The Nitty-Gritty: How to Read Credit Reports Jake Bebar Chief Executive Officer Katherine McLarney Chief Executive Officer

Agenda ●What are Credit Reports? ●Where do you get Credit Reports? ●Common Lingo of Credit Reports ●The Four Components of Credit Reports and Practice ●What is FICO? ●Questions and Wrap Up

What is a Credit Report? Credit Report: A detailed report of an individual's credit history prepared by a credit bureau and used by a lender to in determining a loan applicant's creditworthiness A Credit Report Includes: 1. Personal data 2. Summary of credit history (number and type of accounts that are past-due or in good standing) 3. Detailed account information 4. Inquires into applicant's credit history (number and type of inquiries into applicant's credit report) 5. Details of any accounts turned over to credit agency (such as information about liens, wages garnishments via federal, state or county records) 6. Information on how to dispute any of the above information.

Where to “Pull Credit Reports” From: Credit Karma: Advantages: Disadvantages: Various Sites Offer Credit Reports We have had positive experience with the following sites or services: ●Credit Karma ●Credit Builders Alliance ●Annual Credit Report

Where to “Pull Credit Reports” From: Credit Builders Alliance Advantages: ●LFA Partner ●No Impact on Credit Score ●Allows reporting on loan repayments to help clients build credit Disadvantages: ●Requires 501c3 status and application to join ●There is a cost to join and pull each report AnnualCreditReport.com: Advantages: ●Only site credit reports authorize to provide fully free credit reports ●Able to Pull Reports from all 3 Credit Bureaus ●No Impact on Credit Score Disadvantages: ●Sometimes clients struggle with verification questions ●Does not provide FICO Score

Learn The Lingo TYPE: Revolving, Installment, Mortgage Revolving: credit available up to predetermined limit Installment: set payment schedule and terms for specific amount Mortgage: debt with set terms secured by real estate property BALANCE: Balance owed as of date verified or closed HIGH CREDIT: Highest amount ever owed by the consumer on that account CREDIT LIMIT: Maximum amount of credit approved by credit grantor PAST DUE: Amount past due as of date verified or closed ***List Taken from ”Become a Pro at Reading Credit Reports Webinar on Fri, Mar 22, 2013”***

Learn The Lingo (continued) OPENED DATE: Date the account was opened VERIFIED DATE: Date of last update on the account CLOSED DATE: Date account was closed. Closed means person can’t borrow anymore on it. PAID DATE: Date account was paid. TERMS: Number of payments, payment frequency and dollar amount agreed upon DELINQUENCY: Indicates the date on which the maximum level of delinquency for that account occurred and the dollar amount of consumer’s maximum delinquency ***List Taken from ”Become a Pro at Reading Credit Reports Webinar on Fri, Mar 22, 2013”***

Personal Information

4 Components of The Credit Report 1.Personal Information 2.Tradelines 3.Public Records 4.Inquiries Will be on every credit report regardless of site from which the credit report is ‘pulled’

Personal Information: ●Usually the first section of the credit part ●Used to verify that the credit report belongs to you client ●Sometimes the address and employment may not be accurate but can be verified by collecting other documents from your client (ie photo id, pay stub, etc.) ●Name ●Social Security Number (or last 4) ●Birthday Day ●Most Current and Previous Addresses ●Employment ●Other Names Previously Used

Personal Information on Credit Karma Can You Spot the Following: ●Name ●Previous Addresses ●Social Security Number ●Date of Birth ●Employment History

Personal Information on Credit Karma Answers: Can You Spot the Following: ●Name ●Addresses ●Social Security Number- Will not appear on Credit Karma but is used to set up an account ●Date of Birth- Will not appear on Credit Karma ●Employment History

Personal Information Practice: Can You Spot the Following: ●Name ●Previous Addresses ●Social Security Number ●Date of Birth ●Employment

Answers: Can You Spot the Following: ●Name ●Address ●Social Security Number ●Date of Birth ●Employment

Personal Information Practice: True of False: ●This credit report belongs to John Smith ●The last 4 of the social security number is 9291 ●The Date of Birth is 09/02/1991 ●The most recent address was 1398 Kansio Rd ●His current employer is Marmers Corp.

Answers: True of False: ●True: This credit report belongs to John Smith ●False: The last 4 of the social security number are 0000 ●False: The Date of Birth is 01/01/1970 ●False: The most recent address was 123 South St ●False: His current employer is Canlon Inc.

Tradelines

Tradelines are credit accounts opened within the last 7 years that is reported by the lender of each account Include Info about: ●Account Type ●The Date Opened ●The High Credit ●The Account Balance ●The Payment History Types of Tradelines: 1.Revolving Accounts 2.Mortgage Accounts 3.Installment Accounts

Revolving Accounts ●Charge Accounts Providing Credit up to Predetermined Credit Limit ●Require Minimum Monthly Payment ●Often Credit Cards Example of Revolving Account Tradeline:

Installment Accounts ●Set Payment Schedule and Terms ●Set Payment Amount ●Example: Car Loan

Mortgage Account ●Debt with set Terms ●Fixed or Variable Monthly Payments Required ●Secured by Real Estate Property Example of Mortgage Account Tradeline:

Tradeline Practice:

Public Records & Collections

Public Records ●Indicates a debt owed ●Information obtained from county, state and federal court records ●Types of Public Records on Credit Reports: o Civil Judgement o Bankruptcy o Tax Lien

Civil Judgements A civil judgment: occurs when someone sues the person for money owed as a result of monetary loss or damages and a court orders the person to pay a certain amount. On The Credit Report for a Civil Judgment You Can See: ●The Docket Number and Record Number ●The Original Balance Owed ●The Current Balance Owed ●The Defendant and Plaintiff ●The Date Filed ●The Date of the Judgement ●The Date Paid, if it has been paid

Bankruptcy Bankruptcy: A legal proceeding involving a person or business unable to repay outstanding debts Two Types of Bankruptcy: ●Chap 7: straight bankruptcy liquidation with no payments o Debtor must meet income eligibility ●Chap 13: creates a payment plan for people with regular income for 3 to 5 years after bankruptcy o Total unsecured debt must be below $307K On a Bankruptcy Tradeline: ●The Type ●The Court ●The Docket Number ●The Attorney ●The Date Filed ●The Date Verified ●The Date Paid, if it has been paid There will always be a second tradeline for when a bankruptcy is discharged

Tax Lien Tax Lien: Occurs when a person is in default with the state or federal government On The Credit Report for a Civil Judgment You Can See: ●The Docket Number ●The Court ●Liabilities ●The Original Balance ●The Current Balance ●The Date Filed ●The Date Effective ●The Date Paid, if it has been paid

Public Records Practice: Jake do you have any example of credit karma judgements?

Public Records Practice: As an analyst, how would you interpret the trade lines above?

Public Records Practice: The client has a Chapter 13 Bankruptcy which has been dismissed. Example from AnnualCreditReport.com

If Client Believes The Debt has Been Paid: Ask for the letter indicating discharge of the bankruptcy. On the letter ensure that the following match the credit report: ●The Name ●Type of Debt ●Docket Number On this example, did the client satisfy their judgement?

If Client Believes The Debt has Been Paid: If Client states they have paid the bankruptcy, ask for the letter indicating discharge of the bankruptcy. On the letter ensure that the following match the credit report: ●The Name ●Type of Debt ●Docket Number On this example, did the client satisfy their judgement? NO

Public Records Practice: As an analyst, how would you interpret the trade lines above?

Public Records Answer: There was a civil claim of $200 filed on 10/15/12 by “Any Commissioner O.”, which has been resolved on and there is no longer any money owed as of 3/4/12.

Public Record Practice: As an analyst, how would you interpret the trade lines above?

Public Record Answer: The Client Filed for Bankruptcy on 5/04. The bankruptcy was discharged on 7/07.

Inquiries

Hard Inquiry: for credit decisions Soft Inquiry: for education, counseling, or marketing purposes Displays which companies viewed the consumer’s credit file

FICO Scores

FICO The best-known and most widely used credit score model in the US, the FICO score is calculated statistically, with information from a consumer's credit files. The score provides a snapshot of risk to help make lending decisions. Do not appear on Annual Credit Report and are estimated on Credit Karma

What Factors Into a FICO Score

Tips and Resources

Jake’s Tips and Tricks for Success

Katherine’s Tips and Tricks for Success 1.Don’t freak out, take it one tradeline at a time 1.Print out the report and mark up the first few reports (just don’t mark it up in front of a client and keep the printed report in a safe place) 1.Don’t be afraid to ask the client for more information- as a lender you have the right to ask for clarification about certain tradelines 1.Look at the Credit Summary and make sure you can find each account on the summary within the credit report (important for negative or potentially derogatory accounts)

Side by Side Comparison of all Codes by Credit Agencies Direct Link: coding-your-credit-report/ Bankitis:

Questions