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1 Understanding Your Credit Score Consumer Credit Nationwide

2 First -- some background… In the old days…banks relied on their own records and sometimes even the loan officers instincts, (or their gut), when making lending decisions. Obviously, while this worked some of the time, it wasnt necessarily the most effective, or fair method of determining whether or not someone was qualified for a loan. Bill Fair (an Engineer) & Earl Isaac (a Mathematician) came up w/ an idea! They said that math could better predict future behavior than the gut of a loan officer…So They developed the Fair Isaac Credit Scoring model.

3 Credit Score defined A number that attempts to measure the odds that someone will pay the bank back if the bank gives that person money

4 Some other details Your score is a number between 300 - 850 A high score means a good credit rating which means your interest rates will likely be lower A low score means a bad rating, which means interest rates will likely be higher Your score measures activity over the past 7 years Giving greatest weight to most recent information (6 months to 2 years)

5 Comparing your Credit Score to a Grading Scale in School School Grading Scale 100% - 93%A 92% - 85%B 84% - 70%C 69% - 60%D 60% - 0F * The above scale ranges may vary. Credit Grading Scale 850 – 720A 719 – 680B 679 – 620C 619 – 600D 599 – 300F Median Score 723

6 What factors are used to make up your Score? 35% Payment History 30% Amounts Owed (current balances vs. amount available on credit line)

7 Remaining Factors 35% Other Including: Length of time youve had credit (15%) Types of Credit (10%) New credit (10%) Inquiries Note: The statistical formula that is used create your score is a secret. The above are guidelines that have been given to consumers to help explain the score.

8 Payment History (35%) Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.) Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items) Severity of delinquency (how long past due) Collection items Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any) Number of past due items on file Number of accounts paid as agreed Greatest weight given to the largest payment creditor

9 Amounts Owed (30%) Amount owing on accounts Number of accounts with balances Debt Utilization Ratios – Amounts owed/Credit Given Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts) Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

10 Other Factors Length of Credit History (15%) –The longer youve had credit the better your score. What is measured? Time since accounts opened Time since account activity

11 Other Factors (contd) Types of Credit (10%) Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgages, consumer finance accounts, etc.)

12 Other Factors (contd) New Credit (10%) Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account Number of recent credit inquiries Time since recent account opening(s), by type of account Time since credit inquiry(s) Re-establishment of positive credit history following past payment problems

13 Inquiries This is a list of who has been checking your credit. 2 types of inquiries – Inquiries you initiate Ex. You apply for a loan, or apply for insurance This type of inquiry will have an impact on your score but generally not a significant one. If you are shopping for a loan, the multiple inquiries will have the impact of a single inquiry within a 15 day period. Inquiries others initiate or self-check of credit Ex. Bank wants to offer you a pre-approved offer or you check your credit yourself. The score does not count consumer-initiated inquiries – requests you have made for your credit report, in order to check it. It also does not count promotional inquiries – requests made by lenders in order to make you a pre-approved credit offer – or administrative inquiries – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either.

14 What is not in your Score? Income Gender Race Age Zip Code Credit Counseling

15 Facts and Fallacies Fallacy: My score will drop if I apply for new credit. Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called inquiries) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score. (

16 Facts and Fallacies Fallacy: A poor score will haunt me forever. Fact: Just the opposite is true. A score is a snapshot of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.

17 How do I improve my score? Pay all bills on time Pay off old collection accounts Get current & Stay current Keep balances low in relation to credit limits Only use credit when needed

18 How do I get a copy of my Credit Report? By Phone: 877-322-8228 By Web: By Mail: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

19 What information is on my Credit Report? Identification Name Address Soc. Sec. Number Year of Birth Gender Employer Address Public Information Bankruptcies Judgments Tax Liens Account History Company Name Acct Number Type of account Date Opened Date Reported Credit Limit Highest Balance Current Balance Monthly Payment Past Due Amount Payment History for last 24 mos.

20 Additional Questions? Please contact us: Consumer Credit Nationwide 3509 Spring Street * Suite 4 Davenport, Iowa 52807 563-359-8830 * 800-Debt Help (332-8435)

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