1. 1 CREDIT THE TRUE STORY SMART MONEY

2. 2 What is Credit? An arrangement to receive cash, goods, or services now, and pay for them in the future. A claim against Future Income. A reduction in Disposable Income during the time period the Credit is repaid.

3. 3 Why do you need Credit? It enables people to enjoy goods and services now, and pay for them in the future. You may not have enough cash to pay for the good or service, and it may take a very long time to save the necessary funds. The proper use of Credit Cards allows consumers to postpone payment of goods, earning interest on the funds that would have been paid in cash.

4. 4 Where do you obtain Credit? Commercial Banks Consumer Finance Companies Credit Unions Life Insurance Companies Federal Savings Banks Credit Card Companies

5. 5 What determines if you will get the Credit desired? 1.CHARACTER – Will you repay the loan? 2.CAPACITY – Can you repay the loan? 3.CAPITAL – What are your Assets and Net Worth? 4.COLLATERAL – What if you don’t repay the loan? 5.CONDITIONS – What if your job is insecure?

6. 6 Other Creditworthiness Factors AGE (ECOA) PUBLIC ASSISTANCE HOUSING LOANS Care must be taken not to violate the conditions of the Equal Credit Opportunity Act, or protected classes under the Civil Rights Act of 1964, and its extensions.

7. 7 Credit Reports Nowadays, due to the glut of consumers and the need to save time, grantors of credit have come to rely on Credit Reports. There are three (3) major Credit Reporting Bureaus, and each publishes its own form of a FICO Score. FICO is the acronym for Fair Isaac Corporation, the developer of the algorithm and program used to calculate a FICO Score (1956).

8. 8 What’s in your Credit Report? Personal Information Accounts Inquiries Negative Items According to independent research Credit Scoring is not unfair to minorities or those with little Credit History.

9. 9 FICO Scores It’s intention is to measure your Credit Risk, based on your current FICO Score. The Scores range between 300 and 850. FICO Scores are based on: 1.Payment History (35%) 2.Amounts Owed (30%) 3.Length of Credit History (15%) 4.New Credit (10%) 5.Type of Credit Used (10%)

10. 10 FICO Scores - continued The Median FICO Score is 723. Higher Scores mean Lower Interest Rates. Most Lenders based Approval on FICO Scores. Many Lenders use the FICO Score in conjunction with their own Application. Scores will vary between different Credit Bureaus.

11. 11 FICO Scores - continued 1.Equifax produces a BEACON Report. 2.Experian produces an Experian/Fair Isaac Risk Model. 3.TransUnion produces a FICO Risk Score, Classic. Any and all Bureaus may be contacted by your Lender.

12. 12 Why is my FICO Score ‘X’? Depends on your Credit track record reflected in the FICO Score. Items will remain on your Credit Report for between 7 and 10 years; it’s up to you to check your Report for Accuracy. Do not allow debts to be placed with Collection Agencies. Do not permit balances on your Credit Cards, pay them monthly.

13. 13 FICO Payment History (35%) Almost 65% of all Credit Reports show no late payments. This is the largest portion of your FICO Score. Take care of past debts and ensure they are corrected on your Credit Report.

14. 14 FICO Amounts Owed (30%) What is the total amount owed? How many accounts have balances outstanding? How close to ‘limits’ are the revolving accounts? What is remaining on any installment loans? Is your debt over suggested ratios?

15. 15 FICO Length of Credit History (15%) How long have you been using Credit? How long have specific accounts been established? How long has it been since you’ve used specific accounts? Do not open and close accounts too quickly. Let them ‘season’ for a couple of years.

16. 16 FICO New Credit (10%) Are you taking on too much debt (ratios)? How many ‘new’ accounts do you have? How long has it been since you’ve opened a new account? What has been the length of time between and number of Credit Inquiries? What is your most recent Credit History?

17. 17 FICO Types of Credit in Use (10%) How well are you managing your current Credit? What kinds of Credit Accounts do you have? Closed Accounts stay on your record, so don’t try to ‘escape’ an existing debt.

18. 18 Facts A ‘good’ FICO Score is determined by the Lender. Statistics are published by Fair Isaac Corporation. If you’re turned down for Credit, you should receive a written statement stating the reason for rejection of your application. Manage your Credit so you pay the best available interest rates, terms, etc. when you need Credit.

19. 19 CREDIT THE TRUE STORY Now you know …