whats a credit report? from age 18 on, agencies collect data about your spending habits. monitor...
TRANSCRIPT
What’s a Credit Report?
From age 18 on, agencies collect data about your spending habits.
Monitor your ability to handle risks (i.e. loans I installment and revolving)
Impacts: amount you can borrow and the interest rates on that loan.
Who Can Access Your Report? Creditors Collection agencies Insurance companies Employers Landlords. Many others!!!
www.howmanyofme.com
What is in a Credit Report? Personal Data
Employment History
Public Records (liens, judgments, secured loans, foreclosures, bankruptcies, etc.)
Collection Accounts (defaults and lateness)
Credit Information (open accounts, date account was opened, payment status)
Inquiries (approved requests and others seeking credit information)
How Long Does the Information Remain On A
Credit Report? TYPE LIMITATIONSuits & Judgments 7 years Tax Liens – Paid 7 years from
paymentTax Liens – Unpaid No limitationCharged to Profit & Loss 7 yearsCriminal Record Limitations No limitations Other adverse information 7 Years Late Payments 7 YearsDebt Collections 7 YearsBankruptcy 10 Years
Annual Credit Report
The Fair Credit Reporting Act guarantees you access to a free credit report from each of the 3 nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months.
To get your free Credit Report By Internet: www.annualcreditreport.com By phone: 1-877-3222-8228 By mail: Annual Credit Report Request
Service P.O. Box 105281, Atlanta, GA
30348-5281
Improving Your FICO Credit
Score
http://www.whatsmyscore.org/estimator/
6
• What is a “Credit Score”?• Why you need a credit score?• How are these scores created?• Why are there different types of
scores?• What hurts your score?• Tips to improve your score. 6
Credit Score
What is a Credit Score?
A tool created from your credit report which can assess your financial status, history, and debt repayment record.
Credit rating is determined by three bureaus that all banks, employers,
companies you deal with check to see if you are a good risk
Two most commonly used credit scores is the: FICO (Fair Isaac Corp.) which ranges from 300 – 850. Vantage (Experian) scores go from 501 - 990.
There are hundreds of credit scores which are used by mortgage lenders, and companies that sell auto, homeowners and health insurance policies.
What doesn’t Count in a Score.
• age• race• sex• income• education• marital status• job or length of employment at your job• whether you've been turned down for
credit• length of time at your current address• whether you own a home or rent• information not contained in your credit
report
The scoring model doesn't look at:
Why is a Credit Score
Important? A poor credit score can affect a person’s ability to:
Obtain credit cards, car loans and mortgages Receive favorable interest rates and preferred credit limits on
cars and credit cards Qualify for utility and cell phone services with no down
paymentor substantial security deposit
Rent or lease a house or apartment Obtain government sponsored student loans Obtain private student loans with low rates
It might also affect: Your car insurance rate Life insurance rates Health insurance premium Possible job offers
Distribution of FICO
Credit score Percentage
499 and below 2 percent
500-549 5 percent
550-599 8 percent
600-649 12 percent
650-699 15 percent
700-749 18 percent
750-799 27 percent
800 and above 13 percent
Fair Isaac reports that the American public's credit scores break out along these lines:
The key credit score elements
Payment history32%
Utilization23%
Balances15%
Depth of credit13%
Recent credit10%
Available credit7%
Payment history
Repayment behavior (satisfactory, delinquency, derogatory)
Utilization
Percentage of credit amount used/owed on accounts
Balances Amount of recently reported balances (current and delinquent)
Depth of credit
Length of credit history and types of credit
Recent credit
Number of recently opened credit accounts and credit inquiries
Available credit
Amount of credit available
To compare your Vantage Score to a FICO Score:
Multiply your Vantage Score by 0.86
Vantage Score of 800 times 0.86 =
FICO Score of 688
How Much Will My FICO Score Drop?Alex
BlancaCurrent FICO Score 680 780Score after one of these is added to the credit report
One inquiry for a new credit card 675 (5) 775 (5)
A new charge card (additional hit) 665 (15) 760 (20)
Maxing out credit card 660 (20) 745 (35)
A 30-day delinquency 610 (70) 680 (100)
Settling a debt 625 (55) 665 (115)
Foreclosure 585 (95) 630 (150)
Bankruptcy 540 (140) 550 (230)
CREDIT BUREAU RISK SCORE REASON CODES
EQUIFAX
TRANS
UNION
EXPERIAN
Amount owed on accounts is too high 1
1 1
Level of delinquency on accounts 2 2 2
Too few bank revolving accounts 3 3 3
Too many bank or national revolving accounts 4 4 4
Too many accounts with balances 5 5 5
Too many consumer finance company accounts 6 6 6
Account payment history is too new to rate
7 7 7
Too many recent inquiries last 12 months 8 8 8
Too many accounts recently opened
9 9 9
Proportion of balances to credit limits is too high on bank revolving or other revolving accounts
10 10 10
Amount owed on revolving accounts is too high 11 11 11
Length of time revolving accounts have been established 12 12 12
Time since delinquency is too recent or unknown 13 13 13
Length of time accounts have been established 14 14 14
Lack of recent bank revolving information 15 15 15
Lack of recent revolving account information 16 16 16
No recent non-mortgage balance information 17 17 17
Number of accounts with delinquency 18 18 18
Too few accounts currently paid as agreed 19 19 19
Length of time since derogatory public record or collection is too short 20 20 20
What Rate Will Your Score Get You?
FICOScore
30-yearfixed-rate mortgage
36-monthnew auto loan
15-yearhomeequity loan
CreditCard APR
740 5.0% 6.4% 8.1% 7.3%
720 5.2% 6.4% 8.4% 10.0%
700 5.2% 7.9% 8.9% 15.0%
680 5.4% 9.9% 9.7% 15.0%
660 5.6% 9.9% 11.2% 18.0%
What is APR? APR is the Annual Percentage Rate on a loan or a credit card.
It is interest rate that will determine how much you pay in interest each year.
How much will you pay?
A home theater system for $1,000, when purchased on credit card and each month you
pay minimum payment will actually cost
FICOScore
CreditCard APR
You will pay off the balance in about
You will end up paying an interest of
You will end up paying an estimated total of
740 7.3% 5 years $196 $1,196680 15.0% 7 years $580 $1,580660 18.0% 8 years $863 $1,863
Credit Scores and Interest Rates
2010 Ford Focus 5 yrs. 4 yrs. 3 yrs.
5% $377.42 $22,645
$460.59
$22,108
$599.42 $21,579
4% $368.33 $22,100
$451.58
$21,676
590.48 $21,257
3% $359.37 $21,562
$442.69
$21,249
$581.62 $20,938
0% $333.34 $20,000
$417.66
$20,000
$556.00 $20,000
Credit Score Mistakes
1. Paying bills late2. Closing old credit cards3. Maxing out . Watch the “Utilization Rate” (35%)4. Using cash over credit5. Applying for extra cards6. Not shopping around for lower rates7. Not checking your credit reports.