Credit Scores Credit Reports and Identity Theft

Name 4 things NOT indicated Credit Score.

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

- 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.

Describe Charge Cards.

- 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 6 simple ways for Managing Credit

- 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 how the FICO Score is broken down.

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

Name 3 easy ways to establish credit.

- 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

List 10 factors that positively impact FICO scores.

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

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

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.

8 Signs of Identity Theft.

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?

Name 4 Other Users of Credit Information.

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

List 6 factors that negatively 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

What is Familiar Fraud.

1.5 million consumers were victims of familiar fraud, which means the victim knew the criminal.

A credit report does not include

A credit report does not include information about pay raises, checking or savings accounts, brokerage accounts, bankruptcies that are more than 10 years old, gender, ethnicity, religion, political affiliation, medical history, criminal records

Describe "credit scores" in general.

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.

Contrast Debit Card, Credit Card, and Charge Card.

A debit card transfers funds out of your account immediately. Charge cards are expected to be paid within one month. (Amex is #1 Charge Card) Credit cards allow for extended payment for charges with interest.

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

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 unsecured loans.

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.

Discuss how to fix errors in credit reports.

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.

Compare FICO score and VantageScore

Both the FICO score and the VantageScore are used by merchants and lenders to extend credit. FICO has been around for much longer than VantageScore and is used more often. The two scores had different ranges but now they are aligned with VantageScore 4.0. Both scores use similar factors. However, VantageScore puts more weight on the last 24 months of credit history.

Describe the C&P (chip and pin) technology.

C&P (chip and pin) technology inserts an embedded computer chip into the card and it creates a unique number for each transaction. Also requires a pin to approve any charges. The C&P card is superior to the magnetic stripe and sign card and it's used in most of the world outside of the U.S. United States banks have resisted C&P technology because of the cost, but we are currently adopting because it helps to reduce fraud.

Discuss the benefits of Good Credit Scores related to Car Loans.

Car loans and credit cards generally require lower minimum FICO scores than mortgages loans. FICO PR say that a score of 760 will get the best rates and terms.

2 reasons why consumers need to review credit reports.

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.

Describe what credit agencies do.

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.

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

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".

Summarize the most important information in a credit report.

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

Describe VantageScore.

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.

Explain how a Credit Application and Credit Score work together.

Even with an excellent credit score, you may not be approved for a loan by a particular lender. Lenders use income, employment, and other criteria in addition to the credit score to determine credit approval. However, lender obtains this key information not from a credit score or credit report but from the credit application filled out by the person applying for the loan/credit.

Briefly describe the FICO Score.

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

Describe the FICO "ALTERNATIVE" SCORE.

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"

FICO score

FICO score estimates the level of future credit risk.

Define the FICO score ranges.

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

How to File a complaint with the Federal Trade Commission.

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.

Discuss the benefits of Good Credit Scores related to Mortgage Loans.

For mortgage loans, a score of around 700 is good for conventional loans, and 620 points for FHA loans.

Summarize THE FAIR CREDIT reporting ACT OF 1971.

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

Describe 4 factors that DO NOT influence FICO scores.

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

Discuss the benefits of Good Credit Scores related to cost of credit.

Good credit scores get the borrower better terms: down payment, term of loan, points, and interest rate for the credit or loan. The best scores will vary based on the type of debt and the lending environment.

Name 2 types of inquiries.

Hard inquiries Soft inquiries

Compare the costs of credit based on Credit Scores

Lower credit score will cost borrowers more money over the life of their loans. Borrowers with lower credit scores are typically charged a higher rate of interest on loans compared to borrowers with higher credit scores.

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

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

What is one benefit of the FICO scoring system

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

The Justice Department acronym SCAM stands for.

S = Be Stingy and skeptical about giving out personal data and information. C = Check financial information often (alerts, accounts, etc.). A = Ask for credit reports and review them regularly. M = Maintain careful records.

Describe secured loans.

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.

Summarize the importance of consumer spending in the economy.

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

Explain how easy to damage credit score vs. what it takes to improve it

Small negative factors can quickly damage your credit score. Improving your credit score takes a lot of time, persistence, and discipline.

Name 2 different credit scores.

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

Identify the three major credit reporting agencies.

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.

Describe VantageScore

VantageScore was created by the three major credit bureaus (Equifax, Experian, and TransUnion) to make credit scoring more consistent and accurate across all of the bureaus. The VantageScore puts more weight on the past 24 months of credit history.

Describe the factors that influence Vantage scores.

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.

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

https:

5 Factors in FICO Score

payment history, amount of credit and credit utilization, length of credit history, mix of credit types, new credit or new accounts

Sources of fraud or identity theft include.

stolen wallets, breaches of computer data, stolen Social Security numbers

Where to find Social Security benefits statement.

www.ssa.gov