Credit Reports, Scores, and You. This screen is up before presentation. Introductions, tell them it’s short and sweet, we will answer general questions at the end and they can stop in anytime next door for specific questions.
What is a Credit Report? A credit report is a factual record of your credit activities. It will show lenders your credit accounts and outstanding loans, the balances on your credit cards and loans, and your bill payment history. There are four main categories of a credit report: Personal Information Your Credit History Credit Report Inquiries Public Records Personal Information such as your name, SS #, DOB, phone #, current and previous employers and current & previous addresses. Credit History; bill paying to lenders such as banks, credit unions, retail stores, finance companies and mortgage companies. Credit report inquiries lenders that have been requested to review your credit. Public Records such as bankruptcies, tax liens and court judgments. 2
Credit Reporting Agencies There are three Credit reporting agencies; Experian Transunion Equifax Each creditor may only report to one or all three agencies meaning each report may have different information on them. It’s important to always look at all three. 3
What is a credit score? A credit score is a number between 300 and 850 calculated from credit information using a standardized formula. The score is used by lenders to determine how risky a loan is. The lower the score, the higher the risk (and interest rate). It can also be used by employers, insurance companies, landlords, utility companies and cell phone companies. Scores under 600 are generally described as “poor” Scores over 720 are generally described as “excellent” 4
What makes up your credit score? Payment history – paying your monthly bills on time is most important. Amounts owed- if all your credit cards are maxed out, your score will be lower. The longer you have had credit reporting to the bureau, the better your score could be. New credit- lots of new credit will lower your score Types- A Mortgage and car payment help. Finance company debt hurts
What affects your score in a Positive Way? Pay your bills on time Always keep a high credit line to debt ratio – Rule of thumb is do not exceed 50% of your available credit Pay off your balance, don’t pay it down. Having a mix of credit lines; Credit Cards, unsecured loan, auto loan, mortgage Obviously, knowing your score can help you be better prepared to shop for anything you might finance and you can get that info free from the internet, or free from us.
What affects your score in a Negative Way? Late payments Non-payment High Balances on revolving credit accounts Judgments Accounts in Collections Obviously, knowing your score can help you be better prepared to shop for anything you might finance and you can get that info free from the internet, or free from us.
How Credit Impacts You Aahh, a new 2011 Harley Dyna Fat Bob. I want one, we finance them. But my credit score will affect both my ability to get approved for a loan, and what my interest rate and payment will be……..
How Credit Impacts You The 2011 Chevrolet Cruze runs $16,500 “out the door” 725 Credit Score = 2.88% rate and a $296 payment 600 Credit Score = 15.99% rate and a $401 payment Over a 5 year loan the lower credit score would cost you $6,300 in extra interest!
How Credit Impacts You It matters even more with a home purchase…..let’s assume this is a $130,000 house here in Kalamazoo
How Credit Impacts You A $130,000 home in Kalamazoo 725 Credit Score = 5.25% rate and a $718 payment 610 Credit Score = 10.50% rate and a $1,189 payment Over a 30 year loan the lower credit score would cost you $169,668 in extra interest! Yikes, that’s like buying an entire second home….or let’s look at it another way, say you can afford a $1,200 mortgage payment…
How do you establish credit? Credit can be established by getting credit A credit card is a good place to start Many companies offer Student Visa cards where you will not need a co-signer. Consumers Credit Union offers Student Visa cards. Requirements for approval will usually require a class schedule, employment history and no bad credit. Have your parents co-sign for a credit card
How do you establish credit? Start out Small – establishing good credit will take time. Don’t run into trouble by opening too many accounts at one time. Know the traps – Don’t open a store card just to get the 10% discount. The interest rates on those cards will wipe out the discount you got from opening the card in the first place. Obviously, knowing your score can help you be better prepared to shop for anything you might finance and you can get that info free from the internet, or free from us.
Credit Score Having a good credit history is important! Things you do today will affect your borrowing abilities later on in life. Negative credit stays on your credit report for at least 7 years. Obviously, knowing your score can help you be better prepared to shop for anything you might finance and you can get that info free from the internet, or free from us.
Any Questions?