UNDERSTANDING YOUR CREDIT SCORE Whether you realize it

UNDERSTANDING YOUR CREDIT SCORE

Whether you realize it or not, your credit score is a very important aspect of your financial status. It can mean the difference between getting a loan and not getting a loan, and it can also affect the interest rate. Many of us do not understand how a credit score is calculated, or more importantly how, if your credit score is less than perfect, we can improve it.

Credit Scores range from 300 – 850 n A good score is 700 or better n A bad score is below 600 n Your score can affect a variety of things n

WH 0 LOOKS AT YOUR SCORE n n n Potential Lenders- Score determines interest rate Landlords Insurance companies Employers Any government agency

HOW YOUR CREDIT SCORE IS BROKEN DOWN n n n 35%=Payment History More weight is based on current pay history. Ex. 40% of credit weight consists of payment history over the past 12 months, 30% for 13 -24 months, 20% for 25 -36 months, and 10% in excess of 36 months. 30%=Credit Capacity A members score will be higher the lower a members debt level is compared to available credit. 15%=Length of Credit The more years with credit history the better. 10%=Accumulation of debt in the last 12 -18 months, especially the number of inquiries made and opening dates. 10%=Credit mix Installment debt raises scores while revolving debt will lower a score. Also, the higher number of finance company loans, the lower the score.

ACTIONS THAT HURT YOUR SCORE n n n Missing payments Credit cards at maximum limit. Keep balances below 75% of available credit Shopping for credit excessively Opening up numerous accounts in a short period of time Having more revolving loans Borrowing from finance companies

BEST WAYS TO IMPROVE YOUR SCORE n n n Pay down credit cards Do not close all of your credit cards Continue to make payments on time Slow down on opening new accounts Acquire a solid credit history Move revolving debt to “installment debt”

HOW FAST DOES MY SCORE CHANGE? Your score can change on a monthly basis n In a three month period only 1 person in 4 Has a 20 point or more change § Bankruptcy or late payment lower your score quickly § Inquires lower your score by around 5 points § Check your score every 6 -12 months n

HOW CAN I GET MY SCORE? If you are turned down for credit n Equifax- www. equifax. com n www. myfico. com n

MANAGING DEBT n n n n Assess your situation Understand your spending Create a budget Reduce your expenses Find a low-cost credit card (average family has $7000. 00 in credit card debt, pay out $1000. 00 per year in interest Consider consolidating your bills Talk to a debt Counselor Check on your credit

WARNING SIGNS OF DEBT n n n n You don’t have any savings Making minimum payments on credit cards You have 3 or more major credit cards Near credit limit Taking cash advances to pay bills Don’t know how much debt you have Declined for credit

LENDERS LOOK AT YOUR DEBT n n n Debt to income ratio- 40% Large scale debt such as your home should be no more than 20% of your income Credit Collateral Purpose

n n n Stop Incurring Debt Don’t expect Miracles Plan for the future!!!!!

SAVING MONEY Experts recommend saving 3 -6 month salary n Save at least 10% for retirement n Set savings goals n

ACCOUNTS YOU CAN USE TO SAVE n n n Savings account Money Markets Christmas Clubs Vacation Clubs Pay-roll deduction or direct deposit Do not use checking accounts

Retirement Savings 401 k Plan n IRA’s- Roth and Traditional n Annuity n

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