2 what does it mean? determine how much money you can borrow, and how much interest you’ll pay....
TRANSCRIPT
Credit Scoring…Protecting Your Future
and your Capital
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What Does it Mean?
What Does The Score Mean?
Determine how much money you can borrow, and how much interest you’ll pay.
Each score is specific for each bureau
Scores range from…
– 300 to 850 for Classic FICO
– The higher the score the lower the risk
The score is generated by analyzing the information contained in the consumer’s credit report at a particular point in time
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Other names for FICO Score
Equifax – BEACON® Score
Experian – Experian/Fair Isaac Risk Model
TransUnion – EMPIRICA®
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Other Scoring Models
Vantage Scoring Model– Unveiled on march 14 2006
– Driven by the Big 3
– Score range from 501-990
– Scores Combine a letter to the Score:A: 900–990
B: 800–899C: 700–799D: 600–699F: 501–599
In 2013 adopted the 300-850 range
Other Scoring Models
Plus Score– Developed By Experian Decision Analytics
– Ranges from 330 – 830
– Used primarily for consumer reports
Trans Risk Score– Developed By Transunion
– Ranges from 300 – 850
– Used primarily for consumer report
Scoring Models
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Consumer Default: What are the Odds?
Odds on Consumers: 90 Days Late
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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
Odds on Consumers: 90 Days Late
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Score Odds
660 to 679 38 to 1
620 to 659 26 to 1
500 to 600 8 to 1
Below 500…
FORGET IT!
A Low Credit Score Can Cost You BIG!
FICO Score APR RateMonthly Payment
Interest Paid
720-850 5.3% 2776.52 $499,549
700-719 5.9% 2965.68 $567,647
680-699 6.5% 3160.34 $637,722
620-679 7.6% 3530.37 $770,937
560-619 8.4% 3809.19 $871,305
500-599 9.9% 4350.95 $1,066,352
Compare 30 yr fixed rates on a $500,000 home
Jack & Brad: $500,000/30yr. Fixed
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Jack Brad
Salary Equal Equal
Credit Score 681 595
Jack & Brad: $500,000/30yr. Fixed
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Jack Brad
Salary Equal Equal
Credit Score 681 595
Yearly Savings $14,288 0
Jack & Brad: $500,000/30yr. Fixed
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Jack Brad
Salary Equal Equal
Credit Score 681 595
Yearly Savings $14,288 0
Interest Saved over 30 Years $428,630 0
Jack & Brad: $500,000/30yr. Fixed
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Jack Brad
Salary Equal Equal
Credit Score 681 595
Yearly Savings $14,288 0
Interest Saved over 30 Years $428,630 0
10% return on savings compounded total in 30 yrs.
$ 2,476,911 $0
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What are thedetermining factors?
Credit Score Components
1. Payment history
2. Amounts Owed
3. Length of credit history
4. Types of credit in use
5. New credit
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1. Payment history…
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35% of Credit Score
Chart Title
1. Payment history:35% of Credit Score
Many types of accounts are considered for payment history
– Credit Cards
– Retail Accounts
– Installment Loans
– Finance company accounts
– Mortgage loans
Public record and collection items are considered quite serious
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1. Payment history:35% of Credit Score
FICO® Score considers this details on the accounts:
– How late they were
– How much was owed
– How recently they occurred
– How many there are
Good track record on credit accounts will increase FICO® Score
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How long dodelinquencies stay?
Delinquencies on Credit Reports
Bankruptcies
– Chapter 7, 11 & 12 10 Years from filing date
– Chapter 13 7 Years from the date paid, and 10 years if not completed
Paid Tax Liens* 7 Years from date released (paid) (For California State Residents Only: or 10 years from the date file)
Unpaid Tax Liens Remain on file indefinitely (For California State Residents Only:
10 years from the file date)
Late Payments 7 Years
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Delinquencies on Credit Reports
Charge-offs 7 Years from 1st late pay
Judgments 7 Years from the date filed (For NY State Residents only: 5 years from
the date filed)
Collections 7 years from the initial missed payment that led to the collection
(For NY State Residents Only: 5 years from the date of last activity)
Inquiries 2 Years
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2. Amounts owed…
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Chart Title
30%of
Credit Score
2. Amounts owed: 30% of Score
Amount owed on all accounts
Amount owed on specific types, such as credit cards and installment loans.
How many accounts have balances
How much of the total credit line is being used and other “revolving” credit accounts
How much of the installment loan amounts is still owed, compared with the original loan amount
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3. Length of credit history…
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15%of
Credit Score
Chart Title
3. Length of credit history:15% of Score
How long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts
How long specific credit accounts have been established
How long it has been since you used certain accounts.
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4. Types of credit in use…
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10%of
Credit Score
Chart Title
4. Types of credit in use:10% of Credit Score
The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.
People with no credit cards tend to be viewed as a higher risk than people who have managed credit cards responsibly.
A closed account will still show up on your credit report, and its history will be considered by your FICO Score.
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5. New credit…
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10%of
Credit Score
Chart Title
5. New credit:10% of Credit Score
It’s OK to request and check your own credit report
Don’t open new accounts to rapidly
How many recent inquiries you have
Length of time since credit report inquiries were made
How long it’s been since you opened a new account
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Credit Score Components
1. Payment history
2. Amounts owed
3. Length of credit history
4. Types of credit in use
5. New credit
1 -
35%
2 - 30%
3 -
15%
4 -
10%
5 - 10%
Chart Title
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Now you know!