credit scoring 101 education

UNDERSTANDING CREDIT SCORING

Basic Credit Scoring Webinar

From Data Facts, Inc.with Blake Higgins and Susan

McCullah

TOPICSWhat is a credit score

Why a credit score is importantWhat makes up a credit score

Commonly asked questionsTrue! False! Maybe!

What is a Credit Score?

QUESTION!!

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5 Factors that Make up a Credit Score

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35%: Payment History

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30% Amounts Owed

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15% Length of Credit History

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10% New Credit

the number of new hires who did well in the interview whoMortgage

loan

Installment loans

Retail accounts

Creditcards

= Mix of credit (10%)

ADDITIONAL CREDIT

INFORMATION

QUESTION!!

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Rate Shopping

Because a mortgage is a major purchase, the bureaus allow a window of time for borrowers to “rate shop” and have their credit pulled multiple times without it affecting their credit score.

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The score ignores all mortgage in

the prior 30 days and auto

inquiries made in the 15 days prior.

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All those inquiries are counted as just 1 inquiry

LATE PAYMENTS

So How Bad Does it Hurt?

Experian's National Score Index study showed that the average credit score for U.S. consumers with no late auto payments is nearly 100 points higher than those who have at least one late payment. The national average credit score for consumers with no late auto payments is 703, while the average score for consumers with at least one late payment is 605.

www.experian.com

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COLLECTIONS

Dealing with old collections as a means to raise someone’s credit score can actually have a negative

impact on a person’s credit score. This is because it will bring the “DLA” current, and the impact of that

collection will be felt all over again.

Therefore, the proper time to deal with collections is as at closing, if possible.

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True…False…Maybe

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Negative information on my credit report will eventually fall

off…

Source: www.myfico.com

TRUE

7 years for Late Payments, Chapter 13 bankruptcy, foreclosures.

7 years for most Collections, depending on the age of the debt being collected.

7 years for Public records, although unpaid tax liens can remain indefinitely

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Becoming an authorized user will increase your credit

score…

Source: www.myfico.com

MAYBE….Becoming an authorized user on the account of someone who maintains a low balance and pays their bills on time WILL help to increase your score.

However, if the main account holder maxes out their credit card or pays late, being an authorized user can DECREASE your score.

Make sure the person has a very low balance and no late payments for the last 7 years before becoming an authorized user on an account.

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It’s best to close as many accounts as

possible to get your score higher…

Source: www.myfico.com

FALSEThis is because of a person’s "credit utilization ratio“ which looks at a person’s total used credit

in relation to the total available credit.

The higher this ratio, the more it can negatively affect a person’s credit score.

So, by closing an old card, some of the available credit is wiped out, increasing the credit utilization

ratio, which can LOWER the score.

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My credit score will drop if I apply for new

credit…

Source: www.myfico.com

MAYBE……It depends on the inquiry type. Most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders. Typically, these are treated as a single inquiry and will have little impact on the credit score.

However, if you apply for several credit cards within a short period of time, multiple inquiries will appear on your report.

Looking for new credit can equate with higher risk which could drop a score.

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A poor score will follow me

Forever…

Source: www.myfico.com

A score is a “snapshot” of risk at a particular point in time. It changes as new information is added to credit bureau files.

Past credit problems impact credit scores less as time passes.

By following today’s tips, a person can

eventually increase their scores, and qualify for lower interest rates.

FALSE!

Are You Using 00000000 ??

“Lenders using Credit Xpert as an integral part of their loan origination

process are closing

30% moreLoans each month!”

This means…If you close 6 loans per month at $200,000

each0000000000000 can help you save 2

additional loans that you are losing because of credit scores

Over a year’s time, you will close $4.8 million more loans!

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We offer three exciting CreditXpert productsCredit Assure: Automatically scans the credit report on the front end for opportunities to raise the consumer’s credit score

Credit Essentials: Determines the best actions to take to maximize an applicant’s credit scores, returning specific recommended actions.

What-if simulator: Powerfully simulates both pre-defined scenarios and custom scenarios, helping make informed decisions and uncovering new opportunities.

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Thank you for Attending!Join us for “Advanced Credit Scoring” on

Wednesday, August 17th at 2pm CDT

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