Understanding Credit Reports Credit Scores

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					 Understanding Credit
Reports & Credit Scores

    Presented by
    Rich Call
    Consumer Credit Counseling
What We Will Cover
   Credit Reports and Credit
    Scores - What they are and how
    they are developed.

   Understanding the Reports –
    How to read them and why they are

   Acting On the Information In
    Them – What to do to maintain,
    correct, or improve the information.
      What is a credit report?
   Detailed record of your history of borrowing
    money and paying it back

   Report card about your credit standing

   Used by lenders, insurance companies,
    landlords, and employers to determine
    whether you have good financial habits

   Credit reports are provided by credit bureaus
    based upon information provided to them by
    creditors on a voluntary basis
                   3 Major
         Credit Reporting Companies
   Equifax – www.equifax.com            800-685-1111

   Transunion – www.transunion.com 800-888-4213

   Experian– www.experian.com            888-397-3742

       $12.00/$15.00 if through them for single report from
        one company

       Can also purchase trimerge reports that combine info
        from all three onto one report. Price is higher.
Free Credit Reports
   New law : one free copy of credit report
    from each of three credit bureaus every

       www.annualcreditreport.com
       1-877-322-8228
       Annual Credit Report Request Service
        P O Box 105281, Atlanta, GA 30348-

   Credit score does not come automatically
    with the free report.
Information on a Report
   Identification & employment info

   Account information & payment history

   Collection accounts

   Public record

   Inquiries from creditors/potential
 -----------------------------------------------
    Public, Joe        15 Any Street        325 Broad St. Someplace, USA 55555
    Sam’s plumbing Welder Nice City, America 33333 03/15/52                              222-22-2222
    ------------------------------------------------------------------------------------------------------------
    Trade Line information
    Industry     Date opened       Acct. Number High credit Balance Current rating Historical delinquency

    Bankcard 05/03/92                    xxxx1234                       $5000             Current            90– 5 yr ago
    Auto loan 05/03/01                   xxxx3456 $15,000               $9750             Current
    Retail         04/24/00              xxxx5678 $2500                 $1200              30 days
    Retail         04/05/02              xxx452            $800           $700             Current
    Mortgage 06/05/99                    xxx6789 $125,000 $115,000                         Current
    Credit Inquiries
    Date         Industry              Date        Industry                                  Date          Industry
    12/04        Bank                  5/04        Auto finance                               01/04          Retail
    ------------------------------------------------------------------------------------------------------------
    Public Record / Collection Items
    7/03 collection $450            8/04 judgment $1500 Paid                  12/0402/05 collection $250
        Disputing Information
Fair Credit Reporting Act
   The Dispute Process
       Put it in writing – to CRA and creditor in
       CRAs must investigate – within 30 days
 Must delete what they can’t verify
 Must correct inaccuracies
 Must report back to you
Accurate Negative Information

   Negative account information will be
    reported for 7 years.

   Bankruptcy info – 7-10 years.

   Defaulted student loans, judgments
    on loans, and lawsuits can be listed
    longer per individual state statute
            Credit Scores
   A number developed from a calculation using
    the info from your credit report.

   Most widely used is the Fico Score
     Scores range from 300-850.

   New Score being introduced called Vantage
      Scores range from 501 - 990

   The higher the score, the better risk you are
    determined to be and the better rate you will
    be eligible for.
Five Ingredients of a
    FICO Score
  Credit Score Ingredients
           types of
             10% payment
 new credit
   10%              history

     ow ed         length of
     30%         credit history
Nationwide Range of FICO scores
Why is your Credit Score so important?

   It is used by lenders to determine financial

   A bad score indicates that you are more at
    risk - Could lead to:
      Higher fees and rates
      Being declined for new accounts
      No credit line increases
      Being rejected for jobs, apartments, or
Sample loan with credit scores

   How a good FICO
   score can save you
                          $279 monthly
   $10,000 used car
                                                   $239 monthly
   loan for 48 months
   Can result in an
   extra $1920 in
                           FICO score               FICO score
   payments over the
                           below 590                  720+
   4 years

                        Interest rate of 14.9%   Interest rate of 6.9%
Improving Your Score
   Pay bills on time

   Reduce debt

   Keep balances low / credit limits

   Apply for & open new lines only
    when you need them.

   Check your credit report for
    accuracy and clear errors as soon
    as possible.
    Putting Your Credit Report to
            Work For You
It can be a tool to assess and improve credit-
 Acts like a report card

   Helps you create a goal-focused plan:
     Correct incorrect info
     Start paying bills on time
     Reducing debt
     Preparation for a meeting with a lender

   Your goal? Successful credit application at
    lowest cost to you possible.
           More Information

                Federal Trade Commission

            Consumer website for credit scores

                    Recommended Reading
            Your Credit Score – Liz Pulliam Weston
Dirty Little Secrets: What the Credit Bureaus Won’t Tell You
               – Entrepreneur Press & Jason Rich