Unit 4 Consumer CreditPart 5 Credit Reports

Dollars and Sense

What does Your Credit Report Contain

Identification-Name, address-Social Security Number-Current and Previous employers

Credit Information-Credit accounts with Financial institutions,retailers, credit card issuers, other lenders-Credit limits, account balance, payment patternover the last two years

What does Your Credit Report

Contain Public record information

-Bankruptcies-Judgments-Tax liens

Inquiries-Credit Grantors-Potential employers

Credit Score (if requested)

What is not in your Report

Race or religion

National origin

Sex and Marital status

Whether you receive public assistance

Criminal activity

Why do you think that is?

What is your credit score?

A credit score is a number which represents an estimate of an individual’s financial creditworthiness

Five Parts to your FICO credit scores

35% of Score - Payment history

30% of Score – How much you owe

15% of Score – Length of Credit History

10% of Score – New Credit

10% of Score – Other factors (mix)

http://www.adjustcredit.com/fico-credit-scores-ranges-meanings/

Upon the application of this formula a specific credit score is derived. The following credit score range chart will help you to interpret the credit score:

The advantage of having a good credit score range is that the interest rates that will be levied on your credit and loans would be reasonable and very convenient. Having a score in the excellent credit score range will give you the best possible offers and least possible interest rate.

Credit Score Range

Score Rating

800 + Excellent

700 to 799 Very Good

680 to 699 Good

620 to 679 OK

580 to 619 Poor

500 to 579 Bad

499 & lower Very Bad

Why Credit Scores are important

Helps lenders predict how likely you are to make credit payments on time

Affect whether you can get credit

What you pay for credit cards, auto loans, mortgages, and other types of credit

Higher scores more likely to be approved and pay a lower interest rate

About Credit Scores - Many types of credit scores

Lenders usually mean FICO score developed by Fair Isaac Corporation

Most commonly used scoring system

Scores range from 300 – 850

Most people score in the 600s and 700s

Myths about Credit Scores Close unused credit cards – False

Your credit report merges when you marry – False

FICO Scores are based on income – False

Checking your score hurts your score - False

Why Scores go Down: Pay late or pay less than required

payment

Public Record items appear Bankruptcy, Judgments

Credit balances go up a lot

Open new accounts

What makes scores go up: Pay bills on time

Pay down credit card balances

Keep older accounts open

Avoid opening new ones

Apply for new credit only when you need it

Make sure your credit report is accurate

Improving your Score will…

Lower your interest rates

Speed up credit approvals

Get better credit card, auto, mortgage offers

Key Points: Get a copy of your credit report annually

Every 12 months – free copy of credit report from three major reporting agencies

www.annualcreditreport.com or 1-877-322-8228

Correct any errors or inaccuracies

Establish good credit habits

3 Major Credit Reporting Agencies

Experian Web: www.experian.com Phone: 1-800-200-6020

Equifax Web: www.equifax.com Phone: 1-866-685-1111

Transunion Web:

www.transunion.com Phone 1-800-888-4213

Credit Reporting Agency

FICO Score

EquifaxBEACON®

Score

ExperianExperian/Fair

Isaac Risk Model

TransUnion EMPIRICA®

Español

TransUnion Credit Report

Equifax Credit Report

Your Task Complete the Credit Scores Worksheet