Credit Education Presentation

Welcome

Kelly WellsCredit CRM CertifiedFCRA Certified – Fair Credit Reporting ActFICO Pro Certified – Fair Isaac & CompanyCredit Expert WitnessRadio co-host – Real Estate Radio Network9 years as a mortgage officer before becoming a credit expertOwner – Credit Restoration of WA – CROW

ABC’s of Credit ReportsAnnual Credit Report – Truly free credit report that we are able to obtain every 12 months. This report does not contain any scores it just gives us the data that is furnished to the credit bureaus about our credit.CreditKarma.com – (TransUnion) will give you a score but it is not a true fico scoreCreditsesame.com – (Experian) will give you a credit score, but again is not a true fico score.

Codes for Bureaus

Trans Union - Annual Credit Reports

Personal Info

Public Record

Employment

Trans Union - Annual Credit Reports

Account Info

Experian – Annual Credit Report

Personal Info

Experian Contact Info


Payment Legend

Public Records


Tradeline

Account Information

Payment History

Equifax – Annual Credit Report

Equifax – Annual Credit Report

Tradeline Information

Account Info

Example of lender credit report

Lender Infor

Borrower Info

Reason CodesScores

Example of lender credit report

Bureaus

Tradeline Information

Welcome WagonPersonally welcomed new neighbors – the visit

appeared to be an altruistic overture, not the caseCollected information – visually inspected homes, noting the furniture, decorations, fine china, # of children and anything else.Reported the information to their employers the local credit bureaus.In 1906 the Associated Credit Bureau was formed to facilitate the goals of each bureau – this layed the foundation for the “Big 3”

CREDIT SCORE

What Does It Mean?

What Does The Score Mean?Predicts the statistical chance of a consumer becoming 90 days late or more on a particular loan obligation

Each score is specific for each bureauScores range from…300 to 850 for Classic Fico

The Higher the score the less the odds of default

The score is generated by analyzing the information contained in the consumer’s credit report at that point in time.

Why Credit Scoring

Credit scoring is a “lazy man’s” method to evaluate your risk of defaulting - nondiscriminatoryCredit scoring has become a thermometer of your financial healthFICO scores range from 300 to 850Assets and income not considered

CREDIT SCORE

Consumer Default What Are The Odds

Odds of Going 90 Days or More Late

Score OddsAbove 800 1485 to 1720 to 799 649 to 1680 to 719 112 to 1620 to 679 47 to 1Below 620 15 to 1

CREDIT SCOREWhat Are The Determining Factors?

Payment HistoryLate PaysCollectionsCharge-OffsRepossessionsForeclosuresTax LiensBankruptciesJudgmentsShort-Sales

Amounts OwedCredit CardsMortgage LoansAuto LoansHELOC’sInstallment Loans

Length of History

New CreditSoft InquiriesHard Inquiries

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

Credit Score Factors

1. Payment History…


• Timing of the Delinquency• Level of Delinquency• Last Activity Date• Past Due Notices Destroy

Scores


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

• Derogatory accounts do NOT always fall off of a credit report automatically after 7 years. They must be disputed.

• A divorce decree does NOT take precedence over the creditor agreement.

CREDIT SCOREHow Long Do Delinquencies Stay

Delinquencies on Credit Reports• Bankruptcies Chapter 7 & 11 10 Years From Filing

Date• Bankruptcies Chapter 13 7 Years From

Filing Date

• Tax Liens 7 Years From Date

Satisfied- unless file

for 12277• Late Payments 7

Years• Charge-Offs 7.5

Years From 1st Late Pay

• Judgments 7 Years of S.O.L.

• Inquiries2 Years

2.Revolving Debt Ratio…

Revolving Debt Ratio…..debt management

• New debt temporarily decreases a score.• Balances should be kept below 10% of the

limit to maintain a score. However, remember that the scoring model has no memory when it comes to balances, so if you do go over 10% one month and the next month pay if down you will be ok again.

• Credit card accounts should NOT be closed except in special circumstances.

• Unused credit card accounts will become unrated in 3 months.

2. Credit Cards…

• Use Each Credit Card At Least Every 6 Months(I Recommend Using Them Every 4 Months)

• Do Not Close Credit Cards• Pay-Off Credit Cards Before

Closing Date• Get Added As An Authorized

User

2. Credit Limit…• Ask For Credit Limit Increases

–if you have a very good history with your credit card issuer, you can always ask for a credit line increase if your utilization is out of whack, however, be aware that this will cause an inquiry on your account.

• Maintain Balances Below 10%• Make Sure The Limit Is

Reported

Spouse

• Keep Credit Separate From Spouse

3. Average Age of Credit File…

3. Average Age of Credit File…

• The Longer The History The Better• Hold Onto Old Credit Cards

4. The Mix of Credit…

• A Mixture Is Best• 3 to 5 Revolving Credit Cards --If 850 Is Your

Dream• A Mortgage Account• An Auto Loan• Equity Lines Of Credit (This Is Not A

Requirement)• Student Loans help your credit but they

don’t really fall into Revolving credit category, they are more installment loans.

4. Mix of Credit…

5. Inquiries…

5. Inquiries…

• Inquiries Affect The Score For 1 Year – Stays For 2

• Inquiries Can Cost 0 – 50 Points• Auto & Mortgage Inquiries

- Have a 30 Day Buffer Period- Within A 45 Day Period Are Treated As

1• Many Inquiries Do Not Count

- Personal- Promotional & Job Related- Insurance & Account Reviews

Credit Score Components

Demystifying Credit Repair

• Myth #1 • Credit Agencies are empowered

with some kind of governmental authority.

• Credit agencies have no legal authority at all, they are simply billion-dollar corporations who are in the business of gathering and selling YOUR information


Myth #2The credit agencies are required by law to keep derogatory items on your credit report for 7 to 10 years.There is no law that the credit agencies report anything. Just the opposite is true! Credit Agencies are required by law to automatically remove all derogatory items older than 7 years, or in the case of a bankruptcy, 10 years.


Myth #3It is impossible to remove an item of public record.Bankruptcies, tax liens, etc. come off just like any other item that is incorrectly reported, obsolete, erroneous, misleading, incomplete, or that cannot be verified. Remember, the nature of the item has nothing to do with its removal under the Fair Credit Reporting Act.


Myth # 4The burden of proof rests with the consumer to validate information contained on your credit report.The opposite is true under the Fair Credit Reporting Act; both federal and various state laws REQUIRE that the credit agencies bear the burden.


Myth #5It is illegal or immoral to have the information on your credit report altered or removed.Not only is it not illegal or immoral, but it is what the Fair Credit Reporting Act is all about. It was enacted by congress for the very purpose of protecting consumers from the intrusion of the credit agencies into our lives.


Myth #6Paying a past due debt removes it from your credit report.Just because you pay an old debt does not change or erase the fact that at one time you were not paying on it as you agreed. Can this record be changed? Absolutely!

Fair Credit Reporting Act

How to read your resultsDeleted - This item was removed from your credit reportRemains - This item has been verified as accurate Updated – A change was made to this item; review this report to view the change. If ownership ofthe item was disputed, then it was verified as belonging to you.Reviewed - This item was either updated or deleted; review this report to learn its outcomeItems We investigatedWe completed investigating the items you disputed with the sources of the information. Here are the

results: Credit items outcomeCAP ONE RemainsZALES/CBSD UpdatedSTATE OF ALABAMA HR Deleted CBSI DeletedCBSI DeletedSECURITY CHECK LLC DeletedHSBC BANK DeletedCAVALRY PORTFOLIO SERV DeletedLISTER-HILL CREDIT UN Remains


Myth #8If you get a derogatory item removed, it will just come back.Not if it is removed legally. When it is removed with cause under the Fair Credit reporting Act it cannot legally be placed back on your credit report. Consumer must receive a reinsertion letter 5 days prior.


Myth #9The past equals the future.This is the biggest myth of all. The concept that once bad, always bad, or at least for 7 years is totally false. The scoring model, like Google’s search engine parameters, has been in constant change. The simple truth is, no credit report or scoring model can predict the future


The Fair Credit Reporting Act: 1971 Congress passed the Fair Credit Reporting Act (FCRA). The FCRA was passed by congress with the intention to regulate credit-reporting agencies. The Act spelled out all the rules and regulations that the credit-reporting agencies had to follow before they put anything on someone’s credit report. All information reported must be 1) Verifiable, 2) Complete and 3) Accurate. For the past three decades, those agencies have ignored most of the law. If “reasonable procedures” have not been correctly followed, then any verified inaccuracies, etc. must be removed from your credit reports as defined in the FCRA. The three credit reporting agencies (CRA) ARE Experian (formerly TRW), Equifax and Transunion. There are various agencies that purchase information from these three major agencies, but they get their information from the “Big-3”, so if you can repair your credit with the Big-3, you basically repair it with everyone. www.yale.edu report

Demystifying Credit RepairHow to read your results

Deleted - This item was removed from your credit reportRemains - This item has been verified as accurate Updated – A change was made to this item; review this report to view the change. If ownership ofthe item was disputed, then it was verified as belonging to you.Reviewed - This item was either updated or deleted; review this report to learn its outcomeItems We investigatedWe completed investigating the items you disputed with the sources of the information. Here are

the results: Credit items outcomeCAP ONE RemainsZALES/CBSD UpdatedSTATE OF ALABAMA HR Deleted CBSI DeletedCBSI DeletedSECURITY CHECK LLC DeletedHSBC BANK DeletedCAVALRY PORTFOLIO SERV DeletedLISTER-HILL CREDIT UN Remains Visit experian.com/status to check the status of your pending disputes at any time

Additional Related Acts

Google Search; consumer rights +• FCRA• FCBA• FDCPA• FACTA• CROA

Fair & Accurate Credit Transactions Act(FACTA)

ADDRESS DISCREPANCY: THERE IS A SUBSTANTIAL DIFFERENCE BETWEEN THE ADDRESS SUBMITTED IN THE INQUIRY AND THE ADDRESS(ES) ON FILE

TRANSUNION ID MISMATCH ALERT: PREVIOUS ADDRESS MISMATCH. INPUT DOES NOT MATCH FILE.ADDRESS DISCREPANCY: THERE IS A SUBSTANTIAL DIFFERENCE BETWEEN THE ADDRESS SUBMITTED IN THE INQUIRY AND

THE ADDRESS(ES) ON FILE

SCORE MODELSEQUIFAX/BEACON 5.0 - SOME PPERSON – XXX-XX-XXXX SCORE: 58800038 - SERIOUS DELINQUENCY, AND DEROGATORY PUBLIC RECORD OR COLLECTION FILED 00018 - NUMBER OF ACCOUNTS WITH DELINQUENCY00020 - LENGTH OF TIME SINCE DEROGATORY PUBLIC RECORD OR COLLECTION IS TOO SHORT 00014 - LENGTH OF TIME ACCOUNTS HAVE BEEN ESTABLISHED_________________________________________________________________________________________

TRANSUNION/FICO CLASSIC (04) – SOME PERSON – XXX-XX-XXXX SCORE: N!ASC3 - FILE NOT SCORED BECAUSE SUBJECT DOES NOT HAVE SUFFICIENT CREDIT_________________________________________________________________________________________

EXPERIAN/FAIR, ISAAC (VER- 2) – SOME PERSON – XXX-XX-XXXX SCORE: 52438 - SERIOUS DELINQUENCY AND PUBLIC RECORD OR COLLECTION FILED 13 - TIME SINCE DELINQUENCY IS TOO RECENT OR UNKNOWN 02 - LEVEL OF DELINQUENCY ON ACCOUNTS18 - NUMBER OF ACCOUNTS WITH DELINQUENCY08 - TOO MANY INQUIRIES LAST 12 MONTHS

Fair & Accurate Credit Transactions Act(FACTA)

S C O R E M O D E L S5 MAIN BORROWEREQUIFAX/BEACON 5.0 81000011 - AMOUNT OWED ON REVOLVING ACCOUNTS IS TOO HIGH 00032 - LACK OF RECENT INSTALLMENT LOAN INFORMATION_________________________________________________________________________________

3 MAIN BORROWERTRANSUNION/FICO CLASSIC (04) 808004 - LACK OF RECENT INSTALLMENT LOAN INFORMATION014 - LENGTH OF TIME ACCOUNTS HAVE BEEN ESTABLISHED012 - LENGTH OF TIME REVOLVING ACCOUNTS HAVE BEEN ESTABLISHED_________________________________________________________________________________

1 MAIN BORROWEREXPERIAN/FAIR, ISAAC (VER. 2) 82212 - LENGTH OF TIME REVOLVING ACCOUNTS HAVE BEEN ESTABLISHED 01 - AMOUNT OWED ON ACCOUNTS IS TOO HIGH

Research and Repercussions

In June of 2004, the Public Interest Research Group found (79% or more) have significant errors in their credit profiles. These errors affected credit scores by 50+ points.lyonslawfirm.com/pdfs/creditlawsuits.pdf bankruptcydischargesettlement.com10th Circuit Appeals Court ruled that E-Oscar is not a reasonable validation method (2010)

Contact UsIf you have any questions or comments, and would like to talk to someone, use the phone number below to call and talk with someone on our staff.

Phone: 1-877-956-1014Fax: 1-866-547-2794

Address:3025 Limited Ln NW Suite #101, Olympia, WA 98502

Credit Education Presentation

Economy & Finance

Transcript of Credit Education Presentation