1. What’s a Credit Report?
From age 18 on, agencies collect data about your spending habits.
Monitor your ability to handle risks (i.e. loans I installment and revolving)
Impacts: amount you can borrow and the interest rates on that loan.
Who Can Access Your Report?
Creditors
Collection agencies
Insurance companies
Employers
Landlords.
Many others!!!

2. What is in a Credit Report?
Personal Data
Employment History
Public Records (liens, judgments, secured loans, foreclosures, bankruptcies, etc.)
Collection Accounts (defaults and lateness)
Credit Information (open accounts, date account was opened, payment status)
Inquiries (approved requests and others seeking credit information)

3. How Long Does the Information Remain On A Credit Report?
TYPE LIMITATION
Suits & Judgments 7 years
Tax Liens – Paid 7 years from payment
Tax Liens – Unpaid No limitation
Charged to Profit & Loss 7 years
Criminal Record Limitations No limitations
Other adverse information 7 Years
Late Payments 7 Years
Debt Collections 7 Years
Bankruptcy Years

4. Annual Credit Report
The Fair Credit Reporting Act guarantees you access to a free credit report from each of the 3 nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months.
To get your free Credit Report
By Internet:
By phone:
By mail: Annual Credit Report Request Service
P.O. Box , Atlanta, GA 4

5. Improving Your FICO Credit Score
Ever wonder why you can go online and be approved for credit with in 60 seconds? Or get pre-qualified for a car without anyone even asking you how much money you make? Or why you get one interest rate on loans, while your neighbor gets another? The answer is credit scoring.

6. Credit Score What is a “Credit Score”? Why you need a credit score?
How are these scores created?
Why are there different types of scores?
What hurts your score?
Tips to improve your score. 6

7. What is a Credit Score?
A tool created from your credit report which can assess your
financial status, history, and debt repayment record.
Credit rating is determined by three bureaus that all banks, employers,
companies you deal with check to see if you are a good risk
Two most commonly used credit scores is the:
FICO (Fair Isaac Corp.) which ranges from 300 – 850.
Vantage (Experian) scores go from
There are hundreds of credit scores which are used by mortgage lenders, and companies that sell auto, homeowners and health insurance policies. 7

8. Key factors of your score Just what goes into the score
Key factors of your score Just what goes into the score? Everything in your credit report, with different kinds of information carrying differing weights, says Fair Isaac Corp. Public Affairs Manager Craig Watts. The FICO-scoring model looks at more than 20 factors in five categories. (The VantageScore relies on slightly different factors. The Bankrate feature "New Vantage credit score now online" compares the FICO score with VantageScore. )
1. How you pay your bills (35 percent of the score) The most important factor is how you've paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good. Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.
2. Amount of money you owe and the amount of available credit (30 percent) The second most important area is your outstanding debt -- how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Also considered is the total amount of credit you have available. If you have 10 credit cards that each have $10,000 credit limits, that's $100,000 of available credit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.
"Carrying a lot of debt doesn't necessarily mean you'll have a lower score," Watts says. "It doesn't hurt as much as carrying close to the maximum. People who consistently max out their balances are perceived as riskier. People who never use their credit don't have a track history. People with the highest scores use credit sparingly and keep their balances low."
3. Length of credit history (15 percent) The third factor is the length of your credit history. The longer you've had credit -- particularly if it's with the same credit issuers -- the more points you get.
4. Mix of credit (10 percent) The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. "Statistically, consumers with a richer variety of experiences are better credit risks," Watts says. "They know how to handle money."
5. New credit applications (10 percent) The final category is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your score, Watts says, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.
"Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for a life preserver," Watts says. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.

9. What doesn’t Count in a Score.
The scoring model doesn't look at:
age
race
sex
income
education
marital status
job or length of employment at your job
whether you've been turned down for credit
length of time at your current address
whether you own a home or rent
information not contained in your credit report
A lender may consider all those factors when deciding whether to approve a loan application, but they aren't part of how a FICO score is calculated.

10. Why is a Credit Score Important?
A poor credit score can affect a person’s ability to:
Obtain credit cards, car loans and mortgages
Receive favorable interest rates and preferred credit limits on cars and credit cards
Qualify for utility and cell phone services with no down payment
or substantial security deposit
Rent or lease a house or apartment
Obtain government sponsored student loans
Obtain private student loans with low rates
It might also affect:
Your car insurance rate
Life insurance rates
Health insurance premium
Possible job offers

11. Distribution of FICO Credit score Percentage 499 and below 2 percent
Fair Isaac reports that the American public's credit scores break out along these lines:
Credit score
Percentage
499 and below
2 percent
5 percent
8 percent
12 percent
15 percent
18 percent
27 percent
800 and above
13 percent

12. How Much Will My FICO Score Drop?
Alex Blanca
Current FICO Score
Score after one of these is added to the credit report
One inquiry for a new credit card 675 (5) (5)
A new charge card (additional hit) 665 (15) 760 (20)
Maxing out credit card (20) 745 (35)
A 30-day delinquency (70) 680 (100)
Settling a debt (55) 665 (115)
Foreclosure (95) 630 (150)
Bankruptcy (140) 550 (230)

13. What Rate Will Your Score Get You?
FICO
Score
30-year
fixed-rate mortgage
36-month
new auto loan
15-year
home
equity loan
Credit
Card
APR
740
5.0%
6.4%
8.1%
7.3%
720
5.2%
8.4%
10.0%
700
7.9%
8.9%
15.0%
680
5.4%
9.9%
9.7%
660
5.6%
11.2%
18.0%
What is APR? APR is the Annual Percentage Rate on a loan or a credit card.
It is interest rate that will determine how much you pay in interest each year.

14. How much will you pay? FICO Score 5 years $196 $1,196 7 years $580
A home theater system for $1,000, when purchased on credit card and each month you pay minimum payment will actually cost
FICO
Score
Credit
Card
APR
You will pay off the balance in about
You will end up paying an interest of
You will end up paying an estimated total of
740
7.3%
5 years
$196
$1,196
680
15.0%
7 years
$580
$1,580
660
18.0%
8 years
$863
$1,863
We made the following assumptions for our calculations:
You make no more charges.
Minimum payment: For this estimate, we assume that your minimum payment is 2 % of your current balance each month or $20, whichever is greater. Your credit card issuer may calculate your minimum payment differently. We do not know whether the minimum payment on your bill represents only a percentage of your total balance or includes amounts that vary from month to month (such as fees).
We also assume that you make only the minimum payment each month, that the payment is on time, and that it is credited on the last day of the month. We assume that the final payment pays the balance in full.
New activity: We assume that you do not use your credit card for any additional transactions and that you are not assessed any fees while you are paying the balance down.
APR: For this estimate, we assume that the highest APR on which you have a balance applies to your entire balance. Using the highest APR on which you have a balance means that the actual time it will take you to pay off your balance may be shorter than the calculated estimate but should not be longer. This assumption is necessary because we do not know how your payments will be applied when you have balances with different APRs. We also assume that the APR for your account will not change.
Account status: We assume that your account is not past due and that your balance does not exceed the credit limit for your account.
Interest calculation: We assume that your interest is calculated by applying a monthly rate to the average daily balance. The monthly rate is calculated by dividing the APR by twelve. We also assume that you are charged interest each day in the month.

15. Credit Scores and Interest Rates
2010 Ford Focus
5 yrs.
4 yrs.
3 yrs. 5%
$ $22,645
$460.59
$22,108
$ $21,579 4%
$ $22,100
$451.58
$21,676
$21,257 3%
$ $21,562
$442.69
$21,249
$ $20,938 0%
$ $20,000
$417.66
$20,000
$ $20,000

16. Credit Score Mistakes 1. Paying bills late 2. Closing old credit cards
3. Maxing out . Watch the
“Utilization Rate” (35%)
4. Using cash over credit
5. Applying for extra cards
6. Not shopping around for lower rates
7. Not checking your credit reports.
Here are the biggest blunders you might be making, and how to fix them:
1. Paying bills late
Your payment history is the single most important piece of information on your credit report. “As little as one day late can hurt your score,” says Barry Paperno, consumer operations manager for Fair Isaac Corp., which originated the FICO score. Unfortunately, nearly 64 million adults don’t pay all their bills on time, according to a survey by the National Foundation for Credit Counseling, a nonprofit group. Car payments, electricity bills, even a late library fine can get reported to the credit bureau. Mark your calendar to pay bills at the same time every month, or arrange automatic payments with your bank.
2. Closing credit cards
It seems logical that canceling a credit card you’re not using would raise your credit score. But that’s not actually the case. After payment history, the most important part of your score is your debt-to-credit ratio: how much you’ve borrowed compared to how much you’re allowed to borrow. So canceling available credit can actually damage your score.
Here’s how: Let’s say you’ve got three credit cards, each with a credit limit of $5,000. You owe $5,000 on one card and nothing on the others, so you’re using 33 percent of your available credit. But close two of those accounts and suddenly you’re using 100 percent of your credit line. Such people are not considered good credit risks.
Before you close an account, Paperno suggests you ask yourself three questions:
Am I unable to resist the temptation to spend unless I close the account?
Am I concerned about identity theft due to having been a victim in the past?
Am I trying to avoid an annual fee for a card I no longer use?
If the answer to any of these is yes, it may be wise to close the account, regardless of how it affects your FICO score.
If you really want to close an account or two, close the most recently opened cards (account age is important to your score) and the ones with the lowest credit limit.
3. Taking it to the limit
Just like closing an account lowers your debt-to-available-credit ratio, running your credit cards close to the limits does as well. “The score looks at your accounts individually and as a whole,” says Paperno. Officially it’s called overutilization, and it means you’re using too much of your available credit. So running up even one card can hurt your total score.
If you’ve almost maxed out your cards, use them as little as possible for a while and pay them down. Once you do, keep your charges to 30 percent or less of your available credit, recommends Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
Which should you pay off first, the card with the highest interest rate or the card with highest balance?
That depends on what your goal is. If you want to get your credit score higher, then you should pay off the one with the highest balance, because that high balance is lowering your ratio of debt to available credit. But if you want to save money in the long run, paying off the one with the higher interest rate is probably better, even if it has less effect on your credit rating.
4. Using cash over credit
While that may be good for budgeting, it’s murder on your credit score. “Your credit rating is not solely a function of what you owe, it’s a measure of how well you handle debt,” says Scott Bilker, founder of DebtSmart.com. By using cash all the time, you’re not giving lenders any information to judge your creditworthiness. If you don’t want to pay interest on credit cards, just pay the bill in full every month.
5. Applying for extra cards
Getting a 10 percent discount on a purchase in exchange for opening a new credit account at the department store seems enticing, but every time you apply for a card, a “credit inquiry” is added to your report. Too many inquiries at one time make you look desperate for credit—not the signal you want to send to creditors, says Cunningham. One exception: When you’re rate-shopping for a mortgage, a car loan or a student loan, your FICO score usually reflects that by lumping those multiple inquiries together as one.
6. Not shopping around for lower rates
Lenders don’t know the interest rate you’re paying, and if your finance charges are high, it’s harder for you to pay your bill. “This puts a lot of financial pressure on people, which can eventually cause them to be late or even default,” says Bilker. Spend some time looking at cards and rates at Creditcards.com and Bankrate.com.
7. Not checking your credit reports
Paperno recommends checking your credit reports at least once a year, and more often if you’ve had problems with identity theft, or if you’re a heavy credit user. By law you’re entitled to a free credit report from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. If you want your actual score, you’ll have to pay about $16. Be aware that Annual Credit Report.com is the only place where you can get a credit report for free with no strings attached. (Other sites may slip in monitoring services that will cost you a monthly fee unless you opt out.) When you get your report, make sure it is accurate, and that it’s about you and only you (for example, not about your son with the same name). If not, follow the instructions on how to fix it with the dispute form you’ll be offered on the site.