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Basics Of The Credit Score. If winning isn't everything, why do they keep score? Vince LombardiAll right, everyone, line up alphabetically, according to your height. Casey Stengel. What Is A Credit Score?. A number that reflects your cre
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1. Credit Scores & Credit Reports: How The System Really Works Murphy Canyon Chapel
Military Saves Campaign 2009
Financial Readiness Symposium
Evan Hendricks, Editor/Publisher
Privacy Times February 24, 2009
2. Basics Of The Credit Score If winning isn't everything, why do they keep score? Vince Lombardi
All right, everyone, line up alphabetically, according to your height.
Casey Stengel
3. What Is A Credit Score? A number that reflects your credit worthiness at a given point in time.
The higher the score, the better the risk (Generally)
4. $150,000 30-Year, Fixed-Rate Mortgage 720-850 5.63% $864
700-719 5.75% $875
675-699 6.29% $927
620-674 7.44% $1,043
560-619 8.53% $1,157
500-559 9.29% $1,238
5. Mortgage vs. Auto Loans Excellent Marginal Poor
720-850 640-719 500-559
Mortgage
30-yr Fixed 5.5% 7.4% 8.1%
Home Equity 7.8% 9.3% 12.1
48-Month 5.2% 11.4% 17.2%
New Car Loan
48-Month 5.9% 12.0% 14.4%
Used Car Loan
6. Translation
$24,000 New Car (Financing)
Marginal 127% In Higher Interest = $3,300*
Bad Credit 255% In Higher Interest
= $6,700*
* More than one w/ Excellent Credit
7. Who Makes Them? 75% of Lenders Use FICO Model
Equifaxs Beacon (Multiple Versions)
Trans Unions Fico Classic
Experian/FICO Risk Model.
8. Who Else? (Knockoffs) TrueCredit (Trans Union)
PLUS (Experian)
Vantage Score
9. FICO Scoring Range 780-850 Low Risk
740780 Medium-Low Risk
690740 Medium Risk
620690 Medium High Risk
620 & Below High Risk or sub-prime.
500 & Below Fawgettaboutit
10. FICO Scoring Factors Payment History (35%)
Severity, Quantity & Recency of Delinquencies
Amount OwedExtent of Indebtedness (30%)
Ratio of Credit Balance To Credit Limit, How Much Owed?
Length Of Credit History (15%)
Type Of Credit (10%)
Inquiries (10%)
11. Payment History (35%) Track record with lenders. (Pay on Time?)
Length Of Positive Credit History.
(The longer the better.)
How Long Since Most Recent Negative Item?
Severe Unpaid Debts (Bankruptcy, Collections, Liens, Foreclosure)
Severity & Quantity of Delinquencies
(Pages 15-16)
12. How Much Do You Owe (30%) Ratio: Credit Balance vs. Credit Limit
Quantity of Credit Accounts
(Too many, Too Few? No Magic Number)
How Old Are Accounts?
How Long Since Youve Used Them
(Pages 16-17)
13. Length Of Credit History (15%) The Longer The Better
Specific Accounts
Total of All Accounts
14. Type of Credit (10%) Bank Credit Cards vs.
Store Charge Cards
Mortgages vs.
Finance Company Loans
15. New Credit Inquiries (10%) Designed To Catch Credit Sprees
Not Supposed To Penalize Mortgage, or Auto Loan Shopping (Page 20)
How Old Are Accounts?
How Long Since Youve Used Them
16. The Importance Of Being Recent