Understanding Your Credit Score
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Hillary Combs, Associated Bank - Senior Branch Manager Learn what credit score means, why it's important, and how to keep it strong.
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Understanding Your Credit Score
- 1. UNDERSTANDING YOUR CREDIT SCORE FINANCIAL EDUCATION SERIES Regarding Web sites and other sources, the information conveyed is for information purposes only. No endorsement is implied. Equal Housing Lender. Member FDIC and Associated Banc-Corp
- 2. AGENDA • Give your credit a check-up • Free access to credit report • How your credit score is calculated • What’s a good credit score • How to improve your credit score • Your questions 1
- 3. GIVE YOUR CREDIT A CHECK-UP 1. Get the facts 2. Right the wrongs 3. Improve your behavior 4. Follow up 5. Monitor your credit 2
- 4. FREE ACCESS TO CREDIT REPORT • According to the Fair and Accurate Credit Transaction Act (FACTA) of 2003, consumers are entitled to free access to their credit report. • Credit bureaus must provide free copies of credit reports to victims of identity theft. • For more information go to www.annualcreditreport.com, or call 1-877-322-8228. 3 -Better Business Bureau Equifax www.equifax.com 800-525-6285 (Fraud Hotline) 800-685-1111 (Report Order) P.O. Box 740250 Atlanta, GA 30374 Experian www.experian.com 888-397-3742 (Fraud Hotline) 888-397-3742 (Report Order) P.O. Box 9556 Allen, TX 75013 TransUnion www.transunion.com 800-680-7289 (Fraud Hotline) 800-916-8800 (Report Order) P.O. Box 6790 Fullerton, CA 92634
- 5. HOW YOUR CREDIT SCORE IS CALCULATED • Payment history • Outstanding debt • Credit account history • Recent inquiries • Types of credit 4 -about.com
- 6. WHAT’S A GOOD CREDIT SCORE? • Credit scores (usually) range from 340 to 850. • The higher your score, the less risk a lender believes you will be. As your score climbs, the interest rate you are offered will probably decline. • Borrowers with a credit score in the mid 700s are typically offered better interest rates. 5 -about.com Credit Score US Population Up to 499 1% 500 – 549 5% 550 – 599 7% 600 – 649 11% 650 – 699 16% 700 – 749 20% 750 – 799 29% Over 800 11%
- 7. HOW TO IMPROVE YOUR CREDIT SCORE 1. Improve your payment history 2. Keep debt to a minimum 3. Length of your credit history 4. Manage new credit wisely 5. The types of credit you use 6 -about .com
Editor's Notes
- Welcome participants. Ensure everyone receives the following: a copy of the corresponding handout, your business card and any applicable brochures for related products and/or services as well as any current promotions you’d like to discuss. Please also bring along business cards of any partners you may discuss or mention. Introduce yourself, the Financial Education Series, and its purpose. If time permits, ask participants to introduce themselves and share a question or concern they may have about Understanding Your Credit Score. Explain that this is one of many topics within the Financial Education Series. Other topics include: Debt Reduction, Identity Theft, Budgeting, Saving for College, and IRAs. Encourage future participation in topics of interest. Introduce Understanding Your Credit Score topic and handout (Ex. The credit scoring system became prevalent during the 1980's as a way for lenders to quickly evaluate a potential borrower's creditworthiness. The system was found to accurately predict financial risk over time and grew to several different industries. Now credit scoring is used by lenders, insurers, landlords, employers, utility companies and even judges to evaluate your credit behavior…)
- Review agenda items. Review “Give your Credit a Check-up” on next slide (e.g., with a little research and five simple steps, it’s easy to spruce up your credit profile…)
- The first step is to get a clear picture of your credit profile. Order your credit report, credit score and debt analysis online to get a complete picture of your current status. Look closely at the data from each credit bureau to see that it all matches up. Keep an eye out for: wrong mailing addresses, incorrect Social Security information, old employers, signs of identity theft, errors in your credit accounts, late payments, and unauthorized hard inquiries. Contact the credit bureaus, file a dispute to have errors on your credit report corrected. By law, the credit bureaus have 30 days to investigate your claim and make any appropriate corrections. Identify problem areas on your credit report and make a plan for improvement. If you've had a hard time paying your bills on time, sign up for an automated payment service. If your debt levels are above 50% of your available limit, create a payment plan to reduce your balances. Set goals for improving your credit and be sure to celebrate when you reach a milestone. Check your credit again 30-60 days after disputing errors and changing your behavior to see how much you have improved. If any inaccuracies remain, continue to negotiate to have them taken off your credit report. If you want to tell your side of the story, ask to have a consumer statement added to your credit file. To guard against fraud and keep your credit healthy, sign up for a credit monitoring service that will quickly alert you to any changes in your report. Keep copies of your old credit reports and letters of dispute in a safe place for future reference. Make a plan to evaluate your progress in the spring.
- Review slide. Mention that a credit score may vary depending on which company provides it. In addition, lending institutions have the ability to “customize” the particular scorecard they use, so credit scores should be similar to a customer requested report but may not match exactly. Source: Spring, 2008.
- Review “How Your Credit Score is Calculated” (Ex. The basic credit scoring formula takes into account several factors from your credit report…) Payment history – A good record of on-time payments will help boost your credit score. Outstanding debt – High balances in relation to your credit limits will harm your credit. Aim for balances under 35%. Credit account history – An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application. Recent inquiries – When a lender or business checks your credit, it causes a hard inquiry and a slight ding to your credit score. Apply for new credit in moderation. Types of credit – A healthy credit profile has a balanced mix of credit accounts and loans. Source: Spring, 2008. Introduce “What is a Good Credit Score” on next slide…
- Review bullets. Note that, at Associated, an A grade customer (our best customer), has a credit score of 760 or more. Mention that those with lower scores shouldn’t be discouraged because there is a mortgage product for nearly everyone. Introduce table (e.g., Here’s a look at credit scores among the US population in 2003…) Source: Spring, 2008.
- Improve your Payment History: Always pay your bills on time. If you have past-due bills now, get current and stay that way. Contact your creditors as soon as you know you will have a problem paying bills on time. If your situation is serious, see a legitimate, non-profit credit counselor. Avoid the scam artists who promise a quick reversal of your credit problems. Keep Debt to a Minimum: Keep your credit card balances low. Pay off debt, don't move it around. Owing the same amounts, but having fewer open accounts, can lower your score if you max out the accounts involved. Don't close unused accounts, because zero balance might help your score. Don't open new accounts that you don't need as a quickie approach to altering your debt-to-credit-limit ratios. That can lower your score. Length of Your Credit History: Time is the only thing that can improve this aspect of your scores, but you can manage it wisely. Don't open several new accounts in a short period, especially if your credit history is less than three years. Manage New Credit Wisely Several credit inquiries during a short period means you are attempting to open multiple new accounts, and that lowers your credit scores. Credit scoring software usually recognizes when you are shopping for a single loan within a short period of time, such as a home loan. If multiple inquiries are necessary, have them pulled as closely together as possible. Checking your own credit report does not affect your scores. Do try to open a few new accounts if you've had credit problems in the past. Pay them on time and don't max out your credit limits. The Types of Credit You Use A mixture of credit cards and installment loans, loans with fixed payments, can help raise your score if you manage the credit cards responsibly. Having many installment loans can lower your scores since payments remain the same until balances are paid in full. Don't open new accounts just to have several accounts or to attempt a better mix of credit. Closing an account doesn't remove it from your report. It may still be considered for scoring purposes. Source: Spring, 2008.
- Explain that, in an effort to protect their customer’s credit and identity, Associated Bank is pleased to offer personal credit report and identity theft products through its alliance with an external vendor. To learn more, and to enroll, please access the link provided through our website at associatedbank.com. Mention that there are also various tools on our website to assist with identity theft issues and improving finances. Field any questions/comments/concerns related to Understanding Your Credit Score. Encourage participants to follow the tips provided and provide dates/information for future presentations of the Financial Education Series. Ask if there are any topics that they would like to learn more about (inform Talent Development of new topic suggestions.) Before closing, share information on current ‘sales’. Thank participants for participating. Remain available for one-on-one questions until all participants have left.