1. Understanding Your Credit Score
First at work
Understanding Your Credit Score

2. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Identifying Information
Trade Lines
Credit Inquiries
Public Record/Collections

3. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Identifying Information
These factors are not used in scoring and are provided to the bureaus from information you supply your lender
Name
Address
Date of Birth
Social Security Number
Employment status (employed vs. unemployed)
Trade Lines
Credit Inquiries
Public Record/Collections

4. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Lenders will report on the credit accounts you hold with them. This will include information on each credit line such as:
Type of loan (mortgage, auto, line of credit, credit card, etc.)
Date the account was opened
Credit limit or original loan balance
Current outstanding balance
Payment history
Identifying Information
Trade Lines
Credit Inquiries
Public Record/Collections

5. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
When you apply for a loan, you authorize the lender to request a copy of your credit bureaus, causing an inquiry to show on your report. Typically, inquiries up to 120 days old will show on your credit report.
Identifying Information
Trade Lines
Credit Inquiries
Public Record/Collections

6. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
State and county courts, as well as collection agencies, will provide information to the credit bureaus. This may include:
Bankruptcies
Foreclosures
Suits, liens, and judgments
Wage attachments
Unpaid child or spousal support
Identifying Information
Trade Lines
Credit Inquiries
Public Record/Collections

7. Identifying Information
The Credit Report
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
What’s NOT Included on your Credit Report?
Race, religion, national origin, sex or marital status
Age
Salary and asset information
Interest rates on current or past accounts
Certain types of inquiries (free credit checks)
Political affiliations, medical information or criminal records
Identifying Information
Trade Lines
Credit Inquiries
Public Record/Collections

8. Who Checks Credit? Lenders Credit Card Companies Landlords
Insurance Companies
Utility and Phone Companies
Employers
Government Agencies

9. Determining the credit score
A credit score is derived from the statistical analysis of information collected in the independent databases of each of the three major credit reporting agencies.
These agencies (Experian, Equifax, Trans-Union) accumulate information about your credit account and payment history. A complex algorithm (mathematical formula) is then applied to all of this information, and yields a single number by which the lending industry measures your creditworthiness. This is your credit score.

10. Credit Scoring Models
A common misconception is that there is just ONE credit score per person. In fact, each of the reporting agencies provide a FICO Score, all based on a slightly different scoring model.
The VantageScore is a new model used by the three agencies, and tends to provide a more unified risk assessment across all bureaus.
FICO: 300 – 850 TransUnion: Experian: 330 – 830 Equifax: 300 – 850 VantageScore: 501 – 990 (often assigned a letter grade, A-F)

11. The Credit Score
Before Credit Bureaus provided an unbiased risk rating for loan applicants, bankers would rise early in the morning and ride their horses past the customer’s house. If the customer was awake and working before daybreak, they were seen as low risk and generally were approved for their loan.
662
726
801
604
780
587

12. Credit Score Range Example
> 740 A+
You are at the top. Best rates and terms. A- B+
You should be in strong shape to buy. B B-
You may have to pay a higher rate or fees. C D
The rest of the file must be good.
620 or less F
Try to fix up your credit.

13. Determining the Credit Score
What’s in a score?

14. 35% Payment History Determining the Credit Score
Number of accounts paid as agreed
Number of delinquent accounts and severity
Previous bankruptcies, judgments, liens

15. 30% Amounts Owed Determining the Credit Score
How much of possible credit lines are used
Amounts owed on installment accounts compared to original balances
Number of zero balance accounts
Payment History
Amounts
Owed
30%

16. 15% Length of History Determining the Credit Score
Total time of credit history tracked
Length of time since accounts were opened
Frequent credit card balance transfers are viewed negatively
Payment History
Length of History
Amounts
Owed

17. 10% New Credit Determining the Credit Score
Number of recent new accounts compared to old
Number of recent credit inquiries
New Credit
Payment History
Length of History
Amounts
Owed

18. 10% Types of Credit Used Determining the Credit Score
Lenders want to be sure you can handle a variety of credit line types (installment loans, credit cards, etc.)
New Credit
Payment History
Length of History
Amounts
Owed

19. Common Misconceptions
1. Being unemployed impacts your credit score.
2. Late payments ruin your credit score.
3. Reducing your number of credit cards will raise your score.
4. You can get your credit score free of charge.
5. A late payment will impact your score for seven years.
6. Paying your utilities on time will help your score.
7. My score will drop if I check my credit.
8. People with high incomes have high credit scores.

20. Monitoring Your Credit
Everyone is entitled to one free report from the three agencies a year; you have to pay for your credit score.
Invest in a Trimerg Report each year to watch for inconsistencies between reports and look for items that could impact your score.
If a person is denied credit, the reporting agencies are required to give a copy of their report for free (send denial letter with request).
You can request a copy of your report from each of the three credit agencies or go to

21. Monitoring Your Credit
experian.com
PO Box 2104 | Allen, TX
equifax.com
PO Box | Chester, PA 19022
transunion.com
PO Box 1000 | Atlanta, GA 30358

22. Protect your identity by checking…
Monitoring Your Credit
Protect your identity by checking…
Inaccurate payment history information
Accounts that do not belong to you
Payments listed late that were made on time
Debts paid off that are still listed as outstanding
Old debts that should no longer be reported
Inaccurate personal data
Unknown aliases or unknown name variations
Incorrect or variations of Social Security Number
Unknown address or employment information

23. The Impact on Lending
Terms and conditions of all mortgages rely heavily on a consumer’s credit score. Lower scores and higher debt to income levels will typically result in less favorable lending criteria.
These include:
Higher interest rates
Lowered loan to value levels
Least creative financing

24. Pre Approval
Consumers with lower credit scores will typically pay a higher interest rates on both mortgage loans and consumer loans.
On a $200,000, 30 year loan, the difference between a 740 score and a 640 score could cost you $ per month, a total of $41, over the life of the loan.
On a $30,000, 5 year loan, you may only see a small monthly difference of $13.95 per month, but that adds up to $837 over 5 years.

25. Before Seeking Credit
Lenders will work with consumers but it is important to tie up any loose ends before applying for a mortgage:
Settle with any collection agency seeking payment.
Do not close any open lines of credit, especially not your oldest on file.
Pay down as much debt as possible and get monthly payments down to levels that are less than 10% of monthly income.
Change incorrect information on Credit Report.
Write to any entity in which you owe money and resolve payment issues, then write a letter to a credit reporting agency, to place in your file the explanation of how the debt is being resolved.

26. Improving your Credit Score
1. Understand factors that affect your score.
2. Be patient (your score goes down faster than up).
3. Watch for identity theft that could impact your score.
4. Correct any inaccuracies found on your reports.
5. Pay bills on time to maximize your score.
6. Stop shopping with revolving credit until you are in control.

27. Questions? Thank you for your time! Consider First National Bank
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