Credit Report Presentation

Keeping p g Score Understanding your Credit Score and Credit Report Presented by: Bill Jenkins,, Marketing g Director Countybank Information for this presentation was obtained from myfico.com

Credit Evaluation & Decision Making How much money would you lend a friend or co-worker if you knew they had a reputation for never paying back the money they borrowed?

What’ss in your credit report? What  Identifying Information Ì Name, Name SSN, SSN address address, phone number number, date of birth birth, employment

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

 Inquiries Ì When 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 last two years

 Public Record and Collection Items Ì These include collections, collections bankruptcies bankruptcies, foreclosures foreclosures, suits suits, wage attachments, liens and judgments

Who uses credit scores & whyy are theyy important? Banks, Credit Unions and other lenders – Home and auto insurers, insurers potential employers employers, landlords landlords, auto dealerships and utilities • Need to assess the “stability” in a potential buyer’s, lessee’s or employee’s life life. The less stability/predictability in behavior (as shown by a low credit score), the higher the risk of future problems

How credit scoring helps you People P l gett loans l faster f t Credit decisions are fairer Credit C dit “mistakes” “ i t k ” countt for f less l More credit is available Credit rates are lower Higher risk borrowers that used to be t turned d down d are granted t d loans l

What a credit score considers 1. 2. 3. 4 4. 5.

Payment History Amount Owed Length of Credit History New Credit Types of Credit Used

Score weights breakdown NEW CREDIT 10%

TYPE OF CREDIT USED 10%

LENGTH OF HISTORY 15%

AMOUNT OWED 30%

PAYMENT HISTORY 35%

What a credit score considers Payment History • • • •

(Approximately 35% of your score) What is your track record for paying bills? Public records (suits/judgments) and collection ll ti items it Details on missed or late payments P i 60 or 90 d Paying days llate t iis nott considered good credit Information for this presentation was obtained from myfico.com

What a credit score considers Amount 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? Near line of credit limit? Number of accounts with balances? Information for this presentation was obtained from myfico.com

What a credit score considers Length 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 How d does the th length l th off your credit dit history compare to your age? Information for this presentation was obtained from myfico.com

What a credit score considers New 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?

Information for this presentation was obtained from myfico.com

What a credit score considers Types of Credit Used (Approximately 10% of your score) • Is it a healthy mix? – (credit cards, retail accounts, installment loans, finance company accounts mortgages) accounts, • “How many is too many” will vary • It is not a good idea to open credit accounts you don’t intend to use Information for this presentation was obtained from myfico.com

What a credit score ignores • Race, religion, nationality, sex and marital status • Age • Salary, occupation, title, employer, date employed or employment history • Where you live • Interest rates currently paid • Family/child support payments • Other information not proven to be predictive of future repayment reliability

Information for this presentation was obtained from myfico.com

What do credit scores mean to lenders? Numeric Range

Classification

Risk Rated

730 and above

Platinum

Very Low

680 to 729

A

Low

640 to 679

B

Low to Medium

600 to 639

C

Medium to High

550 to 599

D

High

549 and below

E

Veryy High g

Information for this presentation was obtained from myfico.com

Adverse effects of low scores Higher g risk borrowers pay p y for the risk they pose 19.00% Loan $15,000 4 years Monthly payment: $448

6.00% Loan $15,000 4 years Monthly Payment: $352

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

• Very low scores can mean denial of a loan Information for this presentation was obtained from myfico.com

Improving your score Managing Payment History • Pay your bills on time • If you have missed payments payments, get current and stay current with your lenders paying y g off a collection item • Be aware that p will not remove it from your credit report. – (Collection items stay on your report for 7 years) • If you are having trouble financially, your creditors or see a legitimate g contact y credit counselor Information for this presentation was obtained from myfico.com

Improving your score M Managing i the th Amounts A t Owed O d •K Keep b balances l low l on credit dit cards d and d other revolving lines of credit • Pay 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 Information for this presentation was obtained from myfico.com

Improving your score Managing Credit History

• If you have been managing credit for a short time, don’tt open new accounts too rapidly don 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 It’s s imperative to check your credit report annually Information for this presentation was obtained from myfico.com

Improving your score Selecting Types of 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 away

Information for this presentation was obtained from myfico.com

Facts & fallacies Fallacy: My score determines whether or not I get credit credit. Ì Fact: “Lenders 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 employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may p y extend credit to y you although g y your score is low, or decline your request for credit although your score is high.”

Information for this presentation was obtained from myfico.com

Facts & fallacies Fallacy: A poor score will haunt me forever. forever Ì Fact: “Just the opposite pp is true. A score is a "snapshot" p of 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 credit. handle dit For F example, l pastt credit dit problems bl impact i t 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. available Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.” Information for this presentation was obtained from myfico.com

Facts & fallacies Fallacy: Credit scoring infringes on my privacy. Ì 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 a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application q pp form,, for example.” p

Information for this presentation was obtained from myfico.com

Facts & fallacies Fallacy: My score will drop if I apply for new credit. Ì 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 "inquiries") i i ") will ill appear on your report. Looking L ki for f 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. time Typically, Typically these are treated as a single inquiry and will have little impact on the credit score.” Information for this presentation was obtained from myfico.com

Checking your report  You should make sure the information in your credit report is correct. To request q a copy, py contact the credit reporting p g agencies directly: – – – –

Equifax: (800) 685-1111, www.equifax.com Experian: p (888)397-3742, ( ) , www.experian.com 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 complaint  If you are denied credit, you are entitled to a free copy of your report from the reporting agency used by the credit grantor Information for this presentation was obtained from myfico.com

Questions?  Credit C dit plays l a critical iti l partt in i nearly l everyone's ' life, lif and understanding what credit is and how it affects you can be a challenge. y g A great g way y to understand the role credit plays in your life — and to empower yourself as a consumer — is with the basic knowledge of your credit scores and credit reports. reports

Information for this presentation was obtained from myfico.com

Th k you!! Thank