1. CREDIT RATING CREDIT RATING& CREDIT REPORTS

2. Credit Reports A credit report is a document which includes information on your level of indebtedness and bill paying behavior. A credit report is a document which includes information on your level of indebtedness and bill paying behavior. Each month, your individual creditors submit information to the credit reporting agencies who compile the information together to create the report. Each month, your individual creditors submit information to the credit reporting agencies who compile the information together to create the report. This report is released to lenders and others (more on that later!) and used to make decisions such as interest rates. This report is released to lenders and others (more on that later!) and used to make decisions such as interest rates.

3. FICO SCORE The information from your credit report is translated into a number called your FICO SCORE. (Also called your credit score or credit rating) The information from your credit report is translated into a number called your FICO SCORE. (Also called your credit score or credit rating) This score can range from 300-850, higher is better This score can range from 300-850, higher is better Most lenders base approval on them Most lenders base approval on them Higher scores mean lower interest rates Higher scores mean lower interest rates

4. FICO scores are calculated based on five general categories: –Payment history - 35%  Whether or not payments have been made on time. –Amounts owed - 30%  “ Maxed-out” credit cards and large outstanding loans can mean that a person is financially overextended. –Length of credit history - 15%  Less risk is attached to people who have a longer credit history.

5. Fico Score Calculations cont. –New credit - 10%  This factor considers the number of times new credit is requested, especially over a short period of time. It could mean greater risk. –Types of credit used - 10%  People with revolving credit only (such as a credit card) may be considered riskier than those with a combination of installment and revolving loans.

6. The following can negatively affect your credit score…. Frequent late payments Frequent late payments “Maxed Out” credit cards “Maxed Out” credit cards Opening or applying for too many cards Opening or applying for too many cards Accounts sent to a collection agency Accounts sent to a collection agency Court judgments, tax liens, bankruptcies Court judgments, tax liens, bankruptcies You cannot remove negative information, but you CAN improve your credit score by making better credit decisions in the future.

7. How to Establish Credit History and Improve your FICO Score: Pay ALL bills on time (not just credit card bills) Pay ALL bills on time (not just credit card bills) Keep your balances low (<35%) Keep your balances low (<35%) Have a variety of both revolving & installment credit Have a variety of both revolving & installment credit Keep the total number of credit cards you have low. (Don’t apply for new cards frequently) Keep the total number of credit cards you have low. (Don’t apply for new cards frequently)

8. Who looks at your credit report? Lenders Lenders Prospective employers Prospective employers Prospective landlords Prospective landlords Insurance companies Insurance companies This means that YOUR credit report/score will affect you during your ENTIRE LIFE!

9. How can you see your credit report? Order from Credit Bureaus (also called Credit Reporting Agencies) Order from Credit Bureaus (also called Credit Reporting Agencies) –TransUnion www.transunion.com www.transunion.com –Experian www.experian.com www.experian.com –Equifax www.equifax.com www.equifax.com Order to review for errors Order once a year to review for errors To get your FREE ANNUAL credit report go to : To get your FREE ANNUAL credit report go to : www.annualcreditreport.com