Whats Your Score

1
Whats Your Score?

• Decipher Credit Reports

2
Whats Your Score?

• All credit reports contain 4 basic categories of
  information
• Personal Information
• Accounts
• Inquiries
• Negative Items

3
Decipher Credit Reports

• Personal Information
• Name
• Current and previous address
• Social Security Number
• Date of Birth
• NOT used to determine FICO Score

4
Decipher Credit Reports

• Accounts
• Lender Name and account number
• (Type of Account installment, revolving and
  open)
• Date account was opened
• History of payments
• Loan amount or credit limit
• Current Balance/Highest balance

5
Decipher Credit Reports

• Inquiries
• List of companies that have requested a copy of
  your credit for the past two years
• May include employers, self-inquiries and
  non-voluntary inquires

6
Decipher Credit Reports

• Negative Items
• Delinquency information missed and late
  payments
• Collection Agencies overdue and uncollected
  debt
• Public Record information (local, state and
  federal courts)- Bankruptcy, tax liens,
  judgments, legal suits and garnishments

7
Whats Your Score?

• Credit Scores

8
What is a Credit Bureau Score?

• A statistical means of assessing a borrowers
  likelihood to pay back a loan.
• Based on the data available in the borrowers
  credit report.
• Measures the relative degree of risk a potential
  borrower represents to the lender or investor.
• Calculated using a system of scorecards developed
  by Fair, Isaac and Company, Inc.
• Based on credit data from millions of consumers
  and complex mathematical methods.
• Scores range from 300 - 850

9
How Does It Work?

• Credit Score (or FICO) is provided by the three
  major credit reporting agencies Equifax,
  Experian, and TransUnion.
• FICO evaluates many types of information on your
  credit report.
• Compares that information to the patterns of
  millions of past credit reports.
• Identifies your level of future credit risk.
• To calculate a FICO score from your credit
  report, you must have
• at least one account open 6 months or more
• one account updated in the last 6 months.

10
Whats Your Score?

• What Factors Make Up
• A FICO Score?

11
PAYMENT HISTORY-What is your track record?

• Approximately 35 of your score is based on this
  category.
• Takes into account
• Payment information on many types of accounts.
• Public record and collection items.
• Details on late or missed payments.
• How many accounts show no late payments.

12
AMOUNTS OWED-How much is too much?

• Approximately 30 of your score is based on this
  category.
• Your score takes into account
• The amount owed on all accounts.
• The amount owed on different types of accounts.
• Whether you are showing a balance on certain
  types of accounts.
• How many accounts have balances.
• How much of the total credit line is being used
  on revolving credit accounts.
• How much of installment loan accounts is still
  owed, compared to original amounts.

13
LENGTH OF CREDIT HISTORY-How established is yours?

• Approximately 15 of your score is based on this
  category.
• Your score takes into account
• How long your credit accounts have been
  established, in general.
• How long specific credit accounts have been
  established.
• How long it has been since you used certain
  accounts.

14
NEW CREDIT-Are you taking on more debt?

• Approximately 10 of your score is based on this
  category.
• Your score takes into account
• How many new accounts you have.
• How long it has been since you opened a new
  account.
• How many recent requests for credit you have
  made.
• Length of time since credit report inquiries were
  made by lenders.
• Whether you have a good recent credit history,
  following past payment problems.

15
TYPES OF CREDIT USE Is it a healthy mix?

• Approximately 10 of your score is based on this
  category.
• Your score takes into account
• What kinds of credit accounts you have, and how
  many of each.

16
Whats The Diff?

• Credit reports and Credit scores are used by
  lenders to determine interest rates offered.
  Thats the diff!

17
Whats The Diff?

• Prime Rate
• WSJ survey of 30 largest banks
• T-Bill Treasury Bill auction average discount
  rate.
• LIBOR London Interbank Offered Rate

18
Whats the diff?
19
Index and Margins

• 3 rule

20
History of Interest Rates
21
Cosigner vs. No cosigner

• Some loans require a cosigner regardless of
  applicants credit strength
• Some loans offer lower rates with presence of a
  cosigner
• Generally speakinga good credit worthy cosigner
  is recommended

22
Cosigner vs. No Cosigner

• 10,000 Loan at Prime 0 (8.25 fixed rate), 20
  yr repayment period
• 85.21 for 240 mo 20,448.31
• 10,000 Loan at Prime 5 (13.25 fixed rate),
  20 yr repayment period
• 118.94 for 240 mo 28,549.25
• A cosigner might save you 8000 in interest
  expense on a 10,000 loan

23
Whats the diff?

• Good credit score gets you good interest rate
  (and lower/no fees) on your loans, (or better
  insurance rates/rental opportunities/employment
  opportunities) which saves you MONEY!
• THATS THE DIFF!