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Understanding Credit Reports: The Key to Your Financial Future

A credit report is a detailed record of your credit history, compiled by agencies as you turn 18. It encapsulates your spending habits, highlights your loan repayment behavior, and influences your borrowing capacity and interest rates on loans, whether installment or revolving. Creditors, lenders, and sometimes employers can access your credit report to assess your creditworthiness. Maintaining a positive credit report is crucial for securing loans at favorable rates and managing financial risks effectively.

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Understanding Credit Reports: The Key to Your Financial Future

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  1. What’s a Credit Report? From age 18 on, agencies collect data about your spending habits. Monitor your ability to handle risks (i.e. loans I installment and revolving) Impacts: amount you can borrow and the interest rates on that loan. Who Can Access Your Report? Creditors Collection agencies Insurance companies Employers Landlords. Many others!!! www.howmanyofme.com
  2. What is in a Credit Report? Personal Data Employment History Public Records (liens, judgments, secured loans, foreclosures, bankruptcies, etc.) Collection Accounts (defaults and lateness) Credit Information (open accounts, date account was opened, payment status) Inquiries (approved requests and others seeking credit information)
  3. How Long Does the Information Remain On A Credit Report? TYPELIMITATION Suits & Judgments 7 years Tax Liens – Paid 7 years from payment Tax Liens – Unpaid No limitation Charged to Profit & Loss 7 years Criminal Record Limitations No limitations Other adverse information 7 Years Late Payments 7 Years Debt Collections 7 Years Bankruptcy 10 Years
  4. Annual Credit Report The Fair Credit Reporting Act guarantees you access to a free credit report from each of the 3 nationwide reporting agencies — Experian, Equifax, and TransUnion— every twelve months. To get your free Credit Report By Internet: www.annualcreditreport.com By phone: 1-877-3222-8228 By mail: Annual Credit Report Request Service P.O. Box 105281, Atlanta, GA 30348-5281
  5. Improving Your FICO Credit Score http://www.whatsmyscore.org/estimator/
  6. Credit Score What is a “Credit Score”? Why you need a credit score? How are these scores created? Why are there different types of scores? What hurts your score? Tips to improve your score. 6

  7. What is a Credit Score?

    A tool created from your credit report which can assess your financial status, history, and debt repayment record. Credit rating is determined by three bureaus that all banks, employers, companies you deal with check to see if you are a good risk Two most commonly used credit scores is the: FICO (Fair Isaac Corp.) which ranges from 300 – 850. Vantage (Experian) scores go from 501 - 990. There are hundreds of credit scores which are used by mortgage lenders, and companies that sell auto, homeowners and health insurance policies.
  8. What doesn’t Count in a Score. The scoring model doesn't look at: age race sex income education marital status job or length of employment at your job whether you've been turned down for credit length of time at your current address whether you own a home or rent information not contained in your credit report
  9. Why is a Credit Score Important? A poor credit score can affect a person’s ability to: Obtain credit cards, car loans and mortgages Receive favorable interest rates and preferred credit limits on cars and credit cards Qualify for utility and cell phone services with no down payment or substantial security deposit Rent or lease a house or apartment Obtain government sponsored student loans Obtain private student loans with low rates It might also affect: Your car insurance rate Life insurance rates Health insurance premium Possible job offers
  10. Distribution of FICO Fair Isaac reports that the American public's credit scores break out along these lines:
  11. The key credit score elements To compare your Vantage Score to a FICO Score: Multiply your Vantage Score by 0.86 Vantage Score of 800 times 0.86 = FICO Score of 688
  12. How Much Will My FICO Score Drop? Alex Blanca Current FICO Score 680 780 Score after one of these is added to the credit report One inquiry for a new credit card 675 (5) 775 (5) A new charge card (additional hit) 665 (15) 760 (20) Maxing out credit card 660 (20) 745 (35) A 30-day delinquency 610 (70) 680 (100) Settling a debt 625 (55) 665 (115) Foreclosure 585 (95) 630 (150) Bankruptcy 540 (140) 550 (230)
  13. What Rate Will Your Score Get You? What is APR? APR is the Annual Percentage Rate on a loan or a credit card. It is interest rate that will determine how much you pay in interest each year.
  14. How much will you pay? A home theater system for $1,000, when purchased on credit card and each month you pay minimum payment will actually cost
  15. Credit Scores and Interest Rates 2010 Ford Focus
  16. Credit Score Mistakes 1. Paying bills late 2. Closing old credit cards 3. Maxing out . Watch the “Utilization Rate” (35%) 4. Using cash over credit 5. Applying for extra cards 6. Not shopping around for lower rates 7. Not checking your credit reports.
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