Building a Positive Credit Report

Presentation by Dr. Jean Lown

Financial Planning for Women April 11, 2012

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Overview

Credit Report How & why to get your free report

Credit Bureaus: The big 3 Credit Score

What it is How it is used What’s a ‘good’ score?

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What is a credit report?

Definition:

A continuing record of a borrower’s debt commitments and how well they have been honored.

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How do you build a credit history?

Time and good behavior Start with a low limit credit card

“You don’t have to carry over a balance, but you do need to use it.” –Rod Griffin, Experian

Small loan For vehicle?

Pay on time Use less than 50% of your credit limit

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Other ways to get credit

Use a co-signer Get a secured credit card Document proof of paying rent, utilities,

insurance, etc. as an alternative form of credit

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Who Can Look at Your Credit Report?

1. Creditors – new & current

2. Employers & prospective employers

3. Insurance companies

4. Government agencies

5. Anyone else with a legitimate business reason (i.e. landlords)

6. You

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What is in a Credit Report?

1. Identifying information Name, current & past addresses, SS#

2. Credit use information Active and inactive accounts Payment history

3. Public record information Criminal convictions, foreclosures, lawsuits

4. Inquiries by creditors & your applications for credit

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What to look for

Potentially negative items Open accounts: Status of accounts:

open/never late is good closed, past due, maxed out limit, etc.

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Find wrong information?

Contact credit bureau Report explains how to correct mistakes

Is it your mistake? Spouse could have taken on debt Company name is different than you

recognize but really your account Bought electronics, etc; store provides credit

through finance company

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Negative Information?

Can write 100 word explanation that goes out with credit report. legitimate reason for problem

Business went bankrupt due to 2008 crash lost job, was ill, etc.

Negative Information should be removed after 7 years 10 years for bankruptcy

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Close accounts you aren’t using?

Consider impact on credit score if your credit utilization ratio increases

Gradually close unused accounts

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CBs do NOT decide if you get credit!

Each lender makes a decision Lenders offer range of loan/card rates

based on your credit score Stay tuned to learn about credit scores

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Free Annual Credit Report

Get a free credit report once/year/credit bureau: Experian, TransUnion, Equifax: http://www.annualcreditreport.com 1-877-322-8228

Order 1 free report every 4 months to monitor for identity theft Mark calendar: April, August, & December

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Q on Credit Report?

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Credit Scores

Determines what you will pay for credit Higher score = lower cost credit http://www.myfico.com/HelpCenter/FICOScores/Curious.aspx

FICO=Fair Isaac Company http://www.fico.com 3 Scores: 1 for each credit bureau Average is 678; range from 300-850 Most scores are in the 600s-700s

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FICO Score

Score is based on: Payment history (35%) Outstanding loan balances (30%) Length of credit history (15%) Inquiries (10%) Types of credit (10%)

Variety is good: credit cards, vehicle loan, mortgage

Avoid finance companies

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Estimate your FICO Score

Range: 300-850 http://www.bankrate.com/calculators/credit-s

core-fico-calculator.aspx About FICO Scores:

http://www.myfico.com/Default.aspx (click on “About FICO Scores” near middle

of page)

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Be Aware of Scams

Debt relief companies Credit repair scams

Claims to repair your credit are just not true. Only time, effort and a plan to repay your

debt will improve your credit report.

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Summary

Order a free credit report today Educate yourself at FTC.gov Build a strong credit history Use credit cards prudently

2 cards are enough Pay in full at end of month or be a debt slave

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Resources Federal Trade Commission

http://www.ftc.gov/bcp/menus/consumer/credit.shtm

Credit reports & credit scores http://www.federalreserve.gov/creditreports/default.htm

Myfico.com Credit Education Center

http://www.myfico.com/CreditEducation/

Housing & Financial Counseling @ USU Family Life Center

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May 9 FPW & PF magazine give-away

The best mutual funds for your IRA Learn about Individual Retirement

Accounts Types of mutual funds

Specific funds selected by Advanced Family Finance class

Students have done the research They will recommend specific funds

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