Credit Reports How to improve your score, and help members to do the same.

Long Term Effects of Credit Scores  Two friends - Carl and James  Borrow the same amount of money over the same amount of years.

Credit Cards Balance Carried Credit Score Interest Rate Annual Interest Costs Lifetime Interest Paid James Penalty Carl James $8, % 19.90% $792 $1,592 $39,600 $79,600 $40,000

Auto Loans The average person spends $20, every 7 years when purchasing a car. Over 20 years that interest can add up. Total Amount Borrowed Credit Score Interest Rate Monthly Payment Interest Cost Per Loan Lifetime Interest Paid James Penalty Carl James $140, % 8.50% $378 $411 $2,645 $4,620 $18,515 $32,340 $13,825

Mortgage 1 (10 Years) Total Amount Borrowed Credit Score Interest Rate Monthly Payment Total Interest Paid James Penalty Carl James $230, % 7.375% $1,306 $1,589 $116,524 $159,650 $43,126

Mortgage 2 Total Amount Borrowed Credit Score Interest Rate Monthly Payment Total Interest Paid James Penalty Carl James $280, % 7.375% $1,590 $1,934 $292,326 $416,191 $123,865

Adding It All Up How much more money in interest did James pay than Carl? $220,816.00

Credit Score Breakdown Payment History 35% Amount You Owe (Capacity) 30% Length Of Credit History 15% Types Of Credit 10% New Credit And Inquiries 10%

Scorecards The FICO scoring model sorts people into scorecards. This allows the FICO score to enhance its predictive power by analyzing how the same behavior, in different people, can mean different things.

Ten Myths About the Fico Score 1. Closing Credit Accounts Will Help Your Score. 2. You Can Boost Your Score By Asking Your Credit Card Company To Lower Your Limits. 3. You Can Hurt Your Score By Checking Your Own Credit Report. 4. You Can Hurt Your Score By Shopping Around For The Best Rates. 5. You Don’t Have to Use Credit to Get a Good Credit Score.

Myths You Have to Pay Interest to Have a Good Credit Score. 7. Adding a 100-Word Statement to Your File Can Help Your Score. 8. Your Closed Accounts Should Read “Closed By Consumer,” Or They Will Hurt Your Score. 9. Credit Counseling Is Worse Than Bankruptcy. 10.Bankruptcy Hurts Your Score So Much That It’s Impossible to Get Credit.

Actions That Will Hurt a FICO Score ► Late Payments and Derogatory Public Records. ► A Low Level of Percent Available on Revolving Accounts and Total Revolving Accounts. ► Closing Revolving Accounts ► Having a Lender Lower your limit, or not report the limit on your revolving account. ► Multiple New Accounts In a Short Period of Time. ► Settling for Less Then the Full Balance. ► Having Loans at “Second Tier” Finance Companies.

Actions That Will Help A FICO Score ► Check Credit Report Regularly and Dispute Legitimate Errors. ► Bring Currently Delinquent Loans Current. ► Shop Rates for Mortgages and Auto Loans within a 14 day period. ► Pay off and Close “Second Tier” Finance Companies. ► Pay Down Credit Cards First That Are Near Their Limits. ► Pay Down Total Revolving Balances. (Do Not Close) ► Move Revolving Balances To Installment Loans, but do not close revolving accounts. ► Minimize New Accounts.

Teaching FICO Scores To Members Remember that most members do not look at credit reports or know how a score is calculated. Make sure you inform them that you are teaching them the basics because not all information has been made public. Teach them the credit score formula. Teach them “Capacity.”

Teaching FICO Cont. Show them a list of actions that will hurt a score. Show them a list of actions that will improve the score. Show them how better interest rates can benefit them in the long run.

How Insurance Companines Use FICO  About 90% of insurance companies pull your credit to help determine what rates to give you. Collection Accounts 3 or More Accounts 1.19 on every dollar Collection Accounts 1 Account 97.5 cents on every dollar Collection Accounts 0 Accounts 74.1 cents on every dollar

Helpful Websites Your Credit Score – By Liz Pulliam Weston Credit Scores & Credit Reports – by Evan Hendricks Helpful Books