Understanding Credit Reports

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Understanding Credit Reports Credit Scores
Presented by Rich Call Consumer Credit
Counseling Service
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What We Will Cover

• Credit Reports and Credit Scores - What they are
  and how they are developed.
• Understanding the Reports How to read them and
  why they are important.
• Acting On the Information In Them What to do to
  maintain, correct, or improve the information.

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What is a credit report?

• Detailed record of your history of borrowing
  money and paying it back
• Report card about your credit standing
• Used by lenders, insurance companies, landlords,
  and employers to determine whether you have good
  financial habits
• Credit reports are provided by credit bureaus
  based upon information provided to them by
  creditors on a voluntary basis

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3 Major Credit Reporting Companies

• Equifax www.equifax.com 800-685-1111
• Transunion www.transunion.com 800-888-4213
• Experian www.experian.com 888-397-3742
• 12.00/15.00 if through them for single report
  from one company
• Can also purchase trimerge reports that combine
  info from all three onto one report. Price is
  higher.

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Free Credit Reports

• New law one free copy of credit report from
  each of three credit bureaus every year.
• www.annualcreditreport.com
• 1-877-322-8228
• Annual Credit Report Request Service
• P O Box 105281, Atlanta, GA 30348-5281
• Credit score does not come automatically with the
  free report.

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Information on a Report

• Identification employment info
• Account information payment history
• Collection accounts
• Public record
• Inquiries from creditors/potential employers

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• Sample credit report
• CREDIT BUREAU REPORT
• -----------------------------------------------
• IDENTIFYING INFORMATION
• Public, Joe 15 Any Street 325 Broad
  St. Someplace, USA 55555
• Sams plumbing Welder Nice City, America 33333
  03/15/52 222-22-2222
• --------------------------------------------------
  --------------------------------------------------
  --------
• Trade Line information
• Industry Date opened Acct. Number High
  credit Balance Current rating Historical
  delinquency
• Bankcard 05/03/92 xxxx1234
  5000 Current
  90 5 yr ago
• Auto loan 05/03/01 xxxx3456
  15,000 9750 Current
• Retail 04/24/00
  xxxx5678 2500 1200
  30 days
• Retail 04/05/02
  xxx452 800 700
  Current
• Mortgage 06/05/99 xxx6789
  125,000 115,000 Current
• ---------------------------------------
  --------------------------------------------------
  -------------------
• Credit Inquiries
• Date Industry Date
  Industry Date Industry
• 12/04 Bank 5/04 Auto
  finance 01/04 Retail

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Disputing Information

• Fair Credit Reporting Act
• The Dispute Process
• Put it in writing to CRA and creditor in
  question
• CRAs must investigate within 30 days
• Must delete what they cant verify
• Must correct inaccuracies
• Must report back to you

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Accurate Negative Information

• Negative account information will be reported for
  7 years.
• Bankruptcy info 7-10 years.
• Defaulted student loans, judgments on loans, and
  lawsuits can be listed longer per individual
  state statute

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Credit Scores

• A number developed from a calculation using the
  info from your credit report.
• Most widely used is the Fico Score
• Scores range from 300-850.
• New Score being introduced called Vantage Score
• Scores range from 501 - 990
• The higher the score, the better risk you are
  determined to be and the better rate you will be
  eligible for.

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Five Ingredients of a FICO Score
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Nationwide Range of FICO scores
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Why is your Credit Score so important?

• It is used by lenders to determine financial
  responsibility
• A bad score indicates that you are more at risk -
  Could lead to
• Higher fees and rates
• Being declined for new accounts
• No credit line increases
• Being rejected for jobs, apartments, or insurance

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Sample loan with credit scores
279 monthly payment
How a good FICO score can save you money 10,000
used car loan for 48 months Can result in an
extra 1920 in payments over the 4 years
239 monthly payment
FICO score 720 Interest rate
of 6.9
FICO score below 590 Interest rate
of 14.9
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Improving Your Score

• Pay bills on time
• Reduce debt
• Keep balances low / credit limits
• Apply for open new lines only when you need
  them.
• Check your credit report for accuracy and clear
  errors as soon as possible.

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Putting Your Credit Report to Work For You

• It can be a tool to assess and improve
  credit-worthiness
• Acts like a report card
• Helps you create a goal-focused plan
• Correct incorrect info
• Start paying bills on time
• Reducing debt
• Preparation for a meeting with a lender
• Your goal? Successful credit application at
  lowest cost to you possible.

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More Information

• CCCS
• 1-800-355-2227
• www.cccservices.com
• Federal Trade Commission
• www.ftc.gov
• Consumer website for credit scores
• www.myfico.com
• Recommended Reading
• Your Credit Score Liz Pulliam Weston
• Dirty Little Secrets What the Credit Bureaus
  Wont Tell You Entrepreneur Press Jason Rich