Revised 2.21.11C

How does my credit

report and credit

score affect me? }What is the cost of “Poor” credit score?

Revised 2.21.11C

Revised 3.28.11C

How much does it cost me? } Monthly Payments For the

Average Family.

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)

Revised 2.21.11C

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

What is a Credit Score? } A numerical score indicating a consumer’s

likelihood to repay a loan.

Revised 2.21.11C

Revised 3.28.11C

Credit Report

& 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)

What’s not included in a credit report or credit score?

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

Credit Report

Information }Heading information

Scores

Trade-lines

Inquiries

Collection and Public Record

Revised 2.21.11C

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

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

How are my credit score calculated? }A snap shot in time.

Components:

Payment History

Credit Utilization

Credit History

Types of Credit in Use

Inquires on your Credit

PAYMENT

HISTORY

CREDIT

UTILIZATION

CREDIT HISTORY

TYPES OF CREDIT IN USE

INQUIRES ON CREDIT

Revised 2.21.11C

Payment History

Revised 2.21.11C

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

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

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

Credit Utilization

Revised 2.21.11C

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

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

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

Credit History

Revised 2.21.11C

Credit History (15%) }What is considered…

Length of time accounts have been open.

Revised 2.21.11C

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

Types of Credit in Use (10%) }What types of credit are considered?

Mortgage

Installment Loans

Revolving Accounts

Revised 2.31.11C

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

Inquiries on your

Credit Report (10%)}What is considered…

Only inquiries authorized by you. Pre-approved offers don’t count.

Revised 2.21.11C

Inquiries

Revised 2.21.11C

Revised 3.28.11C ASunderland

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.

Collections

Revised 2.21.11C

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

Public Record

Revised 2.21.11C

Public Record }Judgments

Tax Liens

Other Liens

Bankruptcies

Revised 2.21.11C

Your Credit Report

Revised 2.21.11C

Revised 3.28.11C

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.

Errors on your

credit report }How do I dispute errors on my credit report?

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

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.

Revised 2.21.11C

Bad Credit }How do I repair bad credit?

Pay all bills on-time

Check your credit report, dispute any

factual errors yourself

My opinion, avoid “credit repair

agencies”

Pay judgments and liens

Establish new credit: three-new cards

Credit cards, charge cards

Secured credit cards

Pay collections

Don’t call a creditor UNLESS you

can pay the collection in-full

Try to negotiate a lower payment

Bankruptcy (seek legal advice)

Chapter 7

Chapter 13|Revised 2.21.11C

Pre-Approved }How to stop pre-approved credit card and other offers.

www.optoutprescreen.comStops 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