score some points understanding and raising your credit score
TRANSCRIPT
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Welcome!
Introductions
Objective:
Learn about the importance of credit scores, what is a credit score, what impacts your score, and what actions you can take to raise it.
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Nearly 80% of credit reports
contain an error!
25% of credit reports contain at least one
serious error!
Source: Federation of State Public Interest Research Groups
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Why our credit score matters
It comes into play whenever we try to:• Get a mortgage• Rent a house or apartment• Buy or lease a car• Secure a credit card• Apply for a job
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What’s a credit score, anyway?
A rating to indicate how much credit risk we pose
Used by lenders, insurance companies, landlords and employers
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FICO® scores
FICO® Fair, Isaac and Company Developed the software used by most credit bureaus to calculate a credit
score
FICO® scores is the most commonly used credit rating
Credit scoring is a quick, objective & consistent method for lenders to measure the “risk” of an applicant Scores based solely on information in consumer credit reports
maintained at the credit reporting agencies (Experian, TransUnion & Equifax)
The higher the score, the lower the risk, a FICO score is a constant work in progress
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Credit Score Scale Chart
Credit Score Rating
760-850 Excellent
700-759 Great
660-699 Good
620-659 Fair
580-619 Poor
579 and below Very poor
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Factors behind each score
Payment history 35%
Amounts owed 30%
Length of credit history 15%
New credit 10%
Types of credit in use 10%
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The higher our credit score, the lower our loan payments
30-year fixed mortgageLoan amount $200,000
Credit score Annual percentage rate
(national average)
Monthly payment
760-850 4.419% $1,004700-759 4.641% $1,030
680-699 4.818% $1,052
660-679 5.032% $1,078
640-659 5.462% $1,131
620-639 6.008% $1,200
Source: myfico.com – rates as of 1/25/11; for illustrative purposes only
($196 more than the lowest monthly payment or $70,560 over the life of the loan)
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Personal Action Plan
Action Step When Done
Action Item!Create your own Personal Action Plan throughout this presentation.
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1. Check our credit reports
Once every 12 months, get a free copy of your credit report from each major agency
Check reports before applying for a new job, mortgage or other big loan
Dispute errors with the Credit Reporting Agency (CRA) and the lender
• Go to AnnualCreditReport.com or 1-877-322-8228• Tip: order a free report from a different agency every four months
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2. Know our score
At least once a year, when ordering one of your free reports from one of the Credit Report Agencies, also buy one of your credit scores
Or, buy your credit scores anytime at myFICO.com
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3. Raise our score
Payment History – 35% • Pay bills on time• Get current and stay current
Amount Owed – 30% • Pay down debt do not shift it• Installment is better than revolving
Length of Credit History – 15%• Keep long-running credit card accounts open• Avoid opening a lot of new accounts within a short time frame
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3. Raise our score (continued)
Types of Credit in Use – 10% • Maintain a good mix of credit• Apply for only what you need
New Credit – 10% • If we’ve had problems, re-establish our credit history• Avoid opening new accounts that we don’t need• It’s ok to check your credit
Fix errors on credit reports
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4. Monitor our reports and scores regularly
Every four months, order a free credit report from one agency
At least once a year, buy your credit score from one agency
Take action, if necessary
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Credit Reporting AgencyContact Info
AnnualCreditReport.com or 1-877-322-8228
Equifax.com or 1-800-846-5279
Experian.com or 1-888-EXPERIAN (397-3742)
TransUnion.com or 1-800-888-4213
myFICO.com
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Personal Action Plan
Action step When Done
Close at least 1 unused credit card Next 3 days
Check your credit report and credit score from at least one agency
Next 7 days
Take action to start raising your score Next 14 days
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Charter One Legal Disclaimer
The information presented in these materials are intended and written to be educational only. This presentation is not intended or written to be relied on for tax or legal advise. We are not in the business of providing tax or legal advice. Please seek advise based on your particular situation from an independent tax or legal advisor.
Member FDIC. Equal Housing Lender. Charter One is RBS Citizens, N.A.