CREDIT CONTROLS OUR LIVES Limits or expands our financial stability Increases or decreases our quality of life Opens or closes doors to employment opportunities and promotions Affects our income by way of interest rates Limits or expands our purchasing power
Credit Facts Credit Cards-Debt is a Trillion Dollar Industry Americans are the biggest spenders Approx 83% of Divorces are due to Financial Problems January 2006 - Min. Monthly Payments for credit cards increased from 2% to 4% causing already strapped consumers financial hardship All of your Creditors can increase your interest rates if you are ever late on any of your other accounts Bankruptcy Relief is now more difficult to file due to the new Means Test (as of October 2005)
FICO Fair Isaac Company Provides risk assessment software to the 3 Credit Reporting Agencies (CRAs) Experian (formerly TRW), Trans Union & Equifax Vantage Score New Scoring Model developed by the Big 3 To compete against FICO - Range from 501 -900
Fico Score Basics Scores are damaged by the most recently reported derogatory information Derogatory information reported after 2 years does not highly impact score FICO has 88 Negative Rating Factors and only 6 Positive Rating Factors FICO measures whether a person is moving towards or away from Bankruptcy There are only 5 basic scoring factors that you can control
Consumers Right To Accuracy The Fair Credit Reporting Act: In 1971, Congress passed the Fair Credit Reporting Act (FCRA). The FCRA was passed with the intention to regulate the credit-reporting agencies (CRA). The Act spelled out all the rules and regulations that the credit-reporting agencies have to follow before they put anything on someones credit report. For the past three decades, those agencies have ignored most of the law. Information about you has to be accurate and verified before it is entered on your credit reports. If reasonable procedures have not been correctly followed, then any verified inaccuracies must be removed from your credit reports as defined in the FCRA. The three credit reporting agencies are Experian (formerly TRW), Equifax and Trans Union. There are other reporting agencies also that purchase their information from the Big-3, so if you can repair your credit with the Big-3, you basically repair it with everyone.
FICO scoring factors you can control 35% Payment History 30%Amounts Owed 15%Length of Credit History 10%New Credit 10%Types of Credit in Use
Fico Advantages Consumers obtain loans faster Credit decisions are fairer Older credit problems count for less - Great for Bankruptcies More available credit Credit rates are lower over all With an understanding of the system, a person can change his or her financial standing from D credit to A credit rating
How do Inquiries count? HARD INQUIRIES Only permissible use credit inquiries count against you, including credit card offers youve applied for. SOFT INQUIRIES Credit reports you pull yourself or from a consumer site do not count. Marketing inquiries also fall in this category. For Mortgage or auto loans, FICO counts multiple inquiries during a 30-day period as just one inquiry. In the old Scoring Model, multiple inquiries were counted as one inquiry within a 14-day period.
Length of time the following items stay on Credit Reports? Bankruptcies 7, 11 and 13 10 Years Collections 7 Years Public Record 10 Years Inquiries 2 Years Chex Systems (for banks) 5 Years Telecheck (for merchants) 5 Years SCAN (for merchants) 5 Years Regulated by FTC through Fair Credit Reporting Act
Collections, Judgments & Liens Do not be too quick to pay an old collection account; depending if youre getting a loan or just repairing credit. Judgments will reflect as Satisfied when paid. Collections will reflect as Paid when paid. Liens will reflect as Released when paid.
WEB SITES to Check out www.myfico.com www.annualcreditreports.com www.transunion.com www.equifax.com www.experian.com www.UCan2credit.com/2blessed