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There are approximately 1,900 credit bureaus in the US; however, there are only 3 major bureaus: Equifax, Experian & TransUnion.
A credit score is often referred to as a Fair Isaac’s or FICO Score.
True or False?
FALSE. Closing a credit card account will often lower your available credit, which lowers your ratios and can raise the average age of your trade lines. Older accounts show stability and that you can handle credit wisely.
A) An average of your credit scores
B) Your highest credit score
C) Your lowest credit score
D) Your middle credit score
When reviewing credit, a mortgage underwriter looks at:
D) Your middle credit score from Equifax, Experian and Trans Union.
True or False?
FALSE. Having a low credit score may increase your property & casualty insurance rates (i.e. home & car rates), not your life insurance rates. P&C Insurance companies consider people with lower scores to be greater insurance risks and more likely to file frivolous insurance claims. So “if you don’t know insurance, know your insurance agent.”
True or False?
TRUE. A credit score does not consider income or an individual’s occupation; although a person with a high FICO Score with minimal income, will likely not qualify for a large mortgage or unsecured bank loan.
True or False?
FALSE. By law, a collection agency can keep on account on a credit report for seven (7) years, however, there is no minimum.
True or False?
TRUE. Opening a new account will often lower your credit score and raise the average age of your trade lines. Applying for too many accounts can be a sign of financial problems. Very few bankers are fired for not making a loan, they are fired for making a bad loan. It is better to raise the credit limit on your revolving accounts than apply for new ones.
True or False?
FALSE. If you lost your wallet or purse, it is better to lose a VISA or MasterCard because your liability is limited to $50. With a debit card, you can lose everything in your checking / savings account.
You should know all three (3) credit scores since different lending institutions use different credit bureaus to evaluate your credit. It is important to run your own credit report 2 times a year, not only to know your credit scores, but also to monitor activity on your account (such as the opening or closing of credit cards, unauthorized activity, unknown charges, new bank accounts, any past due payments, over the limit, identity theft, etc.)
A) 3 - 4
B) 5 - 10
C) Between 500 & 1,000
D) Over 1,500
D) Over 1,500. There are approximately 1900 credit agencies in the U.S. All purchase their information from the “BIG 3” and often tailor it to a specific industry (i.e. automobile dealerships, mortgage lenders, department stores, etc.)
A) $50.00
B) $500.00
C) $2,500.00
D) All of the above
A) $50.00. When reviewing credit, a Banker is typically more concerned about a small, unpaid debt rather than a large debt. Not paying a small debt is considered a choice. Someone may want to pay a large debt, but NOT have the ability to pay, is considered a condition. Bankers will often put the initials WNC (= Willful Non-Compliance) next to small accounts, if you have the ability to pay.
True or False?
FALSE. Having a low credit score can eliminate an applicant from being considered for employment; and is considered legal discrimination. If the applicant cannot handle their own finances, why would we let them work with our client’s money. AND if they do not handle money (someone in marketing or sales), will the employee (with poor credit) be distracted from performing their job, wondering about how to pay their mortgage, rent, make a car payment, etc.
________%, ________%, and ________%
FICO Scores get a medium size increase when a credit card balance is under 50% of their credit limit. The largest increase comes when your balance is under 30%; and there is a minor increase under 10% of the limit.
History _______%
Utilization _______%
Mix of Accounts _______%
Time Opened _______%
New Credit _______%
The 5 Primary Factors that influence FICO Scores are: Payment History (35%); Credit Utilization (30%); Time Open (15%); Mix of Credit (10%); and “New” Credit (10%); there are also sub-categories. It is easier to go from a “0” FICO Score to 600, than it is to go from 600 to a 700 FICO Score!
The 6th BIGGEST Factor that influence a FICO Score are inquiries. Too many inquires can cause your credit score to drop 10-50 points or more, in a single day.
True or False?
FALSE. All adverse accounts harm your credit, however, “NEW” items (0-24 months), are more damaging than older adverse accounts, because they’re weighed more heavily.
FICO (FAIR ISAAC’S CORP) Scoring is what over 90% of all banks, mortgage lenders, department stores, automobile dealerships, credit card companies, etc. use in decision making. Vantage 3.0 Scoring is a “knockoff” and is what Credit Karma provides to their clients for free.
True or False?
FALSE. Paying it improperly, harms your credit rating. Never pay a collection without a written agreement, and never pay with a credit card, a debit card, over the phone, with a cashier’s check or money order. Send a personal check with a restrictive endorsement, for your protection.
The BIG 3 are: Equifax, Experian, & Trans Union. LexisNexis is the 4th bureau, and is used by the other bureaus to report Public Records such as bankruptcies, judgments, tax liens, etc.
When a new credit card is issued, it’s often at a very low (or zero) APR. Use it frequently, it shows you deserve a high credit limit and can handle credit wisely; then take it down under 30%, to maintain your FICO Score.
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