© 2006 Consumer Jungle Credit Scores & Reports. Are you Creditworthy? Have you ever borrowed money? Did you pay it back? Did you pay it back quickly?

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Presentation transcript:

© 2006 Consumer Jungle Credit Scores & Reports

Are you Creditworthy? Have you ever borrowed money? Did you pay it back? Did you pay it back quickly? © 2006 Consumer Jungle

Creditworthiness and Credit Scores Credit card / loan approval depends on borrower’s perceived creditworthiness Creditworthiness is determined by a credit report and/or credit score How a person uses a credit card / pays their loans affects their creditworthiness

Credit History Credit Report A record of a consumer’s credit history that includes information about credit card use as well as the use of other types of credit A number that summarizes an individual’s credit record and history; a numeric “grade” of a consumer’s financial reliability Credit Score

NO Credit History If an individual has not used credit or loans, they will not have any information in their credit report Not having a credit report can cause an individual to be denied credit

What is a credit score? Most credit scores fall between 600 and 750 A score above 700 usually suggests good credit management Watch this commercialcommercial tewURQ © 2006 Consumer Jungle

Why Credit is Important FICO or credit score used by: –Credit Card Issuers & Lenders Determine APR –Auto Insurers Determine Premium –Employers Are you a worthy hire? –Landlords Are you a reliable tenant?

© 2006 Consumer Jungle Credit / FICO Score Fair Isaac Company Range between 300 & 850 U.S. Median: 723 < 620 = sub prime > 760 = best rates

© 2006 Consumer Jungle The Cost of Borrowing Your Credit score: Your interest rate: Your monthly payment: %$1, %$1, %$1, %$1, %$1, %$1,543

© 2006 Consumer Jungle

35% Payment History Late payments have the greatest negative impact.

© 2006 Consumer Jungle 30% Outstanding Balances Total balance vs. total available credit. Are you overextended? $1,000 limit – and you have a $950 balance

© 2006 Consumer Jungle 15% Length of Credit History Number of years you’ve used credit. How long since you’ve used certain accounts.

© 2006 Consumer Jungle 10% New Credit Number of new accounts. Multiple requests reduce your score.

© 2006 Consumer Jungle 10% Types of Credit Mix of: –Revolving Credit Credit cards –Installment Credit Car loan Home loan

© 2006 Consumer Jungle How to Improve Your Score Pay all bills on time. Pay any delinquent bills. Lower your total credit card debt.

© 2006 Consumer Jungle How to Get Your Score Three Credit Scores –1) Trans Union –2) Experian –3) Equifax

© 2006 Consumer Jungle How to Get Your Credit Report Free Report each year by each credit bureau: –TransUnion –Experian –Equifax Order once from all three companies (or) Order every 4 months from a different company

© 2006 Consumer Jungle How long Info stays on Report Trade: Sears, Macy’s –7 years from last activity Judgments or liens –7 years from filing. Chapter 7 Bankruptcy –10 years Medical: case by case

Work on #26 – “Credit 101 Worksheet” When done – show Me Then complete makeup work! © 2006 Consumer Jungle