposes only. This presentation is not intended and should not be interpreted or relied upon as legal advice. We encourage you to seek advice from a qualified professional.

Legal Disclaimer

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Total Debt Balance and Its Composition

0

3

6

9

12

15

0

3

6

9

12

15 Mortgage HE Revolving Auto Loan Credit Card Student Loan Other

Trillions of Dollars

Source: FRBNY Consumer Credit Panel/Equifax

2016Q4 Total: $12.58 Trillion

2016Q3 Total: $12.35 Trillion

(3%) (10%)

(6%)

(9%)

(4%) (67%)

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Credit Score vs. Credit Report

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National credit reporting companies

P.O. Box 740241 Atlanta, GA 30374-0241 1 800 685 1111

1 888 397 3742 www.experian.com

P.O. Box 1000 Chester, PA 19022 1 800 888 4213

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Consumer opens an account The Credit Cycle

Credit reporting

companies share

with new lenders

Lender

updates

records

Lender shares history with

credit reporting companies

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• Identifying information

• Credit Accounts (known as Credit History or Tradelines)

• Inquiry information

• Public record and collection information

What is in a credit report?

Source: TransUnion

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• Race, ethnicity, religion or political affiliations

• Criminal background

• Medical information or history

• Buying habits / transaction data

• Bank account information

• Major purchases made by cash

• Credit scores

What’s NOT in a credit report?

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FICO® Score General Score Mortgage Score

Auto Score Bankcard Score

Installment loan Score Personal finance Score

Vantage Score

50+ 300-850 300-850

Source: CreditSesmae.com

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Your FICO Score Depends on Their FICO Model

Experian® Equifax® TransUnion®

Most widely used version

FICO Score 8 FICO Score 8 FICO Score 8

Newly release version

FICO Score 9

FICO Auto Score 9

FICO Bankcard Score 9

FICO Score 9

FICO Auto Score 9

FICO Bankcard Score 9

FICO Score 9

FICO Auto Score 9

FICO Bankcard Score 9

Version required by Fannie Mae and Freddie Mac

Experian®/Fair Isaac Risk

Model V2SM

Equifax Beacon® 5.0 TransUnion FICO® Risk

Score, Classic 04

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• Race, color, religion, national origin, sex and marital status

• Age

• Salary, occupation, title, employer, employment history

• Where person lives

• Interest rate being charged on a particular account

• Child/family support obligations or rental agreements

• Certain types of inquiries

• Any information not found in your credit report

• Participation in credit counseling of any kind

What does NOT impact FICO Score?

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Payment history - 35%

Amounts Owed - 30%

Credit History - 15%

Types of Credit - 10%

New Credit - 10%

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35%

Late payments:

• How late they were

• How much was owed

• How recently they occurred

• How many there are

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• Amount owed on all accounts

• Amount owed on types of accounts

• How many accounts have a balance

• How much of the total credit line is being used

• How much of installment loan amount is still owed

30%

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• How long credit accounts have been

established

• age of oldest account

• age of newest account

• an average age of all your accounts

• How long have specific credit accounts been

established

• How long it has been since certain accounts

15%

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• Does the person have experience with both revolving debt and installment accounts

• How many accounts are there in each type

Revolving credit Credit cards Home equity lines of credit

Installment credit Mortgages Car loans Personal loans

10%

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• How many new accounts does the person have

• How many inquiries have been made

• Length of time since inquires were made

• How long has it been since a new account was

opened

10%

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Inquiries are not a factor for at least 57% of consumers

Only 14% of consumers lose more than 10 points because of inquiries

Soft inquiries A person checking their own credit report won’t impact their score

Hard inquiries Occur when a person excessively applies for credit, especially in a short time span

How inquiries affect FICO Scores

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Mortgage inquiries

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What’s a good score?

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Median FICO Scores by State

FICO Score

Ranges

730-745

723-729

711-722

691-719

650-690

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Trended credit data will impact

credit scores.

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Boy

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Girl

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Couple

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Credit check

About 30% of women won’t marry

a person with a low credit score

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57% of men and 75% of women

say credit scores play into dating decisions

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Credit score can cost you a job.

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Carrying balance builds credit.

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Paying on time is all you need to do.

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Paying off debts remove them

from a person’s credit report.

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Closing accounts improves credit.

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More income = higher credit score

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Getting married merges credit

reports/scores.

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Using prepaid credit cards and debit

cards can boost credit score.

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Age of person impacts credit score.

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Not having any credit cards or credit card

debt will help have good credit score.

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Young Americans living without

a credit card has doubled since

the recession.

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• 63% of adult millennials don’t have a credit card. By comparison, only 35% of consumers over age of 30 don’t have credit cards

• 21% of millennials have never written a physical check to pay a bill

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73% of young adults say they have never

been added to another person’s account.

Source: Credit Sesame

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Authorized User

An authorized user is any person who has permission to use your credit card account, but is not responsible for paying the bill.

Co-signer/Guarantor

A co-signer or guarantor is a person who signs an agreement to pay off a credit card balance for someone else if that person does not pay.

Joint Account

A joint account is a credit card account equally shared by two individuals. Parties involved all share the associated rights and liabilities of the account and are regarded by law as co-owners of the account.

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Fastest, easiest way to get MI

Max LTV/CLTV: 97% / 105%; Max cash out: $150,000

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• Pay bills on time

• Get current and stay current

• Don’t open a lot of new accounts too rapidly

• Shop for loan rates within a focused period of time

• Keep balances low on revolving credit

• Pay off debt

• Check & Correct

Improving a Credit Score

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Equifax Information Services

P.O. Box 740256

Atlanta, GA 30348

1-866-349-5191

Experian Information Solutions

P.O. Box 4500

Allen, TX 75013

1-866-200-6020

TransUnion Consumer Solutions

P.O. Box 2000

Chester, PA 19022

1-800-916-8800

For a fraud alert, you only need to contact one bureau and that bureau will notify the other

two: Equifax, 1-888-766-0008; Experian, 1-888-397-3742; TransUnion, 1-800-680-7289

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@mgic

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Thank You!

To get a copy of today’s slides contact:

Karen Maierle

karen_maierle@mgic.com