Understanding Your Credit

Part of the FIT Women workshop series offered byThe Family Resource Center.

Sponsored in part by:The NH Charitable Foundation and

The Women’s Fund of NH

Credit Score vs.

Credit Report

Credit Score

• A snapshot - a moment in time

• Changes frequently

• Is determined by a complex formula (not always within your control)

• Not free unless using www.creditkarma.com or similar site to obtain

• Shows a pattern of behavior

• Covers a longer period of time than a credit score

• Can be used by potential landlords and creditors to decide your ability to pay your bills on time

Credit Profile or Payment History

Credit Scores and the Credit Bureaus

• The number range of the three major reporting bureaus vary as follows:

Credit Agency Range– Equifax 300 to 850– Experian 340 to 820– Trans Union 150 to 934

• FICO scores have a range 300 – 850• Vantage scores range from 501 - 990

Source: Informa Research Services through www.myfico.com Interest rates accurate as of December 14, 2011

Credit is a valuable financial asset

See for yourself how much a good FICO® score can save you on a 30-year fixed mortgage of $150,000 in New Hampshire:

FICO® score APR [?] Monthly payment *

760-850 3.685% $689

700-759 3.910% $708

680-699 4.089% $724

660-679 4.306% $743

640-659 4.741% $782

620-639 5.293% $832

Interest with score between 620 and 639 = $149,629.82 With a score between 680 and 699 total interest = $110,582.66.

A lower score could cost you an additional $39,047!

Your Credit Score:• 35% - Payment History• 30% - Amounts Owed• 15% - Length of Credit History• 10% - New Credit Applications• 10% - Types of Credit Used

Start Where You ARE…

Learn how to review your credit reports for errors or problems

Get your FREE Credit Report atwww.annualcreditreport.com

BEWARE…It is NOT at freecreditreport.com

Correct inaccurate information as soon as possible

How To Correct Reporting Errors

11 Credit Report Mythswww.bankrate.com

1. Paying my debts will instantly fix my credit report. A credit report is a history, not a snapshot in time

2. Credit Counseling always destroys my credit score. If debts are negotiated with lenders for a lesser amount, this can be seen as past due on your report, depending on the lender. Remember taxes may be owed on any amounts “forgiven”.

3. Canceling credit cards boosts my score.

This used to be the case, now it is better to keep cards open for the increased credit limits they provide.

4. Too many inquiries hurt my score. Again, this was the case in the past, however if you will be searching for a mortgage or a car loan, shop around within a 30-day period and it will only count as one “hard” pull.

11 Credit Report Myths continuedwww.bankrate.com

5. Checking my own credit hurts my standing. When you pull your own credit it is a “soft” pull and does not affect your score.

6. Credit scores are locked in for 6 months. This is a snapshot in time that changes frequently.

7. If I pay my bills on time there is no need to check my credit report. 80% of all credit reports have at least one error and you won’t know unless you check and review it.

8. All credit reports are the same. It would be nice if all three reporting bureaus show the same accounts and information, however this is rarely the case.

11 Credit Report Myths continuedwww.bankrate.com

9. A divorce decree automatically severs joint accounts. Divorcing parties must contact creditors to close accounts or sign to have one name removed. If the lender sees the party responsible as unable to pay, they may not agree to remove the other name.

10. Bad news comes off in 7 years.

Some of it does, like Chapter 13 bankruptcy which reorganizes your debt. Chapter 7 however, won’t come off for 10 years (exoneration of all debt.)

11. I can always pay someone to repair or fix my credit. If there is incorrect information, this can be corrected. However, if the information is true and accurate, that is a hard fact that cannot be changed.

Credit-All-Better!

When does your credit report get clean?

• Negative information such as late payments, collection accounts and foreclosures or repossessions stay on your report for 7 years.

• Bankruptcy for 7 - 10 years• Judgments or liens 10 years• Inquiries 2 years

Know Where You Stand Now

Calculate your net worth

Make the Change

• Commit to pay your bills on time• Create a spending/saving plan and

stick to it• Today is a new day-put yesterday

behind you and begin to improve your credit

• Once you begin to pay your payments on time your credit score and report will improve

If you are committed to making a change, you can make it happen!