secrets of credit scores presentation

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  • 1. *The difference between school and life? In school, youre taught a lesson andthen given a test. In life, youre given a test that teaches you a lesson.Tom Bodett

2. * The Top 10 credit mistakes Credit score implications FICO scoring industry secrets How to read a credit report Identifying credit repair candidates How to improve a credit score 3. * 4. * 5. * Because of your credit score, a small difference of just 2% in your mortgage rate can cost an additional $100,000 of interest over the life of the loan for an average $150,000 home.* 6. A 30-Year ComparisonGood CreditMonthly PaymentsPoor CreditMonthly Payments$200,000 mortgage payment $1,043.00$200,000 mortgage payment $1,539.00$20,000 car payment (1st car)$333.38 $20,000 car payment (1st car)$485.83$20,000 car payment (2nd car)$333.38 $20,000 car payment (2nd car)$485.83Car insurance (two cars) $170.00 Car insurance (two cars) $225.55Home insurance $87.50Home insurance $120.83Total monthly payments $1,967.26 Total monthly payments $2,857.04Increased monthly cost is $889.78 due to damaged credit!Monthly savings from example$889.7830 years X 12 = 360 monthsX 360Total cost of bad credit over 30 years?$320,320.80! 7. * Maxed-out card10 to -30* 30 day late payment60 to -80* Debt settlement 45 to -65* Foreclosure85 to -105* Bankruptcy130 to -150* PAY EVERYTHING ON TIME!* IF you see a problem, CALL YOUR CREDITOR to work something out. Avoid 30 day late payments at all cost. * 8. * Not Governmentinstitutions,* For profit (bigprofit)privatecompanies in businessto track , collect,record, and sellinformation on everysingle person with asocial security number. 9. * They record every dollaryou have ever borrowed,and how you paid it back* They track every moveyou have made,recording each newaddress* Every employer you havehad* Every time you have everasked for credit* 10. Components of a credit score 11. Formula to predict the statistical chanceof a consumer becoming 90 day late on aparticular loan obligation over 24 monthsThe Score is generated by analyzing theinformation contained in the consumerscredit report at that point in time. 12. * Some weighted formortgages, and some forautomobiles.* Many formulas ensuresthat no one figures it outand beats the system.* Different formulas resultin different scores. Onescore when you try topurchase a car, and anentirely different score forapplying for a mortgage. 13. 1. Past Delinquencies35% of Credit Score 14. 2. Revolving Debt Ratios (Utilization Ratio)30%ofCredit Score 15. 3. Average Age of Credit File15% of Credit Score 16. 4. Mix of Credit10% of Credit Score 17. 5. Inquiries 10%ofCredit Score 18. Credit Scoring Components1. Past Delinquencies 5 - 10%2. Debt Ratio 4 - 10%1- 35%3. Average Age of File 3 - 15%4. Mix of Credit5. Inquiries2 - 30% 19. Closing my unused credit cards will improve my FICO score. True False My FICO credit score should be the same at all 3 credit bureaus. True False When I get married, my credit report is merged with my spouses. True False Checking my own credit score will create an inquiry at the creditbureau, and that will lower my score. True False My annual household income is part of the calculation of my FICOscore. True False 20. Payment History Credit Accounts35% PAYMENT HISTORY 30% CREDIT ACCOUNTSthe good, the bad and the The higher the amountuglyowed, the lower the credit* All Payment information score.on credit cards, retailaccounts, mortgage, * Balance due oninstallment loans, etc.accounts.* Public records such as* Accounts with balances.bankruptcy, suits, liens,etc.* Proportion of credit* Past due accounts. limits used on credit and installment accounts* Accounts paid on time. 21. REVOLVING INSTALLMANT(unsecured) (secured) 22. Unsecured, revolving accounts are given greater weightthan secured installment loans. Unsecured, revolvingcredit is credit cards. They carry significant weight with the bureaus as they demonstrate responsibility andbehavior when given free rein.BEST CREDIT TO HAVE: Unsecured, revolving, open line ofcredit.This is free rein credit: how do you behave with this? Unsecured credit is simply your promise to pay it backand use it responsibly. * 23. *Affecting your score 24. * Make all payments on time, every time* Do not commit to monthly payment plans unless you are committed to paying them on time, every time. Even small amounts!!* Pay down account balances below 30%* Work to have inaccurate, incomplete dataremoved from your credit report,Mandated by FCRA law! 25. The only website thats monitored by theFederal Trade Commission where youwill NOT be charged for a copy of yourcredit report is..www.annualcreditreport.comYou are entitled by law to one FREE copy of your credit report per bureau every 12 months* 26. * 27. If your balances are over30% of your high creditlimit,THAT IS TOO HIGH!Your score is beingnegatively affected byyour high balances.* 28. 1. Get new credit card (secured or unsecured) from your local bank or credit union. Apply in person, this reports the fastest. 29. 2. Use it lightly, Make a payment.Repeat. Keep a low balance on thecard at all times, make eachpayment on time, every time. Thisactivates your credit file andhelps builds your score. 30. How does credit repair work? 31. * Request that the item in question be investigated.* Demand proof of the investigation procedures.* Demand proof of verification* Persistent Follow up.* 32. ** Dont pay off old* Dont engage or settlecollections!with creditors!* This can update old* This updates your DOLAinformation and have(date of last activity) andthe collection re-posthurts your score. Noas a new paid talking to creditors.collection. * Dont add a formal* Pay down your highdispute to your report. balances and keepThis will be a permanent them low! Below 30%, dispute and damage your BUT NOT TO ZERO. score. 33. Top 10 MYTHS and Mistakes aboutcredit people make:1.Paying off old collectionaccounts believing it willimprove their score2.Filing bankruptcy or usingcredit counseling as a meansto improve credit3.Applying for new credit toconsolidate debt 34. 4.Canceling old creditcards5.Shopping for credit toget the best interest rates6.Not using their creditcards at all7.Using a small amount ofcredit and then paying itoff early, before receivinga bill 35. 8.Using a small amount of credit and then paying it off in full at the end of the month 9.Believing paying things current will fix their credit (late payments compared to on-time) 10.Applying for new credit cards to drive their credit score upDont Make these mistakes! 36. * Any debt still exists and may get re-sold to another collection company. It may or may not show up again. Legally they have the right to continue trying to collect unpaid debt. * 37. * Time is on your side, theolder the item inquestion, the less likelyit is to get re-sold andre-reported.* Paid collections andcharge-offs tend toremain off and not getre-reported.* Un-paid items can showup again.* 38. *