Everything You Ever Wanted to Know About Credit, but Were Afraid to Ask
What is Credit? Confidence in a purchaser's s ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.
Types of Credit Installment Credit (fixed amount) Student Loans Mortgage Loans Personal Loans Car Loans Revolving Credit (limited it amount) Credit cards Utilities Some equity loans The average consumer has 13 credit obligations on record.
Where Can I Find My Credit Report? is the website for your FREE credit report www.freecreditreport.com is NOT FREE!!
Credit Reporting Agencies Equifax P.O. Box 740256 Atlanta, t GA 30374 800-685-1111 www.equifax.com Experian P.O. Box 2002 Allen, TX 75013 888-397-3742 www.experian.com CHECK THESE VERY CAREFULLY!! TransUnion P.O. Box 2000 Chester, PA 19022 800-888-4213 www.transunion.com
Checking Your Credit Report Review all information carefully Every detail is important from the SSN to the individual account numbers Review your reports every year You can request all three at once or at different points in the eyear Check your student loans to make sure they are not counted twice Only 36% of Americans have checked their credit report in the last 12 months.
Credit Report - Example
Errors on Your Report
To Dispute Items Follow instructions from credit bureau Send written dispute letters Creditors have 30 days to provide proof If no reply within 30 days (plus mail time), ask to have negative credit removed If creditor proves cause for negative credit (even outside of 30 days), it may be reinstated Keep copies of everything!
Requesting a Fraud Alert Contact law enforcement and file a criminal report Contact any of the agencies they will alert the other two Fraud Alert 90 days Extended Fraud Alert 7 years Requires criminal complaint Can make it harder to receive credit
Identity Theft Credit and debit card fraud is the No. 1 fear of Americans in the midst of the global financial crisis. Concern about fraud supersedes that of terrorism, computer and health viruses and personal safety. Source: Unisys Security Index: United States, March 2009
Preventing Identity Theft Buy a cross thread shredder! Do not use your SSN on your license or as your password Do not keep PINs or passwords in your wallet Never give out personal information over the phone or online Check your credit card bills carefully Check your credit report annually
Identity Theft Protection What does an Identity Theft Prevention Service provide? Credit score Automatic fraud alerts Automatic fraud alert renewals Service guarantees or identity theft insurance for up to a certain amount Free annual credit reports and monitoring of those reports Legal help in case you encounter fraud or have your identity stolen Coverage of lost wages Removal from mailing lists Credit card monitoring However, not every service will provide every benefit! Do your research before signing i up!!
Identity Theft Protection Pros Cons Can provide legal support if needed You don t need to check your own reports Peace of mind Expensive False sense of security May be hard to end contract May not be needed
Credit Scores A credit score is a number representing a person s creditworthiness; the likelihood that person will pay his or her debt. Obtaining gyour credit score is NOT free unless you have been turned down for a loan or insurance because of the score.* *Wall Street Reform Act of 2010
FICO Score and VantageScore FICO Score is the traditional credit rating Fair Isaac & Company Scores range from 300-850 Used by most lenders VantageScore is a new credit rating product offered by the three credit reporting agencies Created in 2006 by Experian Scores range from 501-990 Includes letter grade
FICO Score and VantageScore Predict your risk to a potential lender Higher the score, lower the risk Determined by information provided to the different credit agencies Equifax TransUnion Experian Calculation l of score is proprietary information
FICO Score What s in your score: What s NOT in your score: Race/Ethnicity/Religion Age/Sex/Marital Status Salary, Occupation or Employment History Child Support or Alimony Responsibilities Location The average FICO score is 692.
FICO Scores % of Popula ation 30% 25% 20% 15% 10% 5% 0% National Distribution of FICO Scores 1 27% 18% 15% 12% 13% 8% 2% 5% up to 499 500-550 550-599 600-649 650-699 700-749 750-799 800+ FICO Score Range 1 http://www.myfico.com
VantageScore How it s measured: Stronger emphasis on the last two years of credit - better for younger people and immigrant populations Each agency uses a single formula, so scores should be consistent
VantageScore Averages VantageScore Averages 2 National 736 Highest State: Minnesota Lowest State: Texas Massachusetts 698 774 761 501 545 590 634 679 723 768 812 857 901 946 990 2 www.vantagescore.experian.com/scoreindex.html VantageScore Range
Credit Scores What can you do to increase your credit score? Pay your bills on time Reduce your overall debt Cancel unnecessary credit cards However, always keep your oldest line of credit open Ask lenders to reduce your high credit limits 33% of all consumers have had a payment late by 90 days or more.
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