5/16/2016

1

Darryl Dahlheimer, Program Director

LSS Financial Counseling – Conquer Your Debt®

888-577-2227 or www.ConquerYourDebt.org

LOAN RATES: Risk-based pricing means lower interest rates for higher credit scores.

680-700 score = 3.7% loan or $1382 per month on 30-year, $300,000 mortgage

620-640 score = 4.9% loan or $1592 per month ($210 extra/month = $2520/year)

EMPLOYERS AND LANDLORDS: sort through the quality and volume of applications for jobs and apartments, using lowest credit scores to toss out those applicants

INSURANCE RATES: also risk-based pricing, but 2015 Pew research study analyzing car insurance rates found that credit score now tops driving record in setting price

5/16/2016

2

Surest path: Mail in the form found at www.annualcreditreport.com

Use simple dispute letter to remove or update incorrect info

Dispute process often broken, so teach advocacy, escalating assertion tactics

www.naca.net has network of consumer attorneys specializing in FCRA rights

Fixing errors on your credit report is free and easy, though may need persistence

Send dispute letter in writing, keep a copy

FCRA requires bureaus to investigate within 30 days and report results to you

If error confirmed, report is corrected and updated

If not heard back within 6 weeks, follow-up letter

Do not use “credit repair” services (frequent use of fraud tactics such as file segregation or frivolous mass-disputes)

Do not use debt “settlement” services which result in bad legal and credit outcomes

> Reported as “settled for less than full balance” = very negative

> Typical coaching to “stop paying creditors” = faster creditor legal action

> Results in 1099 form when forgiven amount = taxable “income”

5/16/2016

3

o Your homebuyer dreamso Your age, race, color, religion, national origin, sex, marital statuso Your salary, occupation, employer or employment historyo Where you live or rental historyo Your banking history or interest rates being charged on each accounto Any criminal recordo Whether or not you are in a nonprofit debt management plan or credit counselingo Inquiries (requests for your report) that are from consumer, promotional, or admin

Payment history35%

Types of Credit 10% Inquiries

10%

Length of Credit History

15% Debt to Credit Limit

Ratio30%

What Makes Up Your FICO Score?

Main factors: pay on time, pay down debt

5/16/2016

4

Credit reports are free once/year, but FICO credit score costs FICO score $20 at www.myfico.com FICO score range estimator is free at www.myfico.com Vantage Score cost varies, order from the bureaus “Free scores” often are not FICO score, but “fake-o” – check to be sure

FICO score range 300-850 – and aim for 700 and up Vantage score range from 500-990 FICO much more widely used by creditors

Continually build new, good credit recordMake monthly payments on time, and pay more than the minimum required payment

Keep monthly balances under 30% of the credit limit (ideal = pay account in full each month)

Limit application inquiries (but mortgage and car loan inquiries in same month count as one)

Credit cards are fastest way to boost score, as debit cards don’t report to bureaus – use and pay in full

If unable to get a regular credit card, get secured credit card at local credit union or bank (not online)

Improve old, negatives on credit recordGet going on debt repayment with written payment plan or DMP and faithful monthly payment

On old debt, once paid off, write bureaus to show accounts as “paid in full, zero balance”

Avoid bankruptcy or debt “settlement” services unless absolutely buried in debt that can’t be paid

Time and effort can improve all credit reports

5/16/2016

5

Zombie debts and complexity of debt buyers and debt collectability

Identity theft issues and using MN Credit Freeze law to more quickly solve

Credit rebuilding after a bankruptcy, repo, or foreclosure