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HEAVENS HARVEST

MINISTRIES – FINANCE NIGHT

Credit Score Rehabilitation

Presented by: Jennoa R. Graham, Ph.D.

Friday, May 10, 2013

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KEY TERMINOLOGY Income – Money that is received in

exchange for a product, service or contract agreement

Expense – Money that is paid out in exchange for a product, service or contract agreement

Credit – The act of borrowing money from a lender for the purpose of making a purchase without actual money exchanging hands.

Income – Expenses = Profit (Loss) or Surplus (Deficit)

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KEY TERMINOLOGY (CONT.) Credit (FICO) Score – A numerical value that

lenders use to determine risk (300-850). The higher the number, the lower the risk.

Fraud – Intentional misrepresentation or concealment of information in order to deceive or mislead (trick).

Tradelines – Loan specific details.

Derogatory – Belittle…extremely Negative Bankruptcy, Garnishment, Warrants

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OVERVIEW Define credit report and its purpose

How to obtain copies of credit report(s)

Review components of credit report

How to address discrepancies found on credit report

Tips to improve, monitor, and maintain credit score

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REPORT A credit report is a detailed history of all

credit related inquiries, payment and personal information used to determine credit score.

Applicant Information Fraud Indicators Profile Summary Credit Scores Trendlines Collection Records Recent Inquiries Public Records

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SCORE Credit (FICO) Score = Numerical Risk Value

Range: 300 - 850

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SCORE (CONT.) FICO is now the standard; there are

many others that will be phased out:FICO NextGen Score range: 150–950

VantageScore range: 501 – 990

Equifax credit score range: 280 – 850

Experian PLUS Score range: 330 – 830

Experian’s National Equivalency Score range: 360 – 840

TransRisk New Account Score range: 300 – 850

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COPIES There are three major reporting agencies

Equifax (www.equifax.com) Trans Union (www.transunion.com) Experian (www.experian.com)

Request credit report and/or scores from agency website…not all reports/scores are free

Free copies every 12 months from www.annualcreditreport.com Obtain copies from all three agencies May or may not include credit score

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COMPONENTS Applicant Information

Full name and any aliasesAll known addressesSocial Security NumberDate of birthEmployers

Fraud IndicatorsAny occurrence were applicant information

does not match lending company database checklist outside of tolerance

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COMPONENTS (CONT.) Profile Summary

Snapshot of total debt for quick assessmentBalances of all debtMonthly payments of all debt# of Inquiries for copy of report(last 6

months)Past Due, Revolving, Derogatory

Credit ScoreMay or may not be includedCheck credit agency website for details

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COMPONENTS (CONT.) Tradelines

CreditorsTypes of CreditorsDate Accounts OpenedCredit AmountsCo-SignersPayment Patterns (last two years)

Collection RecordsDetails of any debt that has been passed to

a collection agency (this is not a garnishment)

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COMPONENTS (CONT.) Recent Inquiries

Names of companies/individuals requesting a copy of your credit report Two year period Your request does increase this count

Inquiries can be blocked by freezing your credit

Public Records (City & State Courts)Bankruptcy Tax Liens Garnishments

Monies Awarded

Non-Money Awarded

Other Derogatory

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FREEZING REPORT This prevents anyone from accessing the

report without a Personal Identification Number (PIN)

Costs vary among state and credit agencies Check fees for Security Freeze and

Requirements on individual agency websites Freezing Placement Date Range Lift – for a specific purpose Permanent Removal Replacement PIN

As of April 29, 2013 fees are < $10 each

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DISCREPANCIES Address Right Away

Make a copy of page where discrepancy is located

Write a dated letter to agency and lender (if applicable) Clearly explain discrepancy and why it is

incorrect Clearly explain the correction or the correct

result Include your full name, current address, and

current phone number

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DISCREPANCIES Retain copy of letter and log date mailed

Refer to agency website for additional information

You should receive acknowledgement of the letter that includes a confirmation (or dispute) of correction If disputed write another letter. Keep fighting

until other options are providedRequest another free copy in 12 months to

verify correction was made

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TIPS - IMPROVE Pay all bills on-time

Pay rent/mortgage first

Limit yourself to one credit card and keep the balance low If you need more than one, open only as needed

Payoff debt as quickly as possible Avoid debt consolidation if you can

Address credit report discrepancies right away

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TIPS - MONITOR Obtain a free credit report/score every 12 months

Does not effect credit score Does increase the # of inquiries

DO NOT apply for a credit card just to check your score Just because you are approved does not mean you are

doing better or your score has improved

Monitoring programs are optional Recommended if you are an increased risk for fraud (i.e.

common name) and/or have a need to check scores more often than 12 months (monthly costs up to $50)

Use Security Freeze which is less costly (< $10 per occurrence)

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TIPS - MAINTAIN Keep improving.. Don’t stop

Set a monthly budget and long term financial goals…STICK to THEM

Share your goals with someone you trust and who will keep you motivated

Get help right away if there is a problem; Don’t let yourself get frustrated or overwhelmed

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TOOLS FOR THOUGHT CredAbility (www.credability.org)

Nonprofit Credit Counseling & EducationFree online classes

TheTruthAboutCreditCards (www.thetruthaboutcreditcards.com) Insightful information about credit cards

American Financial Solutions (www.myfinancialgoals.org/education/classes.htm)Money ManagementFree online classes

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REFERENCES Credit Consumer Counseling Service of Greater

Atlanta (2013). Retrieved April 23, 2013, from http://www.credability.org

Nelly, Good (2013). Understanding your Credit Report and its components. Retrieved April 29, 2013, from http://www.debt consolidationcare.com

Word Press (2013). Retrieved April 29, 2013, from http://www.thetruthaboutcreditcards.com

The American Heritage® Dictionary of the English Language (2009), Fourth Edition, Houghton Mifflin Company. Retrieved April 29, 2013, from http://www.thefreedictionary.com