The CREDIT SCORE “Classic FICO”

What Does The Score Mean? Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation over the next 24 months The score is generated by analyzing the information contained in the consumer’s credit report at that point in time. Makes credit repair valuable! Only available for the three Bureaus, not Innovus, the 4th Bureau

To Have a Credit Score >Have an account that is at least 6 months old and also has been updated in the past 6 months and not be under dispute FICO was going to switch to 3/12 but due to lender feedback kept 6/6 (Next Gen still 3/12) >Not be deceased >Size parameters in older models have caused zero

Consumer Default: What Are The Odds? CREDIT SCORE Consumer Default: What Are The Odds?

Score Odds Above 800 1485 to 1 720 to 799 649 to 1 680 to 719 112 to 1 Odds of a person getting a major derogatory over the next 24 months Score Above 800 720 to 799 680 to 719 620 to 679 Below 620 Odds 1485 to 1 649 to 1 112 to 1 47 to 1 15 to 1

How Long Do Delinquencies Stay CREDIT SCORE How Long Do Delinquencies Stay

Delinquencies on Credit Reports Bankruptcies Chapter 7 & 13 10 Years From Filing Date Trans Union Policy is to remove Ch. 13 after 7 years Tax Liens 7 Years From Date Satisfied Late Payments 7 Years Charge-Offs 7.5 Years From 1st Late Pay Judgments 7 Years or S.O.L. Inquiries 2 Years Collections Cannot be Re-Aged due to change of ownership or a payment being made ( although it happens )

How long does an account included in BK stay? Flash Quiz How long does an account included in BK stay?

What Are The Determining Factors? CREDIT SCORE What Are The Determining Factors?

1. Payment History 35% of Credit Score

Key Issues Past due the day after the due date 30 days late on the report is really 1-30 days late. Paying a Tax Lien or a Collection will not increase the score much at all ( MAY DECREASE IT ) Included in BK just as bad as Foreclosure, Charge-off, 90 day, 120 day etc.

Key Issues ( cont ) Bureaus are now required to mark all delinquent accounts that were in collection or charge-off as being included in BK. Only the creditor was required before 2008 IN SUMMARY – Pay your bills on time, don’t get sued and lose and pay your taxes.

Which single item below hurts the score the most? Flash Quiz Which single item below hurts the score the most? Dismissed Chapter 7 BK Charged off credit card with a $10,000 delinquent balance that’s included in BK Foreclosure Judgment Discharged Chapter 13

2. Revolving Debt Ratio… 30% of Credit Score 30%

Key Issues Revolving is what's important, installment are a very small factor Pay as close to zero as possible Pay before the due date when score boost is needed. PLAY THE GAME IF YOU HAVE TIME Spreading balances is harmless advice even though newer FICO versions don’t reward it (same goes for under 30% threshold advice) AU has done wonders in this area

Effect on the Score by Type Secured and Unsecured credit cards are the same effect Visa, MasterCard & Department Store the same $300 limit at zero has same effect as $25K at zero American Express that is “not” revolving ( “Open” ) is the same as a revolving except the limit is assumed to be the high credit OR it is bypassed completely if no high credit is shown Joint accounts are never a good idea unless needed to get approved. Try to separate now

Exceeding Limit or Original Amount Slight boost on Revolving Slight decrease on Installment i.e. Negative Amortization Loan Being Maxed is the key issue, the rest is a small factor

3. Average Age of Credit File… 15% of Credit Score 15%

Average Age The older the better Don’t close cards AU still helps

4. The Mix of Credit… 10% of Credit Score 10%

Healthy Mix is Best 3 to 5 revolving cards 1 Auto 1 Mortgage Don’t get caught up on this 1 Auto 1 Mortgage One mortgage from zero increases the score

5. Inquiries… 10% of Credit Score 10%

Inquiries Personal, Promotional, Account Review and Insurance Inquiries don’t count Only 1st ten may be bad advice! Oops!!! De-duplication of Mortgage & Auto 45 day window with a 30 day buffer Mortgage and Auto are separate Start 12 months back and work forward

Credit Score Components Summary of the five factors Payment History Debt Ratio Average Age of File Mix of Credit Inquiries

FICO 08

Fico 08 (12 to 16 scorecards) Collections and Public Records under $100 at onset not scored if original reported amount is less than $100 Does not apply to in-house trade lines in the collection department Batter segmentation of scoring variables AU changed dramatically

Under Dispute Partially scored in the first round when under dispute. ( Debt & Negative ) -- Is scored in 2nd dispute. Fannie does not accept files where accounts are listed as “customer disputes, reinvestigation in process” Different than “consumer disputes this information”, reinvestigation in process is the key

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