fico score defined what the score means fico score statistics your score and saving money factors...
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FICO Score Defined
What The Score Means
FICO Score Statistics
Your Score and Saving Money
Factors Determining the FICO Score
Reason Codes
Credit Score Weights
Don’t Let Credit Scores Be An Obstacle
Letter Templates to Correct Inaccuracies
Mortgage Services
Raising Your Credit Raising Your Credit ScoreScore
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Building CreditBuilding Credit
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Credit Score DefinedCredit Score Defined
• A statistical model that evaluates and compares credit data from millions of consumers which in turn applied complex mathematical formulas to determine whether a consumer will default on their loan obligation in the future.
• There are multiple Scoring Models for each Bureau.
• The Models are applied to a consumer’s credit data within the particular bureau to try to determine whether a consumer will be a good payer or a bad payer.
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What The Score MeansWhat The Score Means
• Each score is specific for each Bureau.
• Score predicts chances of default.
• Scores range from 300 to 850 for Classic FICO,
150-950 for NextGen.
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What The Score MeansWhat The Score Means
• The higher the score the less the odds of default.
• The score is generated by analyzing the
information contained in the consumer’s credit
report at THAT point in time.
• Credit scoring software has no memory.
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What The Score MeansWhat The Score Means
Odds of a Consumer becoming 90 days late or more on a loan:
SCOREAbove 800760-799720-759700-719680-699660-679620-659500-600
Below 500
ODDS1292:1597:1323:1123:155:138:126:18:1
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Scoring StatisticsScoring Statistics
Home Financing: 30 Year Fixed with a loan principal amount of $150,000
FICO Score
720-+680-719620-679560-619500-559
APR Rate
5.986%6.523%7.673%8.452%9.234%
Monthly Payment
$898$950
$1,067$1,148$1,232
InterestPaid
$173,271$192,134$233,378$263,378$293,619
If your FICO score ranges between 500-559, you could benefit by improving your credit profile.
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Your Score and Saving Your Score and Saving MoneyMoney
How improving your credit score could save you money.
If your score improves to 720-850, you could save an additional $124,672If your score improves to 680-719, you could save an additional $120,347If your score improves to 620-679, you could save an additional $101,485If your score improves to 560-619, you could save an additional $ 59.625
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Factors Determining Your Factors Determining Your ScoreScore• The more recent the delinquency, the more of a negative
effect• Date of last activity determines score effect• Pay-off collections in escrow, not before• Past due’s destroy a score. Bring current immediately• 30 days late last month worse then 90 days 3 years ago• Paying a charge-off or a lien won’t help or hurt unless it
occurred within past 24 months• Negative information not considered in the score during
an investigation
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Factors Determining Your Factors Determining Your ScoreScore• Make sure your credit limit is being reported.• Do not close credit cards except in certain
circumstances.• Share outstanding debt among many cards. Below 40%
of credit limit on ALL cards.• Keep credit separate from spouse –
• One maxed, both maxed• One delinquent, both delinquent
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Factors Determining Your Factors Determining Your ScoreScore1. Past delinquency
2. The way credit has been used
3. Age of the credit file
4. Number of times a person asks for credit
5. Your mix of credit
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Reason CodesReason Codes
1. Ranked in order of importance
2. Shows where consumer lacks in scoring categories
3. Identify items in report and try to remedy
4. Don’t only focus on late payments when trying to increase your score
5. Codes are a number or a letter followed by a brief description
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Credit Score WeightsCredit Score Weights
• 35% payment history, collections, public records• More recent, more negative effect• More derogatory, more negative effect• Weight given pertaining to derogatory
information (serious delinquency, charge-off, repossession, foreclosure & bankruptcy.)
• Missing high payments
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Credit Score WeightsCredit Score Weights
• 30% outstanding balances carried on account• Ideally should be below 10%• Better to spread over a few cards rather than on one
card• Get letters from creditor faxed stating balance• Don’t pay off while 30 days late, may not update• Score does not distinguish between business and
personal cards• An authorized user is treated as if it’s a joint account
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Credit Score WeightsCredit Score Weights
• 15% length of credit history• Hold onto old credit cards, even if rate is not
great.• The longer the history the better• Children should piggyback off parents cards
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Credit Score WeightsCredit Score Weights
• 10% types of credit• 3 to 5 revolving credit cards is optimal• Mortgage Account raises score• Car loan raises score• News credit temporarily decreases the score of a
month unless unrated status goes away• Equity lines of credit are treated as credit cards
when the amount is low.
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Credit Score WeightsCredit Score Weights
• 10% Inquiries• Multiple auto/mortgage inquiries treated as one
inquiry if within 14 days of each other• Inquiries affect the score for one year• Score is only reduced for the first ten inquiries• Personal, promotional, insurance and account
review inquiries don’t count• Inquiries can cost between 2-50 points on score• 30 day buffer period before mortgage and auto
inquiries count
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Credit Score Weights Credit Score Weights RecapRecap• 35% Payment history, collections, public records
• 30% Outstanding balances being carried on account
• 15% Length of credit history
• 10% Types of credit
• 10% Inquiries
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Don’t Let A Don’t Let A CreditCredit Score Be An Score Be An ObstacleObstacle
• Get an annual FREE credit report to review your account and correct inaccuracies
• Each score is specific for each bureau and the median score is used • TransUnion• Fair Issaic• Equafax
• Send explanation letters to fix inaccuracies• Ask for credit limit increases every 6 months
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Minimum Scoring Criteria for Minimum Scoring Criteria for Traditional FICOTraditional FICO
• At least one trade line updated in past 6 months
• In existence for at least six months on report for
score to generate
• Collection does not count
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How To Build CreditHow To Build Credit
• Authorized User
• Deposit $1000 in savings account
• Ask for loan and use balance to secure
• Take that loan money and go to a new bank
• Wait six months, apply for gas card
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Increase Your Credit ScoreIncrease Your Credit Score• Pay off Credit Cards but do not close
• Ask for credit line increases
• Ask lenders for courtesy adjustment
• Make sure limit is being reported
• Hold onto old credit cards
• Get a mortgage
• Spread balances evenly
• Apply for as little credit as possible
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Alternative Sources of Alternative Sources of CreditCredit• Payment history from Rentals
• Payment history from Telephones
• Payment history from Utilities
• Membership payment history
• Checking and debit activity• Deposit activity• Number of Bounced Checks• Payroll Advances
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Mortgage ServicesMortgage Services
All Closings Attended Network of lenders to guarantee the most
competitive rates Team of professionals who fully supports you
and will guide you through every step of the loan process
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Questions?Questions?Call or email me today Call or email me today
for answers to your loan questions!for answers to your loan questions!
I’m here to help you get the home I’m here to help you get the home of your dreams…of your dreams…
Mortgage ConsultantMortgage ConsultantMark Hairston512-472-3500