Want to learn more about credit scores?

1. Revised 2.21.11C

2. How does my credit
report and credit
score affect me? }
What is the cost of “Poor” credit score?
Revised 2.21.11C

3. How much does
it cost me? } Monthly Payments For the
Average Family.
Revised 3.28.11C

4. Credit Report } Information communicated by a credit reporting agency
that bears on a consumer’s credit standing.
Name
Address
Credit history
Credit inquiries
Collection records
Public records (e.g. tax liens, judgments, bankruptcies)

5. Credit Score } “Refers to a number generated by a statistical model
which objectively evaluates information that pertains to
making a credit decision.”
Revised 2.21.11C

6. What is a Credit
Score? } A numerical score indicating a consumer’s
likelihood to repay a loan.
Revised 2.21.11C

7. Credit Report
& Credit
Score
}
What’s not included in a credit report or credit score?
Race, color, religion, national origin, sex and marital
status
Salary, occupation, job title, employer, date employed
or employment history
Interest rates on any accounts
Rental agreements (monthly rent may be reported if the
major, rental company reports to Experian-only.)
Any information reported as child/family support
obligations (lates may be reported)
Revised 3.28.11C

8. Credit Agencies
} EquiFax: Beacon Score
TransUnion: FICO Score
Experian: Fair Issac Score
Not all companies report to all three credit agencies.
Revised 2.21.11C

9. Credit Report
Information }
Heading information
Scores
Trade-lines
Inquiries
Collection and Public Record
Revised 2.21.11C

10. Resource dated 2.21.11: http://hubpages.com/hub/Lesson-2-you-know-your-crdit-score-Now-What Revised 2.21.11C

11. Average
}
Credit Statistics
Past Payment Performance
Credit Utilization
Credit Statistics:
9 credit cards
4 installment loans
Past Payment Performance:
<50% have ever had 30 day late reported
<30% have ever had a 60 day late reported
<27% have ever had a 90 day late reported
<20% have ever had a loan or account closed due to default
Credit Utilization:
48% owe less than $5,000 on credit cards
15% owe more than $10,000 on credit cards
Revised 2.31.11C

12. How are my credit
score calculated? } A snap shot in time.
Components:
INQUIRES ON CREDIT
TYPES OF CREDIT IN USE Payment History
PAYMENT
HISTORY Credit Utilization
CREDIT HISTORY
Credit History
Types of Credit in Use
CREDIT
Inquires on your Credit
UTILIZATION
Revised 2.21.11C

13. Payment History
Revised 2.21.11C

14. Payment History (35%)
} What is considered….
Number of accounts paid as agreed
Presence of collections and public records (bankruptcy,
judgments, tax liens)
Payment information on all accounts
Number of past dues
Severity of Past Dues (30, 60, 90, 120, 150 & foreclosure)
Time since past dues
Revised 2.21.11C

15. Payment History
} What you need to know…
The fewer late payments, collections, judgments, liens the
better.
RECENT late payments and collections DECREASE YOUR
SCORE MORE than events older than 24-months.
For example:
A 30-day payment today will drop your credit score more than
a bankruptcy three-years ago: with clean credit since the
bankruptcy.
Revised 2.21.11C

16. Payment History
} Tips to improve my scores
Pay all bills on time
If you are past due on an account, get current and stay current.
Pay off judgments and liens
Pay off collections (if needed*)
Contact creditors to ask for extensions, or as a last resort,
negotiate lower payments.
Revised 2.21.11C

17. Credit Utilization
Revised 2.21.11C

18. Credit Utilization (30%)
} What is considered:
Amounts owed on specific type of accounts (i.e.: mortgage,
installment, revolving etc.)
Number of accounts with balances
Installment loan – proportion of balance to original loan
amount.
Revolving Accounts – Proportion of balance to credit limit.
Revised 2.21.11C

19. Credit Utilization
} What you need to know.
Proportion of balance to credit limit is key!
Max score for a credit card is when you owe between $1 to
30% of the credit limit.
Owing zero and never using a credit card doesn’t increase your
scores.
Not having credit cards does not increase your scores.
Revised 2.21.11C

20. Credit Utilization
} Tips to improve my scores.
Keep credit card balances between $1 and 50% of credit limit.
It’s better to have a couple cards with small balances than one
maxed out.
Pay down debt: don’t move it around.
Don’t close open, unused credit cards, use them.
Don’t open new credit cards unnecessarily.
Pay credit cards bills before the due date (credit bureaus are
updated on due dates).
Revised 2.21.11C

21. Credit History
Revised 2.21.11C

22. Credit History (15%)
} What is considered…
Length of time accounts have been open.
Revised 2.21.11C

23. Credit History } What types of credit are considered
The longer you have an account open, the better. Don’t closed
seasoned accounts!!
Avoid “Credit Surfing” (the continuous process of jumping
from one low-rate credit card to another)
Keep balances low.
Don’t open too many new accounts at once.
Revised 2.31.11C

24. Types of Credit in Use (10%)
}
What types of credit are considered?
Mortgage
Installment Loans
Revolving Accounts
Revised 2.31.11C

25. Credit History in Use
} Tips to improve my scores:
Finance company accounts - score
lower than accounts you receive
through banks or stores.
REMEMBER:
Most “90-day same as cash” deals are
from finance companies.
You should have at least three open and active accounts in addition to any
mortgage(s) you may have.
Revised 2.21.11C

26. Inquiries on your
Credit Report (10%) } What is considered…
Only inquiries authorized by you. Pre-approved offers don’t count.
Revised 2.21.11C

27. Inquiries
Revised 2.21.11C

28. Inquiries on my
Credit Report }
Tips to improve my credit score:
Auto and mortgage shopping should be done in a short-
period.
Multiple auto or mortgage inquiries within 45-days
count as one inquiry*.
Inquiries made by YOU are not counted
Research the credit card you want to apply for and
apply direct with the company. Don’t apply to
numerous companies.
*If the inquiring lender uses a general lending code, rather than an auto or mortgage specific
code, the inquiries must be within 15-days to count as a single inquiry.
Revised 3.28.11C ASunderland

29. Collections
Revised 2.21.11C

30. Collections
}
Know what’s on your credit report!
Improving your credit score – paying off collections in
a short-time to improve your credit score is not always
a good idea.
Negotiate pay-off amounts, ask if they will remove the
entry from your credit report.
Get settlement offer in writing.
Pay by check.
Keep settlement offer and cancelled check for record:
this is the proof you will need to reflect the said
collection account has been paid.
Revised 2.21.11C

31. Public Record
Revised 2.21.11C

32. Public Record
}
Judgments
Tax Liens
Other Liens
Bankruptcies
Revised 2.21.11C

33. Your Credit Report
Revised 2.21.11C

34. How to get your
credit report } Federal law states you can get one-free credit report
from each of the bureaus once a year.
Annual Credit Report: www.annualcreditreport.com
1-877-322-8228
EquiFax Bureau: www.equifax.com
1-800-685-1111
TransUnion Bureau: www.transunion.com
1-866-726-7388
Experian Bureau: www.experian.com
1-888-322-5583
Credit scores are not included in the annual free-credit report. You
must purchase your credit scores from each bureau. To better
monitor your credit, space out your requests to the 3-credit bureaus
one at-a-time throughout the year, rather than all 3 bureaus at one-
time annually.
Revised 3.28.11C

35. Errors on your
credit report
} How do I dispute errors on my credit report?
Changes must be made at with the credit bureau in order for the changes to affect your
scores.
The best way to dispute your credit report errors is online.
EquiFax Bureau: www.equifax.com
1-800-685-1111
TransUnion Bureau: www.transunion.com
1-866-726-7388
Experian Bureau: www.experian.com
1-888-322-5583
Revised 2.21.11C

36. Bad Credit
} How do I repair bad credit?
Pay all bills on-time Pay collections
Don’t call a creditor UNLESS you
|
Check your credit report, dispute any can pay the collection in-full
factual errors yourself Try to negotiate a lower payment
My opinion, avoid “credit repair
agencies” Bankruptcy (seek legal advice)
Chapter 7
Pay judgments and liens Chapter 13
Establish new credit: three-new cards
Credit cards, charge cards
Secured credit cards
Revised 2.21.11C

37. Pre-Approved
} How to stop pre-approved credit card and other offers.
www.optoutprescreen.com
Stops companies from sending you “pre-approval” offers.
Good for five-years.
Noticeable drop in junk mail within 30-days.
Theoretically doesn’t improve your credit score.
Revised 2.21.11C