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Building Credit

Building Credit. 512-472-3500 (office) 512-472-3563 (fax). Raising Your Credit Score. 512-472-3500 Mark Hairston. CLICK ON THE ARROW TO ADVANCE OR CLICK ON THE UNDERLINED LINKS. Credit Score Defined.

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Building Credit

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  1. Building Credit 512-472-3500 (office) 512-472-3563 (fax) Raising Your Credit Score 512-472-3500 Mark Hairston CLICK ON THE ARROW TO ADVANCE OR CLICK ON THE UNDERLINED LINKS

  2. Credit Score Defined • A statistical model that evaluates and compares credit data from millions of consumers which in turn applied complex mathematical formulas to determine whether a consumer will default on their loan obligation in the future. • There are multiple Scoring Models for each Bureau. • The Models are applied to a consumer’s credit data within the particular bureau to try to determine whether a consumer will be a good payer or a bad payer.

  3. What The Score Means • Each score is specific for each Bureau. • Score predicts chances of default. • Scores range from 300 to 850 for Classic FICO, 150-950 for NextGen.

  4. What The Score Means • The higher the score the less the odds of default. • The score is generated by analyzing the information contained in the consumer’s credit report at THAT point in time. • Credit scoring software has no memory.

  5. What The Score Means Odds of a Consumer becoming 90 days late or more on a loan: SCORE Above 800 760-799 720-759 700-719 680-699 660-679 620-659 500-600 Below 500 ODDS 1292:1 597:1 323:1 123:1 55:1 38:1 26:1 8:1 Live with Parents!

  6. Scoring Statistics Home Financing: 30 Year Fixed with a loan principal amount of $150,000 FICO Score 720-+ 680-719 620-679 560-619 500-559 APR Rate 5.986% 6.523% 7.673% 8.452% 9.234% Monthly Payment $898 $950 $1,067 $1,148 $1,232 Interest Paid $173,271 $192,134 $233,378 $263,378 $293,619 If your FICO score ranges between 500-559, you could benefit by improving your credit profile.

  7. Your Score and Saving Money How improving your credit score could save you money. If your score improves to 720-850, you could save an additional $124,672 If your score improves to 680-719, you could save an additional $120,347 If your score improves to 620-679, you could save an additional $101,485 If your score improves to 560-619, you could save an additional $ 59.625 www.mortgagesourceoftexas.com

  8. Factors Determining Your Score • The more recent the delinquency, the more of a negative effect • Date of last activity determines score effect • Pay-off collections in escrow, not before • Past due’s destroy a score. Bring current immediately • 30 days late last month worse then 90 days 3 years ago • Paying a charge-off or a lien won’t help or hurt unless it occurred within past 24 months • Negative information not considered in the score during an investigation

  9. Factors Determining Your Score • Make sure your credit limit is being reported. • Do not close credit cards except in certain circumstances. • Share outstanding debt among many cards. Below 40% of credit limit on ALL cards. • Keep credit separate from spouse – • One maxed, both maxed • One delinquent, both delinquent

  10. Factors Determining Your Score • Past delinquency • The way credit has been used • Age of the credit file • Number of times a person asks for credit • Your mix of credit www.mortgagesourceoftexas.com

  11. Reason Codes • Ranked in order of importance • Shows where consumer lacks in scoring categories • Identify items in report and try to remedy • Don’t only focus on late payments when trying to increase your score • Codes are a number or a letter followed by a brief description

  12. Credit Score Weights • 35% payment history, collections, public records • More recent, more negative effect • More derogatory, more negative effect • Weight given pertaining to derogatory information (serious delinquency, charge-off, repossession, foreclosure & bankruptcy.) • Missing high payments

  13. Credit Score Weights • 30% outstanding balances carried on account • Ideally should be below 10% • Better to spread over a few cards rather than on one card • Get letters from creditor faxed stating balance • Don’t pay off while 30 days late, may not update • Score does not distinguish between business and personal cards • An authorized user is treated as if it’s a joint account www.mortgagesourceoftexas.com

  14. Credit Score Weights • 15% length of credit history • Hold onto old credit cards, even if rate is not great. • The longer the history the better • Children should piggyback off parents cards

  15. Credit Score Weights • 10% types of credit • 3 to 5 revolving credit cards is optimal • Mortgage Account raises score • Car loan raises score • News credit temporarily decreases the score of a month unless unrated status goes away • Equity lines of credit are treated as credit cards when the amount is low.

  16. Credit Score Weights • 10% Inquiries • Multiple auto/mortgage inquiries treated as one inquiry if within 14 days of each other • Inquiries affect the score for one year • Score is only reduced for the first ten inquiries • Personal, promotional, insurance and account review inquiries don’t count • Inquiries can cost between 2-50 points on score • 30 day buffer period before mortgage and auto inquiries count

  17. Credit Score Weights Recap • 35% Payment history, collections, public records • 30% Outstanding balances being carried on account • 15% Length of credit history • 10% Types of credit • 10% Inquiries

  18. Don’t Let A Credit Score Be An Obstacle • Get an annual FREE credit report to review your account and correct inaccuracies • Each score is specific for each bureau and the median score is used • TransUnion • Fair Issaic • Equafax • Send explanation letters to fix inaccuracies • Ask for credit limit increases every 6 months

  19. Minimum Scoring Criteria for Traditional FICO • At least one trade line updated in past 6 months • In existence for at least six months on report for score to generate • Collection does not count

  20. How To Build Credit • Authorized User • Deposit $1000 in savings account • Ask for loan and use balance to secure • Take that loan money and go to a new bank • Wait six months, apply for gas card

  21. Increase Your Credit Score • Pay off Credit Cards but do not close • Ask for credit line increases • Ask lenders for courtesy adjustment • Make sure limit is being reported • Hold onto old credit cards • Get a mortgage • Spread balances evenly • Apply for as little credit as possible

  22. Alternative Sources of Credit • Payment history from Rentals • Payment history from Telephones • Payment history from Utilities • Membership payment history • Checking and debit activity • Deposit activity • Number of Bounced Checks • Payroll Advances

  23. Mortgage Services • All Closings Attended • Network of lenders to guarantee the most competitive rates • Team of professionals who fully supports you and will guide you through every step of the loan process

  24. Questions? Call or email me today for answers to your loan questions! I’m here to help you get the home of your dreams… Mortgage Consultant Mark Hairston 512-472-3500 mark@mortgagesourceoftexas.com

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