Credit Score Rating Factors


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The Anatomy of a Credit Score . Learn how credit scores are determined and how each individual factor will impact your credit score.

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Credit Score Rating Factors

  1. 1. The Anatomy of a Credit Score How Credit Scores are Determined
  2. 2. Understanding Credit Scoring <ul><li>CREDIT REPORT FACTORS </li></ul><ul><ul><li>A. Credit History </li></ul></ul><ul><ul><li>B. Delinquent Accounts </li></ul></ul><ul><ul><li>C. Credit Card Accounts </li></ul></ul><ul><ul><li>D. Public records, foreclosures, & Collection </li></ul></ul><ul><ul><li>E. Inquiries </li></ul></ul>
  3. 3. Understanding Credit Scoring <ul><li>Credit History shows how well debt has been paid over time </li></ul><ul><li>Older account has greatest impact </li></ul><ul><li>New accounts aren’t higher risk so long as paid on time </li></ul><ul><li>Can substitute non-traditional credit </li></ul>
  4. 4. Factors Into Credit Score <ul><li>Major derogatory items </li></ul><ul><li>Time at present job </li></ul><ul><li>Occupation </li></ul><ul><li>Time at present address </li></ul><ul><li>Ratio of balances to available credit lines </li></ul><ul><li>Number of credit lines on report </li></ul><ul><li>Number of years one had credit in the credit bureau database </li></ul>
  5. 5. Years at Current Address <ul><li>Years at Current Address </li></ul><ul><li>The longer you stay in one place better you will score </li></ul><ul><li>Points Added/Subtracted </li></ul><ul><li><.5 year 12 </li></ul><ul><li>.5 – 2.49 Yrs 10 </li></ul><ul><li>2.5 – 6.49 Yrs 15 </li></ul><ul><li>6.5 – 10.49 Yrs 19 </li></ul><ul><li>>10.49 Yrs 23 </li></ul><ul><li>No Info 13 </li></ul>
  6. 6. Do you Rent or Own? <ul><li>Own or Rent? </li></ul><ul><li>Homeowners will score more points. </li></ul><ul><li>Points Added/Subtracted </li></ul><ul><li>Own 25 </li></ul><ul><li>Rent 15 </li></ul><ul><li>Other 10 </li></ul><ul><li>No Info 7 </li></ul>
  7. 7. Existing Credit Cards <ul><li>Existing credit cards and store cards. </li></ul><ul><li>Consumers who have both credit cards and store cards will score higher. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>None 0 </li></ul><ul><li>Department 11 </li></ul><ul><li>Major CC 16 </li></ul><ul><li>Both 27 </li></ul><ul><li>No Info 10 </li></ul>
  8. 8. Have a Bank Account? <ul><li>Bank Reference </li></ul><ul><li>Consumers who have both a checking and savings account will score higher than those with only one type of account or none at all. </li></ul><ul><li>Note: If you have been denied a bank account due to bad credit you can open a guaranteed checking account . </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>Checking 5 </li></ul><ul><li>Savings 10 </li></ul><ul><li>Both 20 </li></ul><ul><li>Other 11 </li></ul><ul><li>No Info 9 </li></ul>
  9. 9. Debt Ratios <ul><li>Debt Ratios </li></ul><ul><li>The lower the debt ratio, the higher the score. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li><15% 22 </li></ul><ul><li>15-25% 15 </li></ul><ul><li>26-35% 12 </li></ul><ul><li>26-49% 5 </li></ul><ul><li>>50% 0 </li></ul><ul><li>No Info 13 </li></ul>
  10. 10. Number of Inquiries <ul><li>Number of Inquiries </li></ul><ul><li>Consumers will be penalized for having more than 3 inquiries. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>0 3 </li></ul><ul><li>1 11 </li></ul><ul><li>2 3 </li></ul><ul><li>3-4 -7 </li></ul><ul><li>5-9 -20 </li></ul><ul><li>No Record 0 </li></ul>
  11. 11. Age of Credit File <ul><li>Years in File </li></ul><ul><li>Consumers with older consumer credit files score higher. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>< 1 Year 0 </li></ul><ul><li>1-2 Years 5 </li></ul><ul><li>3-4 Years 15 </li></ul><ul><li>5-7 Years 30 </li></ul><ul><li>>8 Years 40 </li></ul>
  12. 12. # of Revolving Lines <ul><li>Number of Revolving Lines </li></ul><ul><li>Consumers with 1-2 revolving lines score higher than those without any, or with more than 3 </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>0 5 </li></ul><ul><li>1-2 12 </li></ul><ul><li>3-5 8 </li></ul><ul><li>>6 4 </li></ul>
  13. 13. Unused Balances <ul><li>Percentage of Balances Available </li></ul><ul><li>Those with an unused balance of 0-15% score highest. Those with high unused balance percentages are penalized. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>0-15% 15 </li></ul><ul><li>16-30% 5 </li></ul><ul><li>31-40% -3 </li></ul><ul><li>41-50% -10 </li></ul><ul><li>>50% -18 </li></ul>
  14. 14. Derogatory Credit <ul><li>Derogatory Credit </li></ul><ul><li>Derogatory credit will significantly lower a consumer’s credit score. </li></ul><ul><li>Points Added/Subtracted to Credit Score </li></ul><ul><li>No Record 0 </li></ul><ul><li>Any Record -29 </li></ul><ul><li>Slow payment -14 </li></ul><ul><li>One Satisfa. 17 </li></ul><ul><li>Two Satisfa. 24 </li></ul><ul><li>Three Satisfa. 29 </li></ul>
  15. 15. Factors that cannot Influence Credit Scores <ul><li>Age </li></ul><ul><li>Gender </li></ul><ul><li>National Origin </li></ul><ul><li>Sources of Income </li></ul><ul><li>Race </li></ul><ul><li>Religion </li></ul><ul><li>Marital Status </li></ul><ul><li>Income Level </li></ul>
  16. 16. Secrets to Getting a High Credit Score <ul><li>Don’t move too often, buy a house and stay there =) </li></ul><ul><li>Avoid derogatory credit at all costs </li></ul><ul><li>Maintain a unused balance between 0-15% and do not go above 30% </li></ul><ul><li>Maintain 1-2 lines of revolving credit </li></ul><ul><li>Open and keep a credit card and department store card </li></ul><ul><li>Open and keep a checking account AND a savings account </li></ul><ul><li>Keep your debt ratio below 15% </li></ul>