Credit Scores Credit Reports and Identity Theft

Sixty to seventy percent of GDP growth in the United States is a result of consumer spending.

Summarize the importance of consumer spending in the economy.

FICO score ranges from 300 to 850 740 - 850 = Excellent 680 - 739 = Good 620 - 679 = Fair 550 - 619 = Poor 300 - 549 = Bad

Define the FICO score ranges.

Consumers should examine their credit report regularly because they frequently contain errors. Reviewing your credit report is one of the ways to reduce the risk of Identity Theft.

2 reasons why consumers need to review credit reports.

1. Mysterious bank withdrawals 2. Failure to receive bills or mail 3. Merchants refuse your checks 4. Debt collectors calling about unknown debt 5. Unknown accounts appearing on your credit report 6. Receiving unknown medical bills 7. IRS notices of multiple tax returns or unknown income reported 8. Notice of data breach from your any business where you have a legitimate account - Ever hear of Equifax?

8 Signs of Identity Theft.

FICO Score is calculated using a formula that evaluates many types of information in the credit report at that credit reporting agency.

Briefly describe the FICO Score.

A credit score is a number that summarizes a person's credit risk based on an evaluation of his or her credit report at a particular point in time. Credit scores are calculated using a formula with four or more variables with various weightings. FICO scores (Fair Isaac Corporation) involve various credit scoring companies and many different credit scores.

Describe "credit scores" in general.

Gender, race, religion, nationality and marital status are not included in FICO scores.

Describe 4 factors that DO NOT influence FICO scores.

- Credit utilization = Keep credit balances low but not $0 - Credit history = Don't close accounts - Payment history = Pay all accounts on time - Limit Hard inquiries = Only apply for credit as needed - Good Credit mix = Have a good mix of credit types (cards, installments, mortgages) - Monitor your credit by getting free credit reports every year

Describe 6 simple ways for Managing Credit

- Charge card issuers expect payment of the full balance within 30 days - Charge cards generally charge annual fees - American Express is the most well-known charge card

Describe Charge Cards.

A person does not need to maintain a balance on Credit Cards. Having a balance as of the end of the payment cycle is counted toward utilization, paying it off at the end of each month does not lower your score. Having zero debt - that is, not using the credit line at all - does NOT help a person's credit score, which is an indication of how well the person handles debt.

Describe Credit Utilization for people who pay off the balance each month.

Equifax, Experian, and TransUnion joined together to create the VantageScore, in March of 2006. VantageScore attempts to improve on the FICO score by putting more weight on the past 24 months of credit history. It weighs payment history more than FICO.

Describe VantageScore.

- Payment History: 35% - Amount Owed: 30% - Length of Credit History: 15% - New Credit: 10% - Types of Credit Used: 10%

Describe how the FICO Score is broken down.

Secured loans are secured by collateral that may be repossessed if the loan is not repaid as agreed. Examples of secured loans are mortgages and automobile loans, where the house or car is considered collateral towards the debt. If the consumer defaults on the loan, the lender seizes the property.

Describe secured loans.

FICO joined with Equifax to use data from cable, cell phone, electric and gas bills to produce a score of credit worthiness for persons who would not have FICO scores otherwise. This alternative scoring system was intended to help people become "credit worthy"

Describe the FICO "ALTERNATIVE" SCORE.

What is the purpose of the FICO scoring system -- The FICO scoring system dramatically lowers the cost of borrowing and the cost of capital in the United States.

Describe the factors that influence Vantage scores.

An unsecured loan has no such collateral and is only backed by the borrower's promise to pay. Examples of unsecured loans are personal loans and non-secured credit cards. Secured loans are considered higher quality loans by lenders because of the collateral.

Describe unsecured loans.

Credit agencies are for-profit companies and not government agencies and they compile and maintain credit information from credit card companies, banks, mortgage companies, and other creditors for the purpose of creating a personal in-depth credit report on individuals.

Describe what credit agencies do.

Any negative information in the report that is incorrect can be "repaired". Correct (negative) information cannot simply be removed, this requires planning, due diligence, and persistence. Negative information in the report that is incorrect should be addressed immediately and in writing (limited to 100 words) to the credit reporting agency.

Discuss how to fix errors in credit reports.

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How can a consumer get free access to his or her credit reports.

File a complaint with the Federal Trade Commission at www.identitytheft.gov or the FTC Identity Theft Hotline at 1-877-438-4338 or TTY 1-866-653-4261.

How to File a complaint with the Federal Trade Commission.

Place a 'fraud alert' on the all credit records by contacting one of the 3 credit bureaus: - Equifax, www.Equifax.com, 1-800-525-6285 - Experian, www.Experian.com, 1-888-397-3742 - TransUnion, www.TransUnion.com, 1-800-680-7289

How to Place a 'fraud alert' on credit records.

Credit cards, home equity loans, home equity lines of credit, auto loans, other recreational vehicle loans, and appliance loans are all included in consumer lending or "credit types".

Identify 3 types of loans (credit types) that make up consumer lending.

There are three major credit reporting bureaus or agencies that collect credit information. - Experian: www.Experian.com - Equifax: www.Equifax.com - TransUnion: www.Transunion.com The three major credit reporting agencies are independent (for profit) companies and they each collect information in different ways.

Identify the three major credit reporting agencies.

1. Consistent, Timely Payments 2. More History on Accounts 3. No Late Charges 4. No payments that are 30/60/90 Days Late 5. Credit Utilization 6. No New Hard Inquiries 7. No Recently Closed Accounts 8. No Charge-Offs 9. No Liens, Judgements, Foreclosures 10. NO BANKRUPTCY

List 10 factors that positively impact FICO scores.

1. Significant Change in Utilization Rate 2. Child Support in Arrears 3. Wages being Garnished 4. New Hard Inquiries 5. Closing of Accounts 6. Opening New Accounts

List 6 factors that negatively impact FICO scores.

The two most well-known credit scores are - FICO - VantageScore

Name 2 different credit scores.

Hard inquiries Soft inquiries

Name 2 types of inquiries.

- secured credit card, - Loan with a co-signer, - Get a single purpose card (e.g. gas card), or - Get an automobile loan with a substantial down payment

Name 3 easy ways to establish credit.

1. Potential employers 2. Life insurance providers (and auto insurance, too?) 3. Potential landlords 4. Cell phone companies

Name 4 Other Users of Credit Information.

*Your clients think these items are indicated in their FICO Score, but these items are not included: 1. Pay raises 2. Credit inquiries (checking a credit report does not cause it to go down) 3. Paying down debt (paying off debts from late payments does NOT automatically increased credit score 4. Trending information: recent changes or trends in a person's finances over time are not reflected in credit score (it's a picture of a point in time)

Name 4 things NOT indicated Credit Score.

- Be SUPER SKEPTICAL about giving out your personal data and information, especially SS#. - CHECK CHECK CHECK financial information often (alerts, accounts, etc.). - ALWAYS ASK for your credit reports and review them regularly. - MAINTAIN and MONITOR your financial records.

Name 4 ways a person can protect themselves from becoming a victim of identity theft (SCAM).

1. File a report with law enforcement. 2. File a complaint with the Federal Trade Commission 3. Place a 'fraud alert' on credit records 4. Contact your financial institutions and close any accounts opened without permission (or have been tampered with). 5. Check the Social Security Administration earnings statement annually.

Name 5 things a person (who is a victim of identity theft) should do to protect themselves.

Free Access to credit reports and credit scores from the three national credit reporting agencies (US citizens).

Summarize THE FAIR CREDIT reporting ACT OF 1971.

Credit reports generally include... - Personal information - Credit account information - Inquiries: Hard and Soft - Delinquency information - Any information from collection agencies - Public information from state and other courts

Summarize the most important information in a credit report.

Quick, easy access to credit is a major source of economic strength and stability for consumers and businesses alike.

What is one benefit of the FICO scoring system

www.ssa.gov

Where to find Social Security benefits statement.