Understanding Your Credit Purdue Employees Federal Credit Union

The Basics What is a credit report? What is a credit report? Information about: Last known and previous address Last known and previous address Last known employer Last known employer Monthly debts Monthly debts Loan repayment history Loan repayment history Credit balances vs. available limits Credit balances vs. available limits

The Basics What is a credit bureau? What is a credit bureau? Company that stores your credit information Company that stores your credit information Also known as Credit Reporting Agencies (CRAs) Also known as Credit Reporting Agencies (CRAs) Three national reporting agencies: Three national reporting agencies: TransUnion TransUnion Equifax Equifax Experian (formerly TRW) Experian (formerly TRW)

The Basics Credit reports can be different depending on which agency it is being pulled from and for what purpose Credit reports can be different depending on which agency it is being pulled from and for what purpose Applying for an auto loan Applying for an auto loan Employment Employment Mortgage Mortgage Credit Card Credit Card

The FACT Act Stands for Fair and Accurate Credit and Transactions (FACT) Act The FACT Act was signed into law December 2003

The FACT Act Provide better consumer credit protection Provide better consumer credit protection Free copy of credit report every 12 months from each of the CRAs – Free copy of credit report every 12 months from each of the CRAs – Ensure credit histories are accurate Ensure credit histories are accurate Create a national system of fraud detection Create a national system of fraud detection Red flag indicators Red flag indicators Fraud alerts Fraud alerts ID theft procedures ID theft procedures Establish communication between the 3 CRAs Establish communication between the 3 CRAs

Your Credit Report Your credit report is divided into 6 (six) main sections: Your credit report is divided into 6 (six) main sections: Consumer Information (address, birthday and employment) Consumer Information (address, birthday and employment) Consumer Statement Consumer Statement Account Histories Account Histories Public Records Public Records Inquiries Inquiries Creditor Contacts Creditor Contacts

Your Credit Score What is a credit score? What is a credit score? A complex statistical model developed from thousands of consumer files A complex statistical model developed from thousands of consumer files Why was the credit score created? Why was the credit score created? Credit scores came into wide use in the 1980s Credit scores came into wide use in the 1980s Used to eliminate judgment decisions Used to eliminate judgment decisions Create consistency and equality Create consistency and equality

Your Credit Score How is my score calculated? How is my score calculated? Payment history Payment history Outstanding debt Outstanding debt Credit account history Credit account history Recent Inquiries Recent Inquiries Types of Credit Types of Credit Scores may be different from report to report depending on the type of scoring model being used.

Your Credit Score What factors dont affect my credit score? What factors dont affect my credit score? Debt ratio Debt ratio Income Income Length of residence Length of residence Length of employment Length of employment

How To Improve Your Score Pay your bills on time Pay your bills on time Keep credit card balances low (under 35%) Keep credit card balances low (under 35%) Apply for and open new credit only as needed Apply for and open new credit only as needed Pay off debt instead of moving it around Pay off debt instead of moving it around Avoid excessive inquiries Avoid excessive inquiries Give yourself time Give yourself time

Create A Positive History Print clearly an all credit applications Print clearly an all credit applications Consistently use your complete name Consistently use your complete name Pay your bills on time Pay your bills on time Set up a budget Set up a budget Review your credit report 60 to 90 days before making a major purchase (home or car) Review your credit report 60 to 90 days before making a major purchase (home or car)

Falling Behind? Contact your lenders immediately Contact your lenders immediately Stop using your credit limits until your finances are under control Stop using your credit limits until your finances are under control Look to professionals for help Look to professionals for help

Credit Misconceptions Your score will drop if you check your credit Your score will drop if you check your credit Closing old accounts will improve your credit score Closing old accounts will improve your credit score Once you pay off a negative record, it is removed from your credit report Once you pay off a negative record, it is removed from your credit report Being a co-signer doesnt make you responsible for the account Being a co-signer doesnt make you responsible for the account Paying off debt will add 50 points to your score Paying off debt will add 50 points to your score

Possible Warning Signs Of Fraud Strange data Strange data Maxed-out credit cards Maxed-out credit cards Late payments Late payments Mistaken identity Mistaken identity Credit score differences Credit score differences

Emergency Contacts Your financial institutions Your financial institutions The credit reporting agencies The credit reporting agencies TransUnion (800) TransUnion (800) Equifax (800) Equifax (800) Experian (888) Experian (888) The Federal Trade Commission The Federal Trade Commission The police The police

Questions?