CREDIT HISTORY & SCORES
CREDIT REPORTS 3 Credit Bureaus receive and maintain
information on consumers: Experian
TransUnion
Equifax
Get a copy of your credit report from www.anualcreditreport.com
One free copy per year from each credit bureau.
Reports contain 4 categories of information
Identification and Employment
Payment History Inquiries Public Records
Information stays on your report for 7 years.
What is not in your credit report?
checking or savings accounts bankruptcies that are more than 10 years old, charged-off or debts placed for collection that
are more than seven years old gender, ethnicity, religion, political affiliation,
medical history, or criminal records. your credit score.
Building bad credit history
Look at the sample credit report. Identify 5 items that suggest this person is a high risk borrower.
Building good credit history
What can this person do to improve her credit?
CREDIT SCORES
A credit score = number used by a lender decide if you qualify for credit/loans
• It is used to determine the rates and terms of your loans.
Why is credit scoring used?
• It is fast
• Scores are based on data and statistics
• They are unbiased and nonjudgmental
• It is a reliable tool to indicate risk
Credit Score Range
• Your score ranges from 300 to 850, but the majority of scores fall within the 600s and 700s.
Higher scores indicate a lower credit risk.
The breakdown
How your score impacts your APR
How to improve your score
• Keep account balances low
• Pay bills on time• Don’t open credit
cards/accounts you don’t need
• Have credit cards, but manage them responsibly
• Closing an account doesn’t make it go away
Strategies for Debt
If you have gotten yourself in debt trouble….• Develop a savings of $300 before paying down
debt (continue to make minimum payments)• Make a chart with cards, limits, amounts, and
APR’s• Attack the card w/ highest APR - pay minimum
on others, pay extra on highest APR• Pay it off, close it if applicable, move on to the
next highest APR.
Bankruptcy
Chapter 7 “fresh start”• Wipes out debt (not child support, student
loans, criminal restitution, court fines)• Qualify: must show income less than the
median income of WA. In 2010 it was $49,124.
• Must demonstrate that you can’t pay the debt (file budget sheet)
Bankruptcy
Chapter 13
• Filed by people who can pay back a part of the debt but want to protect their assets
• Make a Good Faith plan that involves payments that last 36 to 60 months.
• Must commit disposable income to pay back debts.