Credit 101

Credit 101
 Your credit score is extremely important, because a variety of financial
decisions are based on your credit score model, such as:
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Being approved or declined for a loan/credit card
Whether you are required to put down a big deposit, small deposit or no
deposit at all
Whether you are required to put down a big down payment, small down
payment or no down payment for that car or mortgage loan
Whether you are offered a high or low interest rate for credit purchases
Better rates, and offers for credit cards or loans
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
3 Different types of Bureaus
 There are three different types of credit scores and they are
based upon the three different national credit bureaus.
 Each credit reporting agency has a different brand name for
their main scoring model:
 For Equifax, it is called the Beacon Score
 For Experian, it is called the FICO Score
 For Trans Union, it is called the Emperica Score
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How to Improve Your Score
 Payment History (about 35% of total score):
How have you paid your debts in the past? Specifically, how late you
payments were, how much was owed, how many late payments, and
how recently they occurred are all taken into account.
According to fair Isaacs, a 30-day late payment made just a month
ago will count more than a 90-day late payment made 5 years ago.
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How to Improve Your Score
 Amounts Owed (about 30% of total score)
How much is too much? While owing a lot of money on many
accounts might indicate that you are overextended, you score will
not necessarily be harmed by large outstanding amounts.
What is important is how many accounts have balances and how
much of the total credit line is being used on credit cards and other
"revolving accounts."
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How to Improve Your Score
 Length of Credit History
(about 15% of total score):
How established is your credit?
How long has your credit accounts been established?
How long since you used certain accounts?
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How to Improve Your Score
 New Credit (about 10% of total score) Even though this category
makes up only about 10% of the total score, applying for too much
new credit is probably one of the easiest ways for people to
inadvertently harm their credit score.
Here the scoring takes a look at how many new accounts you have
established, how long has it been since you have opened a new
account and how many recent requests have been made by credit
reporting agencies
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How to Improve Your Score
 Types of Credit (about 10% of total score)
Is it a healthy mix?
This factor takes into account your mix of installment loans,
mortgages, retail accounts, credit cards and finance company
accounts
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
7 Steps to Re-establishing Your Credit
1)
2)
3)
4)
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7)
Pay off your debts
Design a plan to manage your money
Pay with Cash
Obtain your credit report
Apply for secured credit
Apply for unsecured credit
Continue to educate yourself
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Adding your own statement to the file
 If investigation does not resolve the dispute to your satisfaction,
you may enter a statement of 100 words or less into your file
explaining why you think the record is inaccurate.
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Accurate negative Information
 When accurate negative information generally can
stay on your report for seven years
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
What is considered in your score
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Current balances on accounts: Accounts showing all payments were on time are
positive.
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Length of time accounts established: Long-established accounts are positive
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Bank revolving accounts: Lack of accounts, or too many can be negative.
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Reported delinquencies: Negative, especially if severe and recent.
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Number of accounts with balances: Too many credit card accounts may have a
negative effect on your score.
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Number of finance company accounts: Loans from finance companies may
negatively affect your credit score
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
What is considered in your score

Recent payment history: An insufficient credit history may have an effect on your score, but that
can be offset by other factors, such as timely payments and low balances
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Proportion of balance to your credit limit: If the amount you owe is close to your credit limit, that
is likely to have a negative effect on your score
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Number of recent inquiries: Not all inquiries are counted. Inquiries by you, or creditors who are
monitoring your account or looking at credit reports to make "pre-screened" credit offers are not
counted.
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No recent (non-mortgage) account balance information: Can be negative when seeking
mortgage loans
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Legal item filed or collection item reported: Negative, effect decreases with time. Accounts not
paid as agreed and/or legal item filed. Your score will be affected negatively if you have paid
bills late, had an account referred to collections, or declared bankruptcy
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Employment and residency: Longer time in your job and at your residence can help your score.
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
How will the credit bureau respond
to my dispute?
 “We have changed your credit file as requested.”
 Your credit file will not be changed because (reason).
 “The party involved did not respond, so the information is being
removed by reason of default.”
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Bankruptcy’s
 Bankruptcy will show up on your credit report as a
public record and may remain on your report for up to
10 years.
Each account included in the bankruptcy will show up
on your credit report as wither a “charge off” or a
“bankruptcy liquidation.”
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Sample statement of dispute
 “This is not my account. I have never owned money
to this creditor. Apparently a mistake was made in the reporting.”
 On (date), I moved to another address. I notified all creditors,
including (name of creditor) promptly. (Name of creditor) was
slow in changing my address in its file.
Subsequently, I did not received my billing statement for (how
long). Once I received the statement at my new address, I paid
this creditor.”
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Sample statement of dispute
 On (date), I was hospitalized at (facility).
The medical bills were forwarded to my insurance
company for payment.
My insurance company delayed in paying and the
hospital turned my account over for collection.
Afterwards, my insurance company paid the
hospital.”
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
Sample statement of dispute
 “Attention. Apparently someone has been using my identification
to obtain credit. Please verify with me at (phone number) prior
to the extension of new credit.”
 “During the period from” (beginning date) to (ending date), I was
laid off work without advance notice.
I have always paid my creditors promptly and satisfactorily prior
to and since that period. I am now gainfully employed an have
been with the same employer since (starting date).
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
What can I do to improve my score?
 Have you paid your bills on time?
 What is your outstanding debt?
 How long is your credit history?
 Have you applied for new credit recently?
 How many and what types of credit accounts do you have?
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177
For more information and to receive copies of the letters to dispute the errors on your
credit report
Email request to: [email protected]
Subject line: Please send me the Credit Letters Kit
Mr. / Mrs. (Your First and Last Name)
123 Any Street
City, State, Zip Code
I’m also interested in the following:
__ A FREE Comparative Market Analysis of my residential home
__ I’m looking to sell / buy my residential property in the next ____ weeks / months
__ Please contact me at (
) ________ - ________ wk / home /mobile
Paul Mirador
Realtor
[email protected]
www.PaulMirador.com
DRE# 01839177