Unit 4 Consumer Credit Part 5 Credit Reports Dollars and Sense

What does Your Credit Report Contain Identification -Name, address -Social Security Number -Current and Previous employers Credit Information -Credit accounts with Financial institutions, retailers, credit card issuers, other lenders -Credit limits, account balance, payment pattern over the last two years

What does Your Credit Report Contain Public record information -Bankruptcies -Judgments -Tax liens Inquiries -Credit Grantors -Potential employers Credit Score (if requested)

What is not in your Report Race or religion National origin Sex and Marital status Whether you receive public assistance Criminal activity Why do you think that is?

What is your credit score? A credit score is a number which represents an estimate of an individual’s financial creditworthiness

Five Parts to your FICO credit scores 35% of Score - Payment history 30% of Score – How much you owe 15% of Score – Length of Credit History 10% of Score – New Credit 10% of Score – Other factors (mix)

/ / Upon the application of this formula a specific credit score is derived. The following credit score range chart will help you to interpret the credit score: Credit Score RangeScore Rating 760 to 849Excellent 700 to 759Good 660 to 699Average 620 to 659Fair 580 to 619Poor 500 to 579Bad The advantage of having a good credit score range is that the interest rates that will be levied on your credit and loans would be reasonable and very convenient. Having a score in the excellent credit score range will give you the best possible offers and least possible interest rate. Credit Score Range Score Rating 800 +Excellent 700 to 799Very Good 680 to 699Good 620 to 679OK 580 to 619Poor 500 to 579Bad 499 & lowerVery Bad

Why Credit Scores are important Helps lenders predict how likely you are to make credit payments on time Affect whether you can get credit What you pay for credit cards, auto loans, mortgages, and other types of credit Higher scores more likely to be approved and pay a lower interest rate

About Credit Scores - Many types of credit scores Lenders usually mean FICO score developed by Fair Isaac Corporation Most commonly used scoring system Scores range from 300 – 850 Most people score in the 600s and 700s

Myths about Credit Scores Close unused credit cards – False Your credit report merges when you marry – False FICO Scores are based on income – False Checking your score hurts your score - False

Why Scores go Down: Pay late or pay less than required payment Public Record items appear Bankruptcy, Judgments Credit balances go up a lot Open new accounts

What makes scores go up: Pay bills on time Pay down credit card balances Keep older accounts open Avoid opening new ones Apply for new credit only when you need it Make sure your credit report is accurate

Improving your Score will… Lower your interest rates Speed up credit approvals Get better credit card, auto, mortgage offers

Key Points: Get a copy of your credit report annually Every 12 months – free copy of credit report from three major reporting agencies or Correct any errors or inaccuracies Establish good credit habits

3 Major Credit Reporting Agencies Experian Web: Phone: Equifax Web: Phone: Transunion Web: Phone Credit Reporting Agency FICO Score EquifaxBEACON® Score Experian Experian/Fair Isaac Risk Model TransUnionEMPIRICA®

TransUnion Credit Report

Equifax Credit Report

Your Task Complete the Credit Scores Worksheet