Post on 30-Dec-2015
Your parents can’t fix everythingHow to rescue your credit—before it needs saving!
Begins when you choose and use credit services
Your credit history
• Influences your ability to obtain products and services—and how much they’ll cost you• Credit cards• Car loans/leases• Private student loans• Mortgages, leases• Employment
Your credit history matters!
A good credit history will help you access services to improve your quality of life
A bad credit history will hold you back–and your missteps will follow you for as long as 10 years
How it worksThree credit reporting companies update and distribute consumers’ information: Equifax, Experian and TransUnion
Credit reporting companies update
consumer’s information
Consumer applies for credit
Creditor requests information about
consumer’s financial history
Credit profile used to determine whether to
authorize credit—and if so, at what interest rates
Consumer is granted (or denied) credit
Credit grantor reports activities back to credit
reporting companies every 30 days
What is a credit report?
Tells lenders how much
credit a consumer has
used and whether they
are seeking new sources
Lists the type of credit a consumer uses, the length of time the accounts have been open, and whether the consumer has
paid their bills on time
Prepared by credit reporting
companies for use by credit grantors and other parties with permissible
purpose
Summary of a consumer’s
financial reliability
Details a consumer’s credit history as it has been reported
1 3 5
2 4
Types of credit reports
1. Abbreviated version of consumer credit report that creditors see
2. Does NOT contain limited inquiries or account reviews
3. Contains credit inquires
Subscriber report (Credit grantor version)
1. Lists all inquiries including limited inquiries and account reviews
2. Only consumers can request this version
Consumer disclosure(Consumer version)
Elements of a credit report
What is NOT in a credit report?What is in a credit report?
Race
Gender
Religion
Sexual orientation
National origin
Medical history
Checking or savings account balances
Income
Driving record
Report card
Identifying information
Credit history
Inquiries
How can you get a copy of your credit report?
• You get one free report every 12 months from each of the three bureaus!
• Visit AnnualCreditReport.com to download• You can also get free reports at CreditKarma.com
What is a credit score?Sum calculated by vendor and used by lenders as an indicator of how likely consumer is to repay loans
Snapshot in time of the consumer’s current financial situation
Generated by a mathematical formula
Each credit grantor has its own strategy for interpreting the credit score
If credit is denied after reviewing the score, credit grantors must disclose reasons for the decision
What’s in a credit score?
What is NOT calculated in a credit score?What’s calculated in a credit score?
Demographic informationAge, race, religion, national origin, gender, sexual orientation, marital status, residence, child/family support obligations
Employment information Salary, occupation, title
Other credit informationInterest rates charged by other credit grantors, usage of a credit counseling company
Payment history
Outstanding debt
Credit account history
Recent inquiries
Types of credit used
What are the Five Parts that go into a Typical Score? What Percent for each part?
Payment history: 35%- Account payment
information- Adverse public records- Amount of delinquent
accounts- Number of past due
items
Types of credit used: 10%- # of various types of accounts
New credit: 10%- # of recently opened
accounts- # of recent inquiries
Credit history length: 15%- Time since accounts opened
Accounts owed: 30%- Outstanding balances on accounts- Proportions of balances to total
credit limits- Proportion of installment loan
amounts
What’s a good credit score?
Very poor
Poor Fair Very good
Good
Typically the higher the score the better
Individual credit grantors decide range of acceptability
For example, a consumer’s credit score might be 680
Based on this particular model, here is how the consumer may be viewed by a certain lender
300 900400 500 600 700 800
You are here
You are here
Credit management tips
• Your parents can make a payment for you.• Your parents cannot make a late payment
not late.
A late payment stays on your credit history and impacts your credit score for as long as 7 years. However, the impact lessens as time passes.
The single most important component of your credit score is whether you make payments on time
More credit management tips
• Check your credit report every three months
• Improve your credit score 50 points or to above 650
• Reduce your debt balances to below 35% of available credit limit
• Create a budget and stick to it
• Dispute negative inaccuracies on your credit report
• Remove expired debts and collection accounts
• Consider refinancing
• Guard against identity theft
Set goals Clean up your records
Top 5 misconceptions
Your credit score will drop
if you check your credit
report
1Closing old
accounts will improve your credit score
2Once you pay off a negative record, it is
removed from your credit
report
3Being a co-
signer doesn’t make you
responsible for the account
4Paying off a
debt will add 50 points to your credit score
5
If you find a mistake…
First, correctly identify inaccurate information
Next, contact the credit grantor responsible for the inaccuracy and try to resolve the issue
If this does not work, contact the credit reporting company(s) reporting the inaccurate information
Credit reporting company(s) will investigate the issue
At the conclusion of the investigation, or within 30 days, you’ll be contacted
You have the right to dispute inaccurate information on your credit report
What questions do you have?
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