Credit Score Information

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Credit Repair, Credit Education, How to Raise Credit Scores.

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Credit Score Information

  1. 1. Creating the Foundation for Success
  2. 4. Credit Scores – FICO <ul><li>“If I give this person a loan or credit card, how likely is it that I will get paid back on time?” </li></ul><ul><li>A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular time. </li></ul><ul><li>Higher the score, the lower the risk. </li></ul>
  3. 5. <ul><li>Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation </li></ul>What Do the Scores Mean?
  4. 6. <ul><li>Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation </li></ul><ul><li>Each score is specific for each bureau </li></ul>What Do the Scores Mean?
  5. 7. <ul><li>Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation </li></ul><ul><li>Each score is specific for each bureau </li></ul><ul><li>Scores range from… </li></ul><ul><li>… 300 to 850 for Classic FICO </li></ul>What Do the Scores Mean?
  6. 8. <ul><li>Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation </li></ul><ul><li>Each score is specific for each bureau </li></ul><ul><li>Scores range from… </li></ul><ul><li>… 300 to 850 for Classic FICO </li></ul><ul><li>The higher the score the less the odds of default </li></ul>What Do the Scores Mean?
  7. 9. <ul><li>Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation </li></ul><ul><li>Each score is specific for each bureau </li></ul><ul><li>Scores range from… </li></ul><ul><li>… 300 to 850 for Classic FICO </li></ul><ul><li>… The higher the score the less the odds of default </li></ul><ul><li>The score is generated by analyzing the information contained in the consumer’s credit report at THAT point in time </li></ul>What Do the Scores Mean?
  8. 10. CREDIT SCORE! Consumer Default: What are the Odds?
  9. 11. Odds on Consumers: 90 Days Late 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
  10. 12. Score Odds 660 to 679 38 to 1 620 to 659 26 to 1 500 to 600 8 to 1 Below 500 Odds on Consumers: 90 Days Late FORGET IT!
  11. 14. <ul><li>WHY IS GOOD CREDIT SO IMPORTANT? </li></ul><ul><li>Lower interest rates on home, auto, personal loans. </li></ul><ul><li>Lower hazard, auto, life insurance premiums. </li></ul><ul><li>Better job prospects, renting a home. </li></ul><ul><li>Easy access to cash </li></ul><ul><li>Will significantly impact your current and future financial outlook </li></ul>
  12. 15. The Cost of Bad Credit <ul><li>Auto Loan : $12,000 for 5 years </li></ul><ul><ul><li>720 FICO : 4.9% = $226/mo. </li></ul></ul><ul><ul><ul><li>$1,554 in interest </li></ul></ul></ul><ul><ul><li>600 FICO : 18% = $305/mo. </li></ul></ul><ul><ul><ul><li>$6,283 in interest </li></ul></ul></ul><ul><li>$79 difference per month! </li></ul><ul><li>$4,729 in interest over 5 years! </li></ul>Copyright 2009 Wellness Credit
  13. 16. The Cost of Bad Credit <ul><li>Auto Insurance : 5 years </li></ul><ul><ul><li>720 FICO : $809/yr. </li></ul></ul><ul><ul><li>600 FICO : $964/yr. </li></ul></ul><ul><li>$775 difference over 5 years! </li></ul>Copyright 2009 Wellness Credit
  14. 17. A Low Credit Score Can Cost You BIG! 30 yr fixed rates on a $200,000 loan: FICO Score APR Rate Monthly Payment Interest Paid 720-850 5.125% $1,089 $192,033 700-719 5.375% $1,120 $203,180 680-699 5.5% $1,136 $208,807 620-679 5.875% $1,183 $225,904 620- N/A N/A N/A
  15. 18. Jack & Brad: $200,000/30yr. Fixed Only a 42 Point Difference! Jack Brad Salary Equal Equal Credit Score 721 679
  16. 19. Jack & Brad : $250,000/30yr. Fixed Jack Brad Salary Equal Equal Credit Score 721 679 Yearly Savings $1,500 0
  17. 20. Jack & Brad : $250,000/30yr. Fixed Jack Brad Salary Equal Equal Credit Score 721 679 Yearly Savings $1,500 0 Interest Saved over 30 Years $33,871 0
  18. 21. CREDIT SCORE! What are the determining factors?
  19. 22. <ul><li>FACTORS OF CREDIT SCORING </li></ul>
  20. 23. 1. Payment History… 35% of Credit Score
  21. 24. <ul><ul><li>Timing of the delinquency </li></ul></ul>Payment History : 35% of Credit Score
  22. 25. <ul><ul><li>Timing of the delinquency </li></ul></ul><ul><ul><li>Level of Delinquency </li></ul></ul>Payment History : 35% of Credit Score
  23. 26. <ul><ul><li>Timing of the delinquency </li></ul></ul><ul><ul><li>Level of Delinquency </li></ul></ul><ul><ul><li>Last activity date </li></ul></ul>Payment History : 35% of Credit Score
  24. 27. <ul><ul><li>Timing of the delinquency </li></ul></ul><ul><ul><li>Level of Delinquency </li></ul></ul><ul><ul><li>Last activity date </li></ul></ul><ul><ul><li>Missed payments (low vs. high) </li></ul></ul>Payment History : 35% of Credit Score
  25. 28. CREDIT SCORE! How long do delinquencies stay?
  26. 29. Delinquencies on Credit Reports <ul><li>Bankruptcies </li></ul><ul><li>… Chapter 7 & 11 10 Years from filing date </li></ul><ul><li>… Chapter 13 7 Years from filing date </li></ul><ul><li>Tax Liens 7 Years from date satisfied </li></ul><ul><li>Late Payments 7 Years </li></ul><ul><li>Charge-offs 7 Years from 1st late pay </li></ul><ul><li>Judgments 7 Years </li></ul><ul><li>Inquiries 2 Years </li></ul>
  27. 30. Revolving Debt Ratio 30% of Credit Score
  28. 31. Revolving Debt Ratio: 30% of Score <ul><ul><li>Cards: …Share debt among many cards </li></ul></ul><ul><ul><li>… Use each every 6 months </li></ul></ul><ul><ul><li>… Do not close credit cards </li></ul></ul><ul><ul><li>… Pay-off before closing date </li></ul></ul><ul><ul><li>… Get added as an authorizer user* </li></ul></ul>
  29. 32. Revolving Debt Ratio: 30% of Score <ul><ul><li>Cards: …Share debt among many cards </li></ul></ul><ul><ul><li>… Use each every 6 months </li></ul></ul><ul><ul><li>… Do not close credit cards </li></ul></ul><ul><ul><li>… Pay-off before closing date </li></ul></ul><ul><ul><li>… Get added as an authorizer user </li></ul></ul><ul><ul><li>Credit …Ask for credit limit increases </li></ul></ul><ul><ul><li> Limit …Maintain balances below 30% </li></ul></ul><ul><ul><li>… Make sure the limit is reported </li></ul></ul>
  30. 33. <ul><ul><li>Spouse: …Keep credit separate from spouse </li></ul></ul><ul><ul><ul><ul><ul><li>… Transfer debt to one spouse </li></ul></ul></ul></ul></ul>Revolving Debt Ratio: 30% of Score
  31. 34. <ul><ul><li>Spouse: …Keep credit separate from spouse </li></ul></ul><ul><ul><ul><ul><ul><li>… Transfer debt to one spouse </li></ul></ul></ul></ul></ul><ul><ul><li>Business …Utilize Business Credit! </li></ul></ul><ul><ul><ul><ul><ul><li>… Reports don’t distinguish </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> personal from business </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>… Some Business Cards don’t report. </li></ul></ul></ul></ul></ul>Revolving Debt Ratio: 30% of Score
  32. 35. 15% of Credit Score Average Age of Credit File…
  33. 36. Average Age of Credit File… <ul><ul><li>The longer the history, the better </li></ul></ul>
  34. 37. Average Age of Credit File… <ul><ul><li>The longer the history, the better </li></ul></ul><ul><ul><li>Hold onto old credit cards </li></ul></ul>
  35. 38. Average Age of Credit File… <ul><ul><li>The longer the history, the better </li></ul></ul><ul><ul><li>Hold onto old credit cards </li></ul></ul><ul><ul><li>Piggyback off Mom to get history* </li></ul></ul>
  36. 39. 10% of Credit Score
  37. 40. Mix of Credit: 10% of Credit Score <ul><ul><li>A mixture is best </li></ul></ul>
  38. 41. Mix of Credit: 10% of Credit Score <ul><ul><li>A mixture is best </li></ul></ul><ul><ul><li>3 to 5 revolving credit cards </li></ul></ul>
  39. 42. Mix of Credit: 10% of Credit Score <ul><ul><li>A mixture is best </li></ul></ul><ul><ul><li>3 to 5 revolving credit cards </li></ul></ul><ul><ul><li>A mortgage account </li></ul></ul>
  40. 43. Mix of Credit: 10% of Credit Score <ul><ul><li>A mixture is best </li></ul></ul><ul><ul><li>3 to 5 revolving credit cards </li></ul></ul><ul><ul><li>A mortgage account </li></ul></ul><ul><ul><li>Auto loan </li></ul></ul>
  41. 44. Mix of Credit: 10% of Credit Score <ul><ul><li>A mixture is best </li></ul></ul><ul><ul><li>3 to 5 revolving credit cards </li></ul></ul><ul><ul><li>A mortgage account </li></ul></ul><ul><ul><li>Auto loan </li></ul></ul><ul><ul><li>Equity lines of credit </li></ul></ul>
  42. 45. Inquiries … 10% of Credit Score
  43. 46. Inquiries: 10% of Credit Score <ul><ul><li>Inquiries affect the score for 1 year </li></ul></ul>
  44. 47. Inquiries: 10% of Credit Score <ul><ul><li>Inquiries affect the score for 1 year </li></ul></ul><ul><ul><li>Inquiries can cost 0 – 50 points </li></ul></ul>
  45. 48. Inquiries: 10% of Credit Score <ul><ul><li>Inquiries affect the score for 1 year </li></ul></ul><ul><ul><li>Inquiries can cost 0 – 50 points </li></ul></ul><ul><ul><li>Score is only reduced for 1st 10 inquiries </li></ul></ul>
  46. 49. Inquiries: 10% of Credit Score <ul><ul><li>Inquiries affect the score for 1 year </li></ul></ul><ul><ul><li>Inquiries can cost 0 – 50 points </li></ul></ul><ul><ul><li>Score is only reduced for 1st 10 inquiries </li></ul></ul><ul><ul><li>Auto & mortgage inquiries </li></ul></ul><ul><ul><li>… have a 30 day buffer period </li></ul></ul><ul><ul><li>… within a 45 day period are treated as 1 </li></ul></ul>
  47. 50. Inquiries: 10% of Credit Score <ul><ul><li>Inquiries affect the score for 1 year </li></ul></ul><ul><ul><li>Inquiries can cost 0 – 50 points </li></ul></ul><ul><ul><li>Score is only reduced for 1st 10 inquiries </li></ul></ul><ul><ul><li>Auto & mortgage inquiries </li></ul></ul><ul><ul><li>… have a 30 day buffer period </li></ul></ul><ul><ul><li>… within a 45 day period are treated as 1 </li></ul></ul><ul><ul><li>Many inquiries don’t count </li></ul></ul><ul><ul><li>… personal </li></ul></ul><ul><ul><ul><li>… promotional & job related </li></ul></ul></ul><ul><ul><ul><li>… insurance & account reviews </li></ul></ul></ul>
  48. 51. <ul><li>Inquiries Continued… </li></ul><ul><li>Hard Inquiry: </li></ul><ul><li>Inquiry made with intent to extend credit. </li></ul><ul><li>MAY impact scores </li></ul><ul><li>Stays on credit for 24 months. </li></ul><ul><li>Soft Inquiry: </li></ul><ul><li>Inquiry made to “offer” you pre-approved credit </li></ul><ul><li>Periodic account review by an existing creditor </li></ul><ul><li>NO impact to credit scores </li></ul><ul><li>Only on consumer report </li></ul><ul><li>Stays on credit for 6 months. </li></ul>
  49. 52. Overview of Good Credit <ul><li>A mortgage, installment (auto), 3 to 5 open CC’s. </li></ul><ul><li>A timely pay history on all accounts. </li></ul><ul><li>At least three to four accounts actively used. </li></ul><ul><li>Balances do not exceed 30% (best case) and no more that 50% of the available credit limit. </li></ul><ul><li>Open accounts have at least a 24 month history. </li></ul>
  50. 53. <ul><li>>8 to 10 open trade lines. </li></ul><ul><li>Late pays > 30 days in last 12 to 36 months. </li></ul><ul><li><4 open trade lines or <4 are actively used. </li></ul><ul><li>Open trade lines are less than 24 months old. </li></ul><ul><li>Credit balances > 50% </li></ul>Overview of Challenged Credit
  51. 54. Overview of Alternative Credit <ul><li>Cancelled rent checks </li></ul><ul><li>Utility company credit letter (electric or gas) </li></ul><ul><li>Phone or cell phone company credit letter </li></ul><ul><li>Cable company credit letter </li></ul><ul><li>Rent Reporters (www.rentreporters.com)* </li></ul>
  52. 55. CREDIT SCORE! Now you Know!
  53. 56. Wellness Credit - Our Program <ul><li>FREE Initial Consultation </li></ul><ul><li>Credit Analysis & Strategic Plan </li></ul><ul><li>Restoration Process – 6 months </li></ul><ul><ul><li>We work directly with credit bureaus and creditors to negotiate and enforce FCRA. </li></ul></ul><ul><li>Education & Credit Preservation </li></ul>
  54. 57. How We Work <ul><li>We meet with your client and determine IF we can even help them*. </li></ul><ul><ul><li>If so, we enroll them in the program and send YOU $100. </li></ul></ul><ul><li>We’ll also send you a link to login and keep you updated on their status. </li></ul><ul><li>If we don’t help them, we have a 100% money-back guaranty! </li></ul>
  55. 58. www.myWellnessCredit.com
  56. 59. Questions & Answers
  57. 60. <ul><ul><li>www.myWellnessCredit.com </li></ul></ul><ul><ul><li>(970) 449-4304 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>Copyright 2009 Wellness Credit

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