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

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.

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 –  Transunion –  Experian– $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 year Annual Credit Report Request Service P O Box , Atlanta, GA  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 employers

 Sample credit report  CREDIT BUREAU REPORT   IDENTIFYING INFORMATION  Public, Joe 15 Any Street 325 Broad St. Someplace, USA  Sam’s plumbing Welder Nice City, America /15/   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 $ 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 question 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  New Score being introduced called Vantage Score Scores range from  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

Nationwide Range of FICO scores

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

Sample loan with credit scores 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 $279 monthly payment $239 monthly payment FICO score below 590 Interest rate of 14.9% FICO score 720+ 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- 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.

More Information CCCS 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