Understanding YourCredit Score

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• A 3-digit number used by lenders to evaluate the risk associated with lending you money

• It is generated by a mathematical model created by Fair Isaac & Company in the 1950’s.

• There are 3 Major Credit Bureaus, Equifax, Experian and Trans Union –You have 3 Scores

• Scores range from 300-850

What is a Credit Score?

Above 740 = Excellent

680 = Good

681 = Fair

Below 620 = Poor

What is a Good Score?

The Cost of a Low Score

• Lost Opportunity• Humiliation• Employment• Auto Loans• Education Loans• Business Ownership• Checking Account• Medical

• Credit Cards• Renting an Apartment• Utilities• Insurance Rates &

Options• Less or No Retirement

Savings

The Cost of a Low Score & Mortgage

• Never Owning a Home At All, Again, or For Years• Higher Interest Rates• Loan Level Price Adjustment Fees• Higher PMI• No HELOC• Higher HELOC Interest Rates

Today, on a $300,000 30-Year Fixed Home Loan, a borrower who increases his or her credit score from 620 to 740+ can potentially save $000.00 per month on mortgage payments, $00,000.00 per year, and approximately $000.000.00 over the life of the loan.

Payment HistoryLate PaysCollectionsCharge-OffsRepossessionsForeclosuresTax LiensBK’sJudgments

Amounts OwedCredit CardsMortgage LoansAuto LoansHELOC’sInstallment Loans

Types of Credit UsedA Mortgage LoanAn Auto Loan2-3 Major Credit Cards

New CreditSoft InquiriesHard Inquiries

Length of HistoryTime since accountOpened and Time sinceaccount activity

Five Factors of Credit Scoring

A recent 30-day late can cost you 50-80 points

Paying a collection that is more than 2 years old can hurt your score

Being past due on an account can cost you 50+ points

Derogatory accounts do NOT fall off of your report automatically after 7 years. You must dispute them.

A divorce decree does NOT take precedence over the creditor agreement

WHAT YOU SHOULD KNOW

Payment History – 35%

New debt temporarily decreases the score

Keep balances below 50% at all times to maintain your score

Keep Credit Card Balances below 30% of the limit 3-6 months prior to applying for a home loan

Don’t consolidate debt. Share outstanding debt evenly among your cards

If you go over the limit on your credit card even by $1, it will cause a serious penalty

HELOC’s can be considered revolving debt, not mortgage

Do not close credit cards except in certain circumstances

USE YOUR CREDIT CARDS or they will become unrated in 3 months

Amounts Owed – 30%

WHAT YOU SHOULD KNOW

Hold onto old credit cards, even if the rate is not great

New credit users can add themselves to another person’s credit card as an authorized user to generate a score

Mixture is best

The type of credit card DOES matter

2-3 revolving credit cards is optimal with established credit history

AKA’s and Multiple Addresses bring scores down

Type of Credit Used – 10%Length of Credit History – 15%

WHAT YOU SHOULD KNOW

Soft vs. Hard Inquiries

30 Day Window for pulling your reports

Inquiries affect the score for one year

Inquiries can cost between 2 and 25+ points on the score depending on your current score

You are Pre-Approved means you are NOT pre-approved

New Credit (Inquiries) – 10%

WHAT YOU SHOULD KNOW

Step 1 - Order Your Credit Reports & Scores The first step is to have a complete picture of your current credit situation by ordering your credit report and score for all three national credit bureaus, TransUnion, Equifax and Experian.

Step 2 - Verify the Data Being Reported It is the consumer's responsibility to verify that the data being reported is accurate.

Step 3- Dispute the Inaccurately Reported InformationContact your creditors and send letters of dispute to the credit bureaus to have errors on your credit report corrected. SEND CERTIFIED.

Start Improving Your Scores Now

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