1. 1 Credit Scores How They Impact Your Financial Success Presented by: Lynne A. Coverdale, MBA Salin Bank & Trust Company

2.  The FICO stands for Fair Isaac and Co., a company founded in 1956 by Bill Fair, an engineer, and Earl Isaac, a mathematician  The company philosophy was that data can improve business decisions when applied intelligently.  In 1957, Conrad Hilton hired FICO to develop and install a billing system for Carte Blanche, one of the first credit card companies.  In 1958- Fair Isaac began creating credit score systems  FICO sent letters to 50 biggest American credit grantors asking for opportunity to explain a new concept – credit scoring  FICO builds its first credit scoring system for American Investments (the only respondent out of the 50 companies)  In 1963- FICO builds credit scoring system for Montgomery Ward – beginning of a very long term relationship 2

3.  In 1981 – FICO introduced the first credit bureau risk score  By 1991 all three credit bureaus were using the FICO credit bureau scores as their standard procedure  The three bureaus: Experian, TransUnion and Equifax  Experian score: FICO® (Experian)  Transunion score: Classic Score formerly called Emperica  Equifax score: Beacon 3

4.  In 1993 – the first insurance bureau score is introduced for the insurance industry  Early 90s – mortgage lenders and banks are using credit scores for lending decisions in some cases  In 1995 – Fannie Mae and Freddie Mac recommend use of “FICO” scores for evaluating US mortgage loans 4

5.  2001 to today – credit score usage expands into a variety of industries, credit score education is prevalent  The range of scores for each of the bureaus is roughly 300 – 850  Equifax: 334 – 818  Experian: 320 – 844  Transunion: 309 - 839  The higher the score - the better  Examples: better rate, lower insurance cost, obtain a job offer 5

6.  Identifying information  Your name, and previous names  Address history  Social security number  Date of birth  Employment information  Requestor’s identifying information  Name  Address  Contact  Tradelines  Current accounts open with or without a balance  Closed accounts  Paid-off accounts  History of tradelines 6

7.  Public records  Judgments  Bankruptcies  Foreclosures  Liens such as tax liens  Satisfactions  Inquiries  Typically for the last 90 – 120 days  Credit Scores  Score from each bureau ordered  Key 4 -5 factors that adversely affected the score 7

8.  Specific to Mortgage Credit Reports  ID Cross Check  Compares social security number provided to social security number on record for each bureau, also compares to SSA issuance date and SSA death master  Compares current address provided to address history for each bureau  Checks birthdate of record  Identity index provided  The higher the index, the better – the more the consumer’s identity was verified 8

9.  Consumer Lenders  Banks  Credit unions  Auto finance companies  Mortgage Bankers, Mortgage Brokers  Commercial and Business Lenders  Other Companies  Insurance companies  Prospective employers  Landlords  US Government 9

10.  Credit reports and credit scores are accessed and evaluated to aid in decisions such as:  Consumer Lenders  Auto loans  RV loans  Personal loans  Lines of credit  Credit cards  Mortgage Bankers, Mortgage Brokers  First mortgages  Second mortgages  Home equity lines of credit 10

11.  Credit reports and credit scores are accessed and evaluated to aid in decisions such as:  Commercial and Business Lenders  Small business loans  Commercial loans  Lines of credit  Other Companies  Insurance companies  Insurance for autos, homes, businesses, personal property  Prospective employers  Possible employment opportunities  Landlords  Apartment or home rentals  US Government – background checks  Special projects  Employment 11

12.  The number and types of accounts you have  Credit cards, auto loans, mortgages, other installment loans  Credit payment history  Paid on time?  Paid late?  Not paid?  Percentage of available credit you are using versus available credit  Age of accounts  Derogatory accounts/ history 12

13.  Payment history (35%)  Paid on time?  Paid late?  Not paid?  Amounts owed (30%)  Amount owed versus amount available  Length of credit history (15%)  The number and types of accounts (10%)  Credit cards, auto loans, mortgages, other installment loans  Inquiries/new credit (10%) 13

14. 14 Source: myFICO

15.  Credit score detail  A person has a score of 700 which consists of:  35% = 245 points for Payment history  30% = 210 points for Amounts owed  $4,000 balance on a $5,000 credit card  15% = 105 points for Length of credit history  Had old history but just closed out the oldest accounts  10% = 70 points for Types of credit  10% = 70 points for New credit/ inquiries 15

16.  Credit score detail  A person has a score of 740which consists of:  35% = 259 points for Payment history  30% = 222 points for Amounts owed  $450 balance on a $5,000 credit card  15% = 111 points for Length of credit history  Did not close out any old accounts  10% = 74 points for Types of credit  10% = 74 points for New credit/ inquiries 16

17. 17 Loan Level Price Adjustment Chart Fannie Mae

18.  Mortgage Example 95% LTV (5% down) purchase:  Credit score 700  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA) 1.0%  Rate: 4.50%  PMI:.89% ($148.33)  Principal and interest and Mortgage Insurance: $1,161.70  Credit score 720  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA).50%  Rate: 4.375%  PMI:.67% ($111.67)  Principal and interest: $1,110.24  Credit score 740  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA).25%  Rate: 4.25%  PMI:.54% ($90.00)  Principal and interest: $1,073.88 18

19.  Mortgage Example 80% LTV (20% down) purchase:  Credit score 700  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA) 1.0%  Rate: 4.50%  Principal and interest: $1,013.37  Credit score 720  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA).50%  Rate: 4.375%  Principal and interest: $998.57  Credit score 740  $200,000 loan on 30 year fixed  Loan Level Pricing Adjustment (LLPA).25%  Rate: 4.25%  Principal and interest: $983.88 19

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21.  Fact or Myth: Not having credit is the best strategy for credit scores?  Fact or Myth: Credit Scores are fixed for a year?  Fact or Myth: Opening a new account does not affect your score?  Fact or Myth: Using the majority of your credit line is a great strategy to build your credit?  Fact or Myth: Not having revolving credit will insure your credit score is the highest?  Fact or Myth: You should always close out accounts that you don’t use? 21

22.  Fact or Myth: Each creditor sends payment information to each of the 3 bureaus?  Fact or Myth: Having no more than 30% of your credit lines outstanding is a good strategy to maximize credit scores?  Fact or Myth: Opening a credit card is a good idea to establish credit?  Fact or Myth: Being added on as an authorized user to a persons credit card is all one needs to do to establish credit?  Fact or Myth: Inquiries into your credit make a huge impact on your credit scores?  Fact or Myth: Scores are the same for each credit bureau? 22

23.  Shred Shred Shred  Opt-out of unwanted mail and solicitations  Get on do not call list  Don’t give passwords or personal information over the phone  Protect your passwords  Change them  Keep personal information secure and offline  If online – make sure it is safe, secure, encrypted, password protected  Vacation hold for mail or mail picked up by trustworthy neighbor or family member, friend  Trash receptacles back from front of house in timely manner  Use the blue box  Don’t overshare on social media sites 23

24.  Lock up your laptop  Be careful when you use Wi-Fi in public areas  Perhaps use your own personal hotspot  Avoid phishing emails  Example annual credit search 24

25.  What is the difference between a soft credit pull and a hard credit pull?  How do I obtain a copy of my credit report?  How can I stop the junk mail solicitations  How do I dispute inaccurate information on my credit report?  Why are my credit scores different? 25

26.  www.annualcreditreport.com www.annualcreditreport.com  www.optoutprescreen.com or 1-888-5-optout www.optoutprescreen.com  www.donotcall.gov www.donotcall.gov  www.dmachoice.org www.dmachoice.org  http://www.ftc.gov/faq/consumer-protection http://www.ftc.gov/faq/consumer-protection  www.experian.com www.experian.com  www.equifax.com www.equifax.com  www.transunion.com www.transunion.com  www.myfico.com www.myfico.com  https://salin.mortgagewebcenter.com/Resources https://salin.mortgagewebcenter.com/Resources 26

27. My contact information: Lynne Coverdale Salin Bank and Trust 8455 Keystone Crossing Dr. Indianapolis, IN 46240 317-452-8125 – direct 317-370-0016 – cell l.coverdale@salin.com l.coverdale@salin.com www.Salin.mortgagewebcenter.com 27