Credit Report Basics and Tips

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1 Give me a little credit What you need to know to put your credit reports and scores to work for you Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian.

2 Credit report basics What a credit report is, where it comes from and how it works 2

3 The three national credit reporting companies Credit reporting companies serve consumers and businesses by making possible: Instant credit Lower-cost credit Nationwide credit Widespread availability Account management 3

4 The credit cycle You pay lender Credit reporting companies share with new lenders Lender updates records Lender shares history with credit reporting companies 4

5 The players in the credit cycle Credit reporting companies The government You Lenders Risk score modelers 5

6 Fact or Fiction Credit reporting companies decide whether a an application should be approved or declined. Fiction 6

7 Credit reporting companies are like libraries Credit reporting company clients check out information If they have a permissible purpose under the law 7

8 The Fair Credit Reporting Act Permissible purposes Open or manage credit accounts Offers of credit Employment purposes Underwrite insurance A business transaction initiated by the consumer Court order or federal jury subpoena Valuation of risk of an investor Eligibility for government license Disclosure to consumer 8

9 What s in a credit report? Identifying information Account information Public record information Inquiries Dispute instructions 9

10 Initiating a dispute Recommend getting a report directly from Experian but no longer required Toll-free number on report gives you access to customer service Report number identifies you and your record You and customer service representative will be looking at the same information in the same order Dispute online, by telephone or by mail Upload all supporting documents for your dispute: Dispute must be specific 10

11 Processing a dispute Credit reporting company verifies with the source of the information (creditor or court) Must allow up to 45 days for processing Source verifies, corrects or updates Secure, encrypted electronic system is used Creditors required to report corrections to all databases Consumer can add statement of dispute if issue is not resolved with source 11

12 Fact or Fiction Paying a collection account will reset the 7 year deletion period. FICTION 12

13 How long is information kept on a report? Open accounts in good standing Closed accounts in good standing Late or missed payments Collection accounts Civil judgments Chapter 7 bankruptcy Chapter 13 bankruptcy Unpaid tax liens Paid tax liens Credit inquiries Indefinitely 10 years 7 years 7 years 7 years 10 years 7 years 10 years 7 years 2 years 13

14 What s NOT in a credit report? Credit reporting companies do not store: Criminal background Medical information Buying habits / transaction data Assets and bank account information Credit scores 14

15 Credit rehabilitation and maintenance Rebuilding your credit report and keeping it in shape to get the credit you need when you need it 15

16 Fact or Fiction Paying rent on time can help you build a good credit history. FACT 16

17 Rental payment history data What is it? United States Population On-time as well as late payments Bad checks and/or insufficient funds (NSF) Unfulfilled lease terms Outstanding balances/write-offs Previous collections activity Why is it important? 96 million of 300 million U.S. residents rent Rental payments not previously on credit report 64 million U.S. consumers insufficient/no credit history Consumers rejected with good payment history Owners 69% Renters 31% 17

18 Rental data Increases scoreable population Rental payment information improves scores for existing consumers and helps score previously unscoreable consumers New Consumers RentBureau 60 consumers 50 Scorable 68% Unscorable 32% No hit 22% Percent % of new consumers are scoreable Thin file 10% No act. 24 mos Learn more at 18

19 CBA Reporter, Business Reporter, and Access Overview 2013 Credit Builders Alliance, Inc. Some rights reserved. CREDIT BUILDERS ALLIANCE and the accompanying Logo are trademarks of Credit Builders Alliance, Inc. Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. This information is not intended as legal, financial, or other advice, and you and your clients should consult qualified advisors before making any decisions. CBA does not represent that any of the 19 This document is licensed under a Creative Commons Attribution-Noncommercial-Share Alike License (US/v.3.0). Noncommercial uses are permitted on the condition that you include an attribution to Credit Builders Alliance. If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. More information regarding the license is at: Requests for permissions beyond the scope of the license should be directed to Credit Builders Alliance, Inc., at

20 Why Credit Building? Increases Access & Options What and how much we pay for credit How we store & manage our money How we get around Where we live The cost of household/ personal needs 20

21 Why Credit Building? Catch-22 21

22 Introduction: Who is Credit Builders Alliance? To create innovative solutions for asset building organizations helping low- and modest income households build credit and financial access. Good Credit is an Asset Mission driven nonprofits and other entities are uniquely positioned to help the households they serve build credit as an asset often the FOUNDATIONAL asset. 22

23 Good Credit is an Asset What is Credit Building? Credit Repair = fixing negative history Credit Counseling = dealing with current crisis Credit Building opportunities for = creating the future 23

24 From CBA Members: Product Models of Success Credit Builder Products can serve many different people and purposes. 24

25 CBA s Credit Builder Platform Reported to consumer and business credit bureaus every month by over 160 members CBA Reporter CBA Rent Reporter CBA Business Reporter CBA Access For financial counseling, underwriting & outcome tracking in the last 12 months 25

26 Get Started with CBA! For more information CBA Reporter Team

27 Credit scores What you need to know to have winning numbers 27

28 Fact or Fiction 0 is a perfect credit score. FACT 28

29 What is a credit score? Used instead of a manual score sheet Valuable risk management tool Many different models, with many different scales available from many different sources Credit reporting companies often apply the model selected by the creditor when delivering the credit report; however, the credit scoring model, or formula, is proprietary to the developer and is not known by the credit reporting company

30 Where to get your credit scores When you request your free annual credit report: From the websites of the national credit reporting companies and risk score modelers From online education sites From your lender if you have had adverse action taken or not received the best terms available 30

31 Fact or Fiction Paying a collection account will immediately improve credit scores. FICTION (For Now) 31

32 Risk factors are the key Generated when a risk score is calculated Tell the consumer what to address in their credit history to become more creditworthy Are largely consistent from model to model Are included in or described in an adverse action notice Experian provides risk factors to consumers with the scores it provides through its direct-to-consumer services 32

33 VantageScore VantageScore 3.0 Characteristics Contributions Recent Credit, 5% Available Credit, 3% Depth of Credit, 21% Payment History, 40% Balances, 11% Utilization, 20% 33

34 Portrait of a Credit Rockstar What do people with the best credit scores look like? Surveyed five categories of consumers: Super Prime Deep Subprime VantageScore 3.0 Six key credit score components Age of accounts Number of accounts Revolving account balances Utilization Inquiries Delinquency 34

35 It never pays to be late Delinquency Super Prime Prime Nonprime Subprime Deep Subprime None (%) days (%) Most recent* *in months 35

36 Don t push the limit Utilization Super Prime Prime Nonprime Subprime Deep Subprime Revolving Util. (%) Installment (%)* *Installment non-mortgage paid-down 36

37 Automated risk scores: There is no silver bullet Time is the key. You can t fix the number. Address the risk factors and every risk score will improve. 37

38 Centralized source for free reports One every twelve months Single contact point Telephone Mail Internet Fee for credit score disclosure 38

39 Experian Education Resources On the Web Free annual FACT Act credit report Access to free report from each of the three credit reporting companies Experian Ask Experian advice column, sample consumer report, frequently asked questions Credit trends and information to inspire consumers to use credit wisely Electronic versions of our published materials, sample credit report, videos, PowerPoint presentations with talk notes and more 39

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