Credit Scores

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					CREDIT SCORES
What is a credit score?
   Three digit number
   Was initially created by Fair Isaac Corporation
   Mathematical formula
   FICO Range – 300-850
   How does it impact you?
   What is a good score?
     For   best interest rates – 720+
  What does a good score save you?

Credit Card                      Susie     Billy

Credit Score                     750       650

Balance                          Equal     Equal

Interest Rate                    9.9%      19.9%

Annual Interest Costs            $792      $1592

Lifetime Interest                $39,600   $79,600

Billy’s penalty for bad credit             $40,000
  What does a good score save you?

Auto Loan                        Susie     Billy

Credit Score                     750       650

Balance                          $30,000   $30,000

Interest Rate                    6.00%     10.00%

Term                             6 years   6 years

Monthly Payment                  $497.18   $555.77

Total Interest                   $5,798    $10,016

Billy’s penalty for bad credit             $4,218
  What does a good score save you?

Mortgage                         Susie      Billy

Credit Score                     750        650

Balance                          $175,000   $175,000

Interest Rate                    5.50%      7.00%

Term                             30 years   30 years

Monthly Payment                  $994       $1,164

Total Interest                   $182,707   $244,149

Billy’s penalty for bad credit              $61,442
How is your credit score calculated?
                                  Credit Score
                Types of credit
                    10%

     Credit Inquiries
         10%
                                                 Payment
                                                  History
                                                   35%

  Length of History
        15%

                                  How much you
                                      owe
                                     30%
Payment History – 35%
   Pay your bills on time
   Late payments only show up if your more than 30
    days late.
   You can still get late payments and fees if you’re
    one to a few days late.
   Dings on your credit score due to late payments are
    determined by how recently they occurred, how
    many there were, (30,60,90, 120, Charged Off),
    and which accounts you’re late on.
How much you owe? - 30%
   How much of your available credit do you use?
   Stay underneath 30% on EACH credit line.
   Don’t max out your credit!
Length of history – 15%
   More points are awarded for longer account history
   Never close out a positive account
   Must use at least once every few months to maintain
    activity.
   Use sparingly, once a month for normal purchases.
   Uses both longest aged account and overall
    average of account ages
Inquiries
   Last two years of credit applications
   When you apply for credit
     Credit cards
     Cell phones
     Mortgages, etc.

   Do not count pre-approval offers and insurance
    inquiries (most of the time).
     Credit cards
     Cell phones
     Mortgages, etc.
Types of credit
   Installment Accounts
     Defined period of time
     Car loans, student loans, mortgages, etc.

   Revolving Accounts
     Credit Cards
     Store Cards

     Gas Cards

     Secured Credit Cards
Recap…
Credit Score Myths
   Boosting score by lowering limits
   Closing old accounts with high interest or not used
   Checking your own credit will add an inquiry
   If you shop for better rates your score will lower
   You don’t have to use credit for a good score
   You must carry a balance to keep your score up
   Credit Counseling is worse than bankruptcy
   Bankruptcy will permanently ruin your ability to get
    credit

				
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