Understanding Credit Reports & Credit Scores

Presented by

Rich CallConsumer Credit Counseling Service

What We Will Cover Credit Reports and Credit

Scores - What they are and how they are developed.

Understanding the Reports – How to read them and why they are important.

Acting On the Information In Them – What to do to maintain, correct, or improve the information.

What is a credit report?

Detailed record of your history of borrowing money and paying it back

Report card about your credit standing

Used by lenders, insurance companies, landlords, and employers to determine whether you have good financial habits

Credit reports are provided by credit bureaus based upon information provided to them by creditors on a voluntary basis

3 Major Credit Reporting

Companies Equifax – www.equifax.com 800-685-1111

Transunion – www.transunion.com 800-888-4213

Experian– www.experian.com 888-397-3742

$12.00/$15.00 if through them for single report from one company

Can also purchase trimerge reports that combine info from all three onto one report. Price is higher.

Free Credit Reports New law : one free copy of credit report

from each of three credit bureaus every year.

www.annualcreditreport.com 1-877-322-8228 Annual Credit Report Request Service P O Box 105281, Atlanta, GA 30348-

5281

Credit score does not come automatically with the free report.

Information on a Report Identification & employment info

Account information & payment history

Collection accounts

Public record

Inquiries from creditors/potential employers

Sample credit report CREDIT BUREAU REPORT ----------------------------------------------- IDENTIFYING INFORMATION Public, Joe 15 Any Street 325 Broad St. Someplace, USA 55555 Sam’s plumbing Welder Nice City, America 33333 03/15/52 222-22-2222 ------------------------------------------------------------------------------------------------------------ Trade Line information Industry Date opened Acct. Number High credit Balance Current rating Historical delinquency

Bankcard 05/03/92 xxxx1234 $5000 Current 90– 5 yr ago Auto loan 05/03/01 xxxx3456 $15,000 $9750 Current Retail 04/24/00 xxxx5678 $2500 $1200 30 days Retail 04/05/02 xxx452 $800 $700 Current Mortgage 06/05/99 xxx6789 $125,000 $115,000 Current ------------------------------------------------------------------------------------------------------------ Credit Inquiries Date Industry Date Industry Date Industry 12/04 Bank 5/04 Auto finance 01/04 Retail ------------------------------------------------------------------------------------------------------------ Public Record / Collection Items 7/03 collection $450 8/04 judgment $1500 Paid 12/0402/05 collection $250

Disputing Information

Fair Credit Reporting Act

The Dispute Process Put it in writing – to CRA and creditor in

question CRAs must investigate – within 30 days

Must delete what they can’t verify Must correct inaccuracies Must report back to you

Accurate Negative Information

Negative account information will be reported for 7 years.

Bankruptcy info – 7-10 years.

Defaulted student loans, judgments on loans, and lawsuits can be listed longer per individual state statute

Credit Scores A number developed from a calculation using the

info from your credit report.

Most widely used is the Fico Score Scores range from 300-850.

New Score being introduced called Vantage Score Scores range from 501 - 990

The higher the score, the better risk you are determined to be and the better rate you will be eligible for.

Five Ingredients of a FICO Score

Credit Score Ingredients

length of credit history

15%

amounts ow ed30%

new credit10%

types of credit10% payment

history35%

Nationwide Range of FICO scores

Why is your Credit Score so important?

It is used by lenders to determine financial responsibility

A bad score indicates that you are more at risk - Could lead to: Higher fees and rates Being declined for new accounts No credit line increases Being rejected for jobs, apartments, or

insurance

Sample loan with credit scores

How a good FICOscore can save youmoney:

$10,000 used carloan for 48 months

Can result in an extra $1920 in payments over the 4 years

$279 monthlypayment

$239 monthlypayment

FICO score below 590

Interest rate of 14.9%

FICO score 720+

Interest rate of 6.9%

Improving Your Score Pay bills on time

Reduce debt

Keep balances low / credit limits

Apply for & open new lines only when you need them.

Check your credit report for accuracy and clear errors as soon as possible.

Putting Your Credit Report to Work For You

It can be a tool to assess and improve credit-worthiness

Acts like a report card

Helps you create a goal-focused plan: Correct incorrect info Start paying bills on time Reducing debt Preparation for a meeting with a lender

Your goal? Successful credit application at lowest cost to you possible.

More InformationCCCS

1-800-355-2227www.cccservices.com

Federal Trade Commissionwww.ftc.gov

Consumer website for credit scoreswww.myfico.com

Recommended ReadingYour Credit Score – Liz Pulliam Weston

Dirty Little Secrets: What the Credit Bureaus Won’t Tell You – Entrepreneur Press & Jason Rich