Understanding Credit Reports & Credit Scores

1. Understanding Credit Reports & Credit Scores Presented by Rich Call Consumer Credit Counseling Service

2. 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 important. • Acting On the Information In Them – What to do to maintain, correct, or improve the information.

3. 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

4. 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.

5. Free Credit Reports • New law : one free copy of credit report from each of three credit bureaus every year. • www.annualcreditreport.com • 1-877-322-8228 • Annual Credit Report Request Service P O Box 105281, Atlanta, GA 30348-5281 • Credit score does not come automatically with the free report.

6. Information on a Report • Identification & employment info • Account information & payment history • Collection accounts • Public record • Inquiries from creditors/potential employers

7. Sample credit report • CREDIT BUREAU REPORT • ----------------------------------------------- • IDENTIFYING INFORMATION • 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

8. Disputing Information Fair Credit Reporting Act • The Dispute Process • Put it in writing – to CRA and creditor in question • CRAs must investigate – within 30 days • Must delete what they can’t verify • Must correct inaccuracies • Must report back to you

9. 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

10. 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 Score • 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.

11. Five Ingredients of a FICO Score

12. Nationwide Range of FICO scores

13. Why is your Credit Score so important? • It is used by lenders to determine financial responsibility • 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 insurance

14. Sample loan with credit scores $279 monthly payment How a good FICO score can save you money: $10,000 used car loan for 48 months Can result in an extra $1920 in payments over the 4 years $239 monthly payment FICO score 720+ Interest rate of 6.9% FICO score below 590 Interest rate of 14.9%

15. 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.

16. Putting Your Credit Report to Work For You It can be a tool to assess and improve credit-worthiness • 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.

17. More Information CCCS 1-800-355-2227 www.cccservices.com Federal Trade Commission www.ftc.gov Consumer website for credit scores www.myfico.com Recommended Reading Your Credit Score – Liz Pulliam Weston Dirty Little Secrets: What the Credit Bureaus Won’t Tell You – Entrepreneur Press & Jason Rich