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 lifelife. 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. Payment History
2. Amount Owed
3. Length of Credit History
4
4. New Credit
5. Types of Credit Used
 Score weights breakdown
TYPE OF CREDIT
USED
NEW CREDIT 10% PAYMENT
10% HISTORY
35%

LENGTH OF
HISTORY
15%

AMOUNT OWED
30%
 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 6.00% Loan
$15,000 $15,000
4 years 4 years
Monthly payment: Monthly Payment:
$448 $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
• Be aware that ppaying
y g off a collection item
will not remove it from your credit report.
– (Collection items stay on your report for
7 years)
• If you are having trouble financially,
contact yyour creditors or see a legitimate
g
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

•KKeep bbalances
l low
l on credit
dit cards
d andd
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 yyour
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 wayy 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