Credit Scoring…

1. Credit Scoring… Protecting Your Future and your Capital

2. CREDIT SCORE! What Does it Mean?

3. What Does The Score Mean? • Determine how much money you can borrow, and how much interest you’ll pay. • Each score is specific for each bureau • Scores range from… • 300 to 850 for Classic FICO • The higher the score the lower the risk • The score is generated by analyzing the information contained in the consumer’s credit report at a particular point in time

4. Other names for FICO Score • Equifax – BEACON® Score • Experian – Experian/Fair Isaac Risk Model • TransUnion – EMPIRICA®

5. Other Scoring Models • Vantage Scoring Model • Unveiled on march 14 2006 • Driven by the Big 3 • Score range from 501-990 • Scores Combine a letter to the Score: A: 900–990 B: 800–899 C: 700–799 D: 600–699 F: 501–599 In 2013 adopted the 300-850 range

6. Other Scoring Models • Plus Score • Developed By Experian Decision Analytics • Ranges from 330 – 830 • Used primarily for consumer reports • Trans Risk Score • Developed By Transunion • Ranges from 300 – 850 • Used primarily for consumer report

7. Scoring Models

8. CREDIT SCORE! Consumer Default: What are the Odds?

9. Odds on Consumers: 90 Days Late

10. Odds on Consumers: 90 Days Late FORGET IT!

11. A Low Credit Score Can Cost You BIG! Compare 30 yr fixed rates on a $500,000 home

12. Jack & Brad: $500,000/30yr. Fixed

13. Jack & Brad: $500,000/30yr. Fixed

14. Jack & Brad: $500,000/30yr. Fixed

15. Jack & Brad: $500,000/30yr. Fixed

16. CREDIT SCORE! What are the determining factors?

17. Credit Score Components • Payment history • Amounts Owed • Length of credit history • Types of credit in use • New credit

18. 1. Payment history… 35% of Credit Score

19. 1. Payment history:35% of Credit Score • Many types of accounts are considered for payment history • Credit Cards • Retail Accounts • Installment Loans • Finance company accounts • Mortgage loans • Public record and collection items are considered quite serious

20. 1. Payment history:35% of Credit Score • FICO® Score considers this details on the accounts: • How late they were • How much was owed • How recently they occurred • How many there are • Good track record on credit accounts will increase FICO® Score

21. CREDIT SCORE! How long dodelinquencies stay?

22. Delinquencies on Credit Reports • Bankruptcies • Chapter 7, 11 & 1210 Years from filing date • Chapter 13 7 Years from the date paid, and 10 years if not completed • Paid Tax Liens* 7 Years from date released (paid) (For California State Residents Only: or 10 years from the date file) • Unpaid Tax Liens Remain on file indefinitely (For California State Residents Only: 10 years from the file date) • Late Payments 7 Years

23. Delinquencies on Credit Reports • Charge-offs 7 Years from 1st late pay • Judgments 7 Years from the date filed (For NY State Residents only: 5 years from the date filed) • Collections 7 years from the initial missed payment that led to the collection (For NY State Residents Only: 5 years from the date of last activity) • Inquiries 2 Years

24. 2. Amounts owed… 30% of Credit Score

25. 2. Amounts owed: 30% of Score • Amount owed on all accounts • Amount owed on specific types, such as credit cards and installment loans. • How many accounts have balances • How much of the total credit line is being used and other “revolving” credit accounts • How much of the installment loan amounts is still owed, compared with the original loan amount

26. 3. Length of credit history… 15% of Credit Score

27. 3. Length of credit history: 15% of Score • How long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts • How long specific credit accounts have been established • How long it has been since you used certain accounts.

28. 4. Types of credit in use… 10% of Credit Score

29. 4. Types of credit in use:10% of Credit Score • The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. • People with no credit cards tend to be viewed as a higher risk than people who have managed credit cards responsibly. • A closed account will still show up on your credit report, and its history will be considered by your FICO Score.

30. 5. New credit… 10% of Credit Score

31. 5. New credit:10% of Credit Score • It’s OK to request and check your own credit report • Don’t open new accounts to rapidly • How many recent inquiries you have • Length of time since credit report inquiries were made • How long it’s been since you opened a new account

32. Credit Score Components • Payment history • Amounts owed • Length of credit history • Types of credit in use • New credit

33. CREDIT SCORE! Now you know!