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2 Welcome  3 rd of 16 Sessions No cost to participate.  Financial Support: FINRA Foundation & United Way Worldwide  Solid Finances Webpage: 

Text Your Questions  Do you have a Question?  Do you want to comment? Type in the Q & A pod: 3

Send Your Questions Click this after typing question in Q & A Pod 4

Schedule  Money Management October 20th Saving Money by Paying Down Debt 5

Schedule  Investments November 30 Investment Risks December 7 Personal Risk Tolerance & Asset Allocation December 14 Mutual Funds December 21 Mortgages (Refinancing & Reverse) 6

What’s Your Credit Score? & What Does it Mean? Joel Schumacher 7

Question A: I learned about Solid Finances from 8 1.Mailed Flyer 2.Campus 3.Poster 4.Newspaper 5.Other

Question B: A Credit Report and a Credit Score are the same 9 1.True 2.False

Question C: A Credit Score is issued by a lender 10 1.True 2.False

Question D: The Maximum Credit Score is True 2.False

The Lending Decision  Who Lends Money? Banks & Credit Unions Finance Companies Credit Card Issuers Utility Companies −Electricity, Gas, Phone, Cable, Internet Landlords? 12

The Lending Decision  What does a Lender do? Connect Savers with Borrowers  Who are the Savers? Bank Customers, Stock Holders, Bond Holders  Savers want to be paid for using their money Saver’s don’t want to lose their money  Borrowers have to pay to use Saver’s money 13

Lender’s Role  Transactional Role Accounting, Statements, Legal, Physical Location  Information Role Lenders want to know: How risky is a potential borrower? Borrowers want to know: Can I borrow money and what are the terms (rate)? 14

Five “C’s” of Credit  Capacity Income & Assets  Capital Investment in this project  Collateral Loan is secured by a car or home  Credit How has a borrower managed credit in the past  Character Borrower’s “dedication” to debt repayment 15

Question E: If couldn’t pay all of your bills which bill would you not pay first? 16 1.Cable TV 2.Phone Service 3.Mortgage/Rent 4.Car Loan 5.Credit Card

Credit Reports A Credit Report is your history with credit. The report contains:  Your Name, Address, SSN, DoB, Employment information  Your loans (current & past) including credit cards Balance & Terms Payment history  Court Judgments, Tax Liens, Past Bankruptcies  Companies who have requested a copy of your Credit Report 17

Credit Reports  What is not in your report: Your Income Your net worth Many on-time bill payments Age 18

Who views my Credit Report?  Lenders  Utility companies, phone, TV, internet, etc.  Your employer or potential employer Only with your approval  Insurance companies  Government agencies reviewing your status for benefits  Anyone with “legitimate business” need For Example: potential landlord or court order 19

Question F: Which of these provides a free credit report every 12 months (no strings attached)? 20 1.FreeCreditReport.com 2.AnnualCreditReport.com 3.FreeScore.com 4.FreeScoreOnline.com

Accessing Your Credit Report   Or call  You need to provide: Name Address Social Security Number Date of Birth 21

Credit Reports  What if I find an error on my report? Contact the reporting agency  How long does negative information stay on my report? 7 years, for most information 10 years for a personal bankruptcy No limit for criminal convictions 22

Questions on Credit Reports 23

What is a credit score?  A Credit Score is an attempt to quantify the credit report.  Credit scores are issued by the same companies that issue credit reports. Higher scores indicate a lower risk (a good borrower) FICO Score range from: 300 to 850 Median Fico Score is about

Different Scores  Experian Plus Score:  Equifax Credit Score:  Vantage Score 2.0:  FICO Scores: FICO NextGen: Max

Average Credit Scores  FICO Scale ( ) 20% % % % %  Median Score:

What is a credit score?  Exactly how there are calculated is a secret 35% Payment History −Late payments can lower this area 30% Credit Utilization −Using the full credit limit on a credit card can lower this area 15% Length of Credit History −No credit history or a short credit history can limit your score 10% Types of Credit Used −Some types of credit look better than other 10% Recent Searches for Credit −Applied for several loans at once can be red flag for a lender 27

Question G: Which lowers your score more? 28 1.A missed payment 3 months ago 2.A missed payment 5 years ago 3.Any missed payment in the last 7 years is equal

Why does your score matter?  Borrowers with low scores may… Be required to have higher down payments Be required to make a security deposit Be charged higher interest rates Be denied credit 29

$200,000 Mortgage Example MonthlyTotal Premium Premium360 Payments  5.780% $0 $0  6.002% $28 $10,223  6.286% $65 $23,457  7.096% $173 $62,123  8.583% $379 $136,312  9.494% $510 $183,554  Deniedbelow 500 Rates from BankRate.com (3/07) 30

Where can I get my credit score?  You may purchase one from: Equifax, Experian or TransUnion  If you apply for a loan, your lender may provide it for free. 31

Key Points  Credit Reports can be obtained for free.  Credit Scores are generally not free.  Low credit scores can cost you money.  How you manage your current credit affects your score. 32

Questions? 33

Final Thought Take Ownership of Your Finances! No one else will! 34