CREDIT FICO SCORES FROM: UNDERSTANDING YOUR FICO SCORE BY FAIR ISAAC CORPORATION

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CREDIT(FICO SCORES)FROM UNDERSTANDING
YOUR FICO SCORE BY FAIR ISAAC CORPORATION
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WHAT MAKES YOU A GOOD CANDIDATE TO RECEIVE GOOD
CREDIT?

• Answer
• FICO Credit Score

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WHATS A FICO SCORE?

• FICO Score is a credit score
• Credit Score - a number that summarizes your
  credit risk, based on a snapshot of your credit
  report at a particular time
• FICO Score is a lending tool invented by Fair
  Isaac Corporation in 1956

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WHATS A FICO SCORE?

• Lenders buy FICO scores from 3 major credit
  reporting agencies
• Equifax
• Experion
• TransUnion

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WHATS A FICO SCORE?

• These companies maintain records about you and
  your credit.
• These companies produce credit reports on you.
• Lenders buy these credit reports and use the
  scores to help decide whether to give you a loan,
  and at what rate.

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WHATS A FICO SCORE?

• In other words..
• FICO scores give lenders a fast, objective
  estimate of your credit risk

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WHATS THE BENEFIT OF FICO SCORES?

• 1) People can get loans faster.
• 2) Credit decisions are fairer.
• 3) Older credit problems count for less.

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WHATS IN MY CREDIT REPORT?
Personal Information Name John Smith Date of
Birth May 1, 1970 Social Security
No 123-45-6789 Current Address 6100 Fifth
Avenue Dayton, OH 45439 Accounts Summary
Acct. Type Company Account No.
Balance Neg. Items Installment Ford Mot.
BFM915X 23,000 No
Revolving Citicorp 427188888
325 No Negative Items Acct.
Type Company Status Delinquency
Neg. Descrip. Installment Ford
Pays as 30 days No
agreed
past due Inquiries Date Company
requesting your credit record 1/4/2005 Main
Street Bank 9/21/2004 XKK Cellular Phone
Service
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FICO Scores

• FICO Scores range from 300 to 850.
• The higher the score the lower the risk.

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WHATS THE BENEFIT OF FICO SCORES?

• Banks make lending decisions based on FICO
  scores. A house mortgage of 150,000 over 30
  years is affected by FICO scores as shown here

Based on March, 2007 survey, WhatsMyScore.org
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So, how is my FICO score calculated?
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So, how is my FICO score calculated?Class
ActivityLets look at several people, and the
way they handle credit.
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HOW IS MY FICO SCORE CALCULATED?

• 1) Your FICO score is a mathematical
  calculation, using several pieces of information
  from your credit report
• 2) You must have one account thats been open
  for at least 6 months, and has been reported to
  the credit agency

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HOW IS MY FICO SCORE CALCULATED?
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HOW IS MY FICO SCORE CALCULATED?

• 1) Payment History - 35
• Late Payments are a score-killer
• Takes into account
• All types of accounts
• Bankruptcy, liens, attachments
• How many accounts show no late
  payments

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HOW IS MY FICO SCORE CALCULATED?

• 2) Amounts Owed - 30
• The amount owed on all accounts, and
  different types of accounts
• How many accounts have balances
• How much of total credit line is being
  used.
• How much is still owed.

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HOW IS MY FICO SCORE CALCULATED?

• 3) Length of Credit History
• How long you have used credit
• How long specific accounts have been
  established
• How long it has been since youve used
  certain accounts

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HOW IS MY FICO SCORE CALCULATED?

• New Credit - 10
• How many new accounts you have
• How many recent requests for credit you have
  made
• Length of time since credit report request
  was made by lender
• Whether you have good credit history
  following past problems

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HOW IS MY FICO SCORE CALCULATED?

• 5) Types of credit in use
• Is it a healthy mix?
• What kinds of credit you have, and how many of
  each

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HOW CAN I IMPROVE MY SCORE?

• Pay bills on time
• Keep balances low on credit cards
• Pay off debt rather than moving it between credit
  cards
• Apply for and open credit cards only when you
  need them
• Check your credit report
• If youve missed payments, get current and
• stay current.

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So, how is my FICO score calculated?Class
ReviewWhich individual most likely had
thehighest FICO score? lowest FICO score?