Credit Report Presentation

Keeping Scorep g

UnderstandingUnderstanding your Credit Score and Credit Report

Presented by:Bill Jenkins, Marketing Director

Information for this presentation was obtained from myfico.com

, gCountybank

Credit Evaluation & Decision Making

How much money would you lend a friend or co-worker if youlend a friend or co-worker if you knew they had a reputation for never paying back the moneynever paying back the money

they borrowed?

What’s in your credit report?What s in your credit report?Identifying Information

Name SSN address phone number date of birth employmentName, SSN, address, phone number, date of birth, employmentTrade Lines

These are credit accounts that lenders report. They report the type of account the date you opened the account your credittype of account, the date you opened the account, your credit limit or loan amount, the account balance and your payment history.

InquiriesInquiriesWhen applying for any loan product you are authorizing the lender to pull and review a copy of your credit report. There is a list of everyone who accessed your credit report within the lastlist of everyone who accessed your credit report within the last two years

Public Record and Collection ItemsThese include collections bankruptcies foreclosures suitsThese include collections, bankruptcies, foreclosures, suits, wage attachments, liens and judgments

Who uses credit scores & why are they y yimportant?

Banks, Credit Unions and other lendersHome and auto insurers potential employers landlords– Home and auto insurers, potential employers, landlords, auto dealerships and utilities

• Need to assess the “stability” in a potential buyer’s, lessee’s or employee’s life The lesslessee’s or employee’s life. The less stability/predictability in behavior (as shown by a low credit score), the higher the risk of future problemsproblems

How credit scoring helps youHow credit scoring helps you

P l t l f tPeople get loans fasterCredit decisions are fairerC dit “ i t k ” t f lCredit “mistakes” count for lessMore credit is availableCredit rates are lowerHigher risk borrowers that used to be t d d t d lturned down are granted loans

What a credit score considersWhat a credit score considers

1. Payment History2. Amount Owed2. Amount Owed3. Length of Credit History4 New Credit4. New Credit5. Types of Credit Used

Score weights breakdownScore weights breakdown

TYPE OF CREDIT

PAYMENT HISTORY

35%

NEW CREDIT 10%

TYPE OF CREDIT USED10%

35%

LENGTH OF HISTORY

15%

AMOUNT OWED30%

What a credit score considersWhat a credit score considersPayment History

(Approximately 35% of your score)• What is your track record for paying

bills?• Public records (suits/judgments) and

ll ti itcollection items• Details on missed or late payments

P i 60 90 d l t i t• Paying 60 or 90 days late is not considered good credit


What a credit score considersWhat a credit score considersAmount Owed

(Approximately 30% of your score)• How much is too much?• Considers amount owed and account

types – (credit cards, installment loan,

mortgage)Pay off credit cards monthly?• Pay off credit cards monthly?

• Near line of credit limit?Number of accounts with balances?


• Number of accounts with balances?

What a credit score considersWhat a credit score considersLength of Credit History

(Approximately 15% of Score)• How long is your credit history?• How long have your accounts been

established?• Are you constantly using the revolving

accounts?H d th l th f dit• How does the length of your credit history compare to your age?


What a credit score considersWhat a credit score considersNew Credit

(Approximately 10% of your score)• Are you increasing your debts too

fast?• How many new accounts do you

h ?have?• How long since you opened a new

account?account?


What a credit score considersWhat a credit score considersTypes of Credit Used

(Approximately 10% of your score)• Is it a healthy mix?

– (credit cards, retail accounts, installment loans, finance company accounts mortgages)accounts, mortgages)

• “How many is too many” will vary• It is not a good idea to open credit• It is not a good idea to open credit

accounts you don’t intend to use


What a credit score ignoresWhat a credit score ignores• Race, religion, nationality, sex and marital status• Age• Salary, occupation, title, employer, date

employed or employment historyemployed or employment history• Where you live• Interest rates currently paid• Interest rates currently paid• Family/child support payments• Other information not proven to be predictive ofOther information not proven to be predictive of

future repayment reliability


What do credit scores mean to lenders?What do credit scores mean to lenders?

Numeric Range Classification Risk RatedNumeric Range Classification Risk Rated

730 and above Platinum Very Low

680 to 729 A Low

640 to 679 B Low to Medium640 to 679 B Low to Medium

600 to 639 C Medium to High

550 to 599 D High

549 and below E Very High


y g

Adverse effects of low scoresAdverse effects of low scoresHigher risk borrowers pay for the risk g p y

they pose6.00% Loan19.00% Loan

$15,0004 years

Monthly Payment: $352

$15,0004 years

Monthly payment: $448

You save about $4,618 in interest with the 6.00% loan, paying nearly $100 less every month!

$352$448

• Very low scores can mean denial of a loan


loan

Improving your scoreImproving your score

Managing Payment HistoryManaging Payment History• Pay your bills on time• If you have missed payments get current• If you have missed payments, get current

and stay current with your lenders• Be aware that paying off a collection item p y g

will not remove it from your credit report.– (Collection items stay on your report for

7 years)7 years)• If you are having trouble financially,

contact your creditors or see a legitimate Information for this presentation was obtained from myfico.com

y gcredit counselor


M i th A t O dManaging the Amounts Owed

K b l l dit d d• Keep balances low on credit cards and other revolving lines of credit

• Pay off debt rather than moving it aroundPay off debt rather than moving it around• Don’t close unused credit cards as a short

term strategy to raise your score• Don’t open a number of new credit cards

that you don’t need, just to increase your available credit


available credit


Managing Credit HistoryManaging Credit History

• If you have been managing credit for a short time, don’t open new accounts too rapidlydon t open new accounts too rapidly

Establishing New Credit Accounts

• Do rate shop for a given loan within a specific period of time

• Re-establish your credit history if you have had problems

• It’s imperative to check your credit report annuallyInformation for this presentation was obtained from myfico.com

It s imperative to check your credit report annually


Selecting Types of Credit AccountsSelecting Types of Credit Accounts

• Apply for and open new credit accounts• Apply for and open new credit accounts only as needed

• Have credit cards-but manage them responsibly

• Note that closing an account doesn’t make it go awayit go away


Facts & fallaciesFacts & fallaciesFallacy: My score determines whether or not I get creditget credit.

Fact: “Lenders use a number of facts to make creditFact: Lenders use a number of facts to make credit decisions, including your FICO score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employmentreasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your p y y g yscore is low, or decline your request for credit although your score is high.”


Facts & fallaciesFacts & fallacies

Fallacy: A poor score will haunt me foreverFallacy: A poor score will haunt me forever.

Fact: “Just the opposite is true. A score is a "snapshot" pp pof your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you h dl dit F l t dit bl i thandle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available Therefore by takingthe most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.”



Fallacy: Credit scoring infringes on myFallacy: Credit scoring infringes on my privacy.

Fact: “Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply aapplication and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.”q pp , p



Fallacy: My score will drop if I apply for newFallacy: My score will drop if I apply for new credit.

Fact: “If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "i i i ") ill L ki f"inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time Typicallymortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.”


Checking your reportChecking your reportYou should make sure the information in your credit report is correct. To request a copy, contact the credit reporting q py p gagencies directly:

– Equifax: (800) 685-1111, www.equifax.com– Experian: (888)397-3742, www.experian.comp ( ) , p– TransUnion: (800)888-4213, www.transunion.com– www.annualcreditreport.com

If you find an error, the credit reporting agency must investigate and respond in writing within 30 days of complaintIf you are denied credit, you are entitled to a free copy of your report from the reporting agency used by the credit grantor


Questions?Questions?

C dit l iti l t i l ' lifCredit plays a critical part in nearly everyone's life, and understanding what credit is and how it affects you can be a challenge. A great way to understand y g g ythe role credit plays in your life — and to empower yourself as a consumer — is with the basic knowledge of your credit scores and credit reportsknowledge of your credit scores and credit reports.


Th k !Thank you!

Documents

Credit Report Presentation