The ONE SOURCE for all your credit reporting needs
It is important to remember that a consumer’s credit report
does not exist, until it is requested.
Then, the various trade lines, public records, addresses (and
personal information), employments, and aliases , are
gathered, based on the information provided by the requestor.
Thursday, October 10, 2013
Bad checks. Civil judgements. Multiple addresses.
1
☟
2
Thursday, October 10, 2013
Many people do not realize they do not have a credit report, until one is ordered.
Your data is just 1s and 0s in a computer.
The information from your inquiry is used to gather the data for a credit report.
If you do not give enough or if you give incorrect information then you will get an incomplete or incorrect report.
2
Credit Education Credit Reports
What’s In Your Credit Report
en Español
Email This
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically
the same categories of information. Your social security number, date of birth and employment information are used to
identify you. These factors are not used in scoring. Updates to this information come from information you supply to
lenders.
Identifying Information.
Your name, address, Social Security number, date of birth and employment information are used to identify you.
These factors are not used in scoring. Updates to this information come from information you supply to lenders.
Trade Lines.
These are your credit accounts. Lenders report on each account you have established with them. They report the
type of account (bankcard, auto loan, mortgage, etc), the date you opened the account, your credit limit or loan
amount, the account balance and your payment history.
Inquiries.
When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries
appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report
within the last two years. The report you see lists both "voluntary" inquiries, spurred by your own requests for
credit, and "involuntary" inquires, such as when lenders order your report so as to make you a pre-approved credit
offer in the mail.
Public Record and Collection Items.
Credit reporting agencies also collect public record information from state and county courts, and information on
overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage
attachments, liens and judgments.
Thursday, October 10, 2013
| About Us | Press Room | E-Mail Signup | Business Solutions | Terms of Use | Privacy Policy
Copyright ©2001-2005 Fair Isaac Corporation. All rights reserved.
3
Credit Education Credit Scores
What is Not In Your Score
en Español
Email This
FICO® scores consider a wide range of information on your credit report. However, they do not consider:
Your race, color, religion, national origin, sex and marital status.
US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the
exercise of any consumer right under the Consumer Credit Protection Act.
Your age.
Other types of scores may consider your age, but FICO scores don't.
Your salary, occupation, title, employer, date employed or employment history.
Lenders may consider this information, however, as may other types of scores.
Where you live.
Any interest rate being charged on a particular credit card or other account.
Any items reported as child/family support obligations or rental agreements.
Certain types of inquiries (requests for your credit report).
The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to
check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a
“pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with
them. Requests that are marked as coming from employers are not counted either.
Any information not found in your credit report.
Any information that is not proven to be predictive of future credit performance.
Whether or not you are participating in a credit counseling of any kind.
ome | About Us | Press Room | E-Mail Signup | Business Solutions | Terms of Use | Privacy Policy
Copyright ©2001-2005 Fair Isaac Corporation. All rights reserved.
4
Thursday, October 10, 2013
Your score will not be affected by any thing not in the credit report and if the data has not been proven to be
predictive of future credit performance.
4
Experian / Fair Isaac
Corporation
Risk Score overview
© Experian 2003. All rights reserved. Confidential and proprietary.
Experian and the Experian marks herein are service marks or registered trademarks of Experian
Thursday, October 10, 2013
5
5
The ONE SOURCE for all your credit reporting needs
CREDIT SCORING
Interest Rates, Down Payments, Loan Points, Deposits (on purchases or for apartment rents),
or Insurance Premiums all may be determined by your CREDIT SCORE.
There are many types of Scores. The most commonly used is Fair Isaacs or FICO.
Experian Fair Isaacs scores range from 840 down to 350, with 840 as a high and best score. Fair
Isaac and other services will offer up to 5 reasons for reducing the score. Scores of 800 and higher
will often only have one or two reasons for reducing the score.
If your financial institution does not report your good payment record, then your score is probably
lower than it would be if they reported your loans.
Fair Isaacs looks at the following to determine your score.
!
•Payment History (35%)
!
•Outstanding debt (30%)
!
•Length of credit history (15%)
!
•Recent inquiries on the report(10%)
!
•Types of credit in use (10%)
© Experian 2002. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
6
Five Elements Information are used to
calculate your credit score
♦ Payment History
♦ Amounts Owed
♦ Length of Credit History
♦ New Credit Inquiries
♦ Types of Credit in Use
Length of Credit History
15%
Amounts Owed
30%
New Credit Inquiries
10%
Types of Credit in Use
10%
Payment History
35%
7
Thursday, October 10, 2013
In the FICO models, v2, v3, v4, & v8, there are 5 elements. Each are weighted differently.
Payment History is 35%, Amounts Owed is 30%, Length of history is 15%, New inquiries are 10%
and Types of Credit is 10%.
7
Two Universal factors are used to
calculate your credit score
♦ TIME - Time is factored in to all elements of the score.
♦ SIZE - Size of the file affects all of the elements of the score
8
Thursday, October 10, 2013
What many people do not understand is that both Time and Size are factored in to each of the 5
elements.
8
Benefits of credit scores

Consistent –
same data equals same decision

Objective –
no underwriter bias

Fast

Accurate –
looks at all relevant data
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
9
Benefits of the Experian / Fair Isaac Corporation model allow clients to reduce credit losses while maintaining or
even growingacceptance rates. Effectively balance risk and revenue to increase profitability.
Increase volume and make faster, more objective and consistent decisions in applicantsʼ screening and account
management areas. Provide faster customer service in accept / decline or cross-sell, pricing and other
account
management strategies.
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
10
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
11
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
These are the Exclusion Codes for FICO models
12
Design objective

Accounts that will exhibit good payment behavior in the future
score higher than those that will exhibit bad payment behavior

To maximize the “separation” between
“goods” and “bads”
Future
goods
Percent
of
population
Future bads
Low
Score
High
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
The primary goal in the design and development of the Experian / Fair Isaac Corporation Risk Model is to
achieve superior predictive power. By assessing the elements of a credit report today, the score is designed
to predict the likelihood that this consumerʼs credit report will show good or bad credit behavior in the future.
If one could indeed look into the future, one could observe whether this consumer would exhibit “good” or
“bad” payment performance. The extent to which todayʼs score separates those that will be good versus
those that will be bad, indicates the power of the scoring system.
13
Better credit decisions
Through more refined
risk assessment

Acquisition and solicitation

Maximize marketing budget

Match offers to risk level
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
14
Credit bureau scores are used at decision areas across the entire account life cycle. These decision areas include: account
acquisition, new account origination and account management.
Targeting prospects – Who is my target customer, and how do I interest him / her in my product?
Credit bureau scores are used in prescreening solicitations and in cross-selling, to help determine to whom and what type of offers
of credit shall be made. Names are either provided from purchased lists or from credit bureau extracts. In the case of cross-selling,
the names come from a lenderʼs list of accounts. Scores are generally combined with other decision criteria, including credit data
or demographic data, some of which may be in the form of another type of score. When acquiring entire portfolios, credit bureau
scores are used to score each account in the portfolio to evaluate the overall credit quality of the portfolio to be purchased. A tape
is sent to the credit bureau with the names and addresses of all the accounts in the portfolio.The resulting distribution of scores is
then analyzed to determine the overall quality of the portfolio.
Types of information used
Tradelines
Age
Credit related
inquiries
Address
Collections
Income
Public
records
Gender
Considered
Employment
Marital status
Not considered
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
The predictive variables (or characteristics) that are used in scoring evaluate all areas of the credit report that
are visible to you except the identifying information.
Trade line, inquiry, collection and public record information are all examined by the Experian / Fair Isaac
Corporation Model score system.
15
Score calculation

Calculated based on
current Experian file

Scores range from 300s to
850 with higher score
representing lower risk

Up to five score factor
reasons returned with
every score to explain
why score not higher

Order of score factor reasons demonstrates relative
impact

Score factor reasons may be used for adverse action
notification and customer service
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
Up to four reason codes are returned with the Experian / Fair Isaac Corporation Risk Model score obtained
from online or account management modes.
These reasons are provided for use in adverse action notification. The score reasons are determined from
the predictive variables in the scorecard with which a report was scored. The reasons chosen correspond to
the variables where the difference between the maximum score (on that variable) and the score received by
the credit report (on that variable) is the greatest. The score reasons are displayed, in order from greatest
to least score differences.
16
Inquiry treatment

Only consumer-initiated, creditrelated inquiries are evaluated

Inquiries have become less
important factor than in
the past

Unique treatment of auto and
mortgage related inquiries to
better reflect the current lending
environment
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
17
Inquiry de-dupe logic
12 months
Score date
**
*
14 day de-dupe
**
30 day buffer

The credit bureau risk score models observe inquiries over a
12-month period

Auto- and mortgage-related inquiries that occur 30 days prior
to scoring have no effect on the score

Outside this 30-day period, auto- and mortgage-related
inquiries that occur within any 14-day period are treated as a
single inquiry
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
To better accommodate consumer shopping behavior, the Experian / Fair Isaac Corporation Risk Model
incorporates a 30-day buffer and a 14-day de-duplication period.
The 30-day buffer indicates that all auto and mortgage related inquiries within 30 days from the time of
scoring are ignored in the score calculation at that time.
Following the 30-days, the inquiries will be treated by the de-duplication rule. All auto and mortgage related
inquiries occurring within a 14-day period are collapsed and treated at a single inquiry.
18
Inquiry de-dupe and buffer period
Type
Number of
days ago
Dept store
68
Counted as
one inquiry
Mortgage
65
Mortgage
56
Counted as
one inquiry
(De-dupe
within 14
days)
Auto
17
Auto
9
Auto
8
Not
counted
(Ignore
within 30
days)
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
So, in the example above, the three auto inquiries that occur 30 days prior to scoring are ignored.
It is assumed that the consumer is rate surfing for an auto loan.
Prior to the 30 days before scoring, we see two mortgage inquiries occurring within a 14-day period.
The Experian / Fair Isaac Corporation Risk Model treats these as one inquiry, again to not penalize the
consumer for rate surfing or rate shopping behavior.
Non-auto and mortgage inquiries, such as the department store inquiry above, are still counted as single
inquiries and are not subjected to this de-dupe and buffer logic.
19
From:
Subject:
Date:
To:
Reply-To:
"myFICO Customer Care" <[email protected]>
myFICO Contact E-Mail - I have a question about my FICO score [Incident: 120105-000274]
January 9, 2012 6:33:55 PM CST
[email protected]
"myFICO Customer Care" <[email protected]>
Recently you requested personal assistance from our on-line support center. Below is a summary of your request and our response.
Thank you for allowing us to be of service to you.
Subject
myFICO Contact E-Mail - I have a question about my FICO score
Discussion Thread
Response Via Email (Ron)
Dear Larry,
01/09/2012 04:33 PM
I apologize we did not answer your question the first time. I hope the following will help. Looking for a mortgage, auto or student loan
may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the
score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the
inquiries won't affect your score while you're rate shopping. If the inquiries are not listed as being mortgage, auto or student loan, then
each inquiry will individually impact the score.
<
Regards,
myFICO Customer Care
www.myFICO.com
FICO (NYSE:FICO) delivers superior predictive analytics solutions that drive smarter decisions. The company's groundbreaking use of
mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products
are marketed. 90% of the largest banks use your FICO® credit score for credit decisions.
Question Reference #120105-000274
Category Level 1: FICO Scoring Questions
Date Created: 01/05/2012 09:29 AM
Last Updated: 01/09/2012 04:33 PM
Status: Solved
Unique Customer Id: 9999
Amount Refunded:
QM_Y/N:
[---001:001287:63824---]
20
Thursday, October 10, 2013
This is an e-mail I received from myFICO.com.
Please note what FICO says about each inquiry!!
20
^
^
^
<
<
<
<
<
Thursday, October 10, 2013
These are samples of inquiries from different members.
Look at the reasons for the inquiry. FICO uses them to help determine the credit score.
Capital One and Ford Credit are not using a purpose code, so FICO does not know it is an auto inquiry.
21
<
<
<
<
Thursday, October 10, 2013
Notice Morton Comm Bank. All inquiries go through Factual Data and are reported as a LBP
(Legitimate Business Purpose. ) FICO is unable to correctly score files when the incorrect purpose is
used.
ADP/Motoworld pulls reports as an unsecured loan.
Better Banks and Farmers State Bank pulled reports correctly, using the purpose code.
22
Thursday, October 10, 2013
Yellow show the impact of the Attributes ie: 2 bank card trade lines reduces your score by 10
3-4 trade lines with 0 balance reduces your score by 15 points
Green shows the most points you can receive
23
Thursday, October 10, 2013
Payment History shows how bad credit has less affect on the score as time passes.
Pursuit of credit - - 3 inquiries in the last 6 months knocks 35 points off
0 inquiries and you get 70 points added.
24
Thursday, October 10, 2013
25
Fico Scoring Explanation
You start with a score of approximately 850. The agencies then use a formula that deducts the points for each
reason shown above that applies to your credit. It is designed to take points away. Borrowers with perfect credit will
still have deductions. The credit bureaus do not disclose the entire process of calculating your credit score. The
sample deductions below are the only part of the formula that is publicly disclosed. Mortgage credit reports usually
show the top four deductions. A mortgage lender will look at the section with the credit scores and pick the middle
score. Not an average of the three...the middle score. This is your score for home loan purposes. The middle score in
this sample is 769. This is an example of excellent credit.
Sample Bureau Score Information On Credit Report
Credit Bureau Source, Credit Score
List of top four deductions
XPN - Experian / Fair, Isaac Model 780
-10 Proportion of balances to credit limit too high
-14 Length of credit history is too short
-08 Too many recent inquiries last 12 months
-09 Too many accounts opened in last 12 months
< High Score
TUC - Trans Union / New Empirica 761
-05 Too many accounts with balances
-28 Number of established accounts
-10 Proportion of balances to credit limit too high
-12 Length of revolving credit history is too short
< Low Score
12/27/05 4:00 PM
ngChart.htm
EFX - Facta Beacon 769
-04 Too many bank or national revolving accounts
-10 Proportion of balances to credit limit too high
-05 Too many accounts with balances
-32 Lack of recent installment loan information
Thursday, October 10, 2013
The following credit bureaus provide the credit scores to lenders:
Experian
P.O. Box 2002
Allen, TX 75013-3742
< Middle Score
Page 2 of 4
26
Credit Education Credit Scores
Credit Education
Facts & Fallacies
Credit Scores
What’s in Your Score
What’s Not in Your Score
How Scoring Helps You
en Español
Email This
Fallacy: My score determines whether or not I get credit.
Fact: Lenders use a number of facts to make credit decisions, including your FICO score. Lenders look at information such
as the amount of debt you can reasonably handle given your income, your employment history, and your credit history.
Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to
you although your score is low, or decline your request for credit although your score is high.
Fallacy: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point in time. It changes as new
information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle
credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when
you submit a credit application, so they have the most recent information available. Therefore by taking the time to
improve your score, you can qualify for more favorable interest rates. See how improved scores can lead to savings.
Improving Your Score
Facts & Fallacies
Credit Reports
What’s in Your Report
How Mistakes Are Made
Checking Your Report
Average Credit Statistics
Credit Inquiries
Calculators
Fallacy: Credit scoring is unfair to minorities.
Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not
included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when
issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people
with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who
have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay
as agreed.
Fallacy: Credit scoring infringes on my privacy.
Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application
and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for
less information - fewer questions on the application form, for example.
Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple
requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate
with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short
period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.
Glossary
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Copyright ©2001-2005 Fair Isaac Corporation. All rights reserved.
Thursday, October 10, 2013
27
Credit Education
Improving Your FICO® Score
Credit Scores
What’s in Your Score
What’s Not in Your Score
How Scoring Helps You
Facts & Fallacies
Credit Reports
What’s in Your Report
How Mistakes Are Made
Checking Your Report
Average Credit Statistics
Calculators
Glossary
Email This
It’s important to note that raising your score is a bit like losing weight: It takes time and there is no quick fix. In fact,
quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. See how much money you
can save by just following these tips and raising your score.
Payment History Tips
Improving Your Score
Credit Inquiries
en Español
Pay your bills on time.
Delinquent payments and collections can have a major negative impact on your score.
If you have missed payments, get current and stay current.
The longer you pay your bills on time, the better your score.
Be aware that paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years.
If you are having trouble making ends meet, contact your creditors or see a legitimate credit
counselor.
This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your
score will get better over time.
Amounts Owed Tips
Keep balances low on credit cards and other “revolving credit”.
High outstanding debt can affect a score.
Pay off debt rather than moving it around.
The most effective way to improve your score in this area is by paying down your revolving credit. In fact,
owing the same amount but having fewer open accounts may lower your score.
Don't close unused credit cards as a short-term strategy to raise your score.
Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower score.
Length of Credit History Tips
If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
New accounts will lower your average account age, which will have a larger effect on your score if you don't
have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
New Credit Tips
Do your rate shopping for a given loan within a focused period of time.
FICO® scores distinguish between a search for a single loan and a search for many new credit lines, in part by
the length of time over which inquiries occur.
Re-establish your credit history if you have had problems.
Opening new accounts responsibly and paying them off on time will raise your score in the long term.
Note that it's OK to request and check your own credit report.
This won't affect your score, as long as you order your credit report directly from the credit reporting agency or
through an organization authorized to provide credit reports to consumers.
Types of Credit Use Tips
Apply for and open new credit accounts only as needed.
Don't open accounts just to have a better credit mix - it probably won't raise your score.
Have credit cards - but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will raise your score.
Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit
cards responsibly.
Note that closing an account doesn't make it go away.
A closed account will still show up on your credit report, and may be considered by the score.
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Copyright ©2001-2005 Fair Isaac Corporation. All rights reserved.
Thursday, October 10, 2013
28
QUICK TIP: Never pay off a delinquent account, if it can be brought current! Bring it current and pay and keep
it current for at least six to twelve months. If you a delinquent account it will be counted against you and
it will show as: “Paid Del. loan”
If you pay
was PM
Del”
1 ofin
1 current for 6 to 12 months, & then pay it off, it will show as a “Pd Current account,
6/29/05 12:33
Remember 35% of the score is History. By paying current for 6 months, your score will increase substantially .
!
!
!
"
Factor"
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Thursday, October 10, 2013
Experian / Fair Isaac Model Score Factor Codes
"
Definition
Current balance on accts
Delinquency reported on accts
Too few bank revolving accts
Too many bank revolving accts
Number of accts with balances
Number of finance company accts
Unable to evaluate recent payment history
Number of recent inquiries
Number of accts opened within the last twelve months
Proportion of balance to high credit on bank revolving or all revolving acct
Current balances on revolving accts
Length of revolving acct history
Length of time (or unknown time) since acct delinquent
Length of time accts have been established
Insufficient or lack of bank revolving acct informaiton
Insufficient or lack of revolving acct information
No recent (non-mortgage) acct balance informaiton
Number of accts delinquent
Too few accts rated "current"
Length of time since legal item filed or collection item reported
Amount past due to accounts
Accts not paid as agreed and / or legal item filed
Lack of recently reported balances on revolving / open accts
Length of installment loan history
Number of revolving accts
Number of accts established
Length of time since most recent acct established
Too few accts with recent payment informaiton
No recent installment loan information
Proportion of current loan balance to original loan amount
Length of time open installment loans have been established
Number of finance company accts established relative to length of finance history
Serious delinquency and public record or collection filed
Serious delinquency
Derogatory public record or colleciton filed
Lack of recent informaiton on auto loan, or lack of auto loans
Lack of recent information on finance accts, or lack of finance accts
FICO has about 40 reasons your scores can be reduced.
A trade line can be effected by more then one reason.
29
The big three credit reporting agencies
Initials of Big Three Credit Reporting Agencies
Trade Names variations for scoring systems
Trade Names variations for scoring systems
"A" Paper
borrowers will
have most
deductions from
this range and
occasionally, some
from bottom
range.
"B" Paper
borrowers might
have several
deductions from
this range and
some from top
range as well.
Thursday, October 10, 2013
hart.htm
Trans
Equifax
Union
XPN
TU or TRU EFX
New
Fair Isaac
Empirica Facta
Beacon
FICO
5.0
FICO
Classic 98
Experian
Amount owed on accounts is too high
Delinquency on Accounts
Too few bank revolving accounts
-1
-2
-3
-1
-2
N/A
-1
- 2
-3
Too many bank or national revolving accounts
Too many accounts with balances
-4
-5
N/A
-5
-4
-5
Consumer finance accounts
Account payment history too new to rate
-6
-7
-6
-7
-6
-7
Too many recent inquiries last 12 months
Too many accounts opened in last 12 months
-8
-9
-8
-9
-8
-9
Proportion of balances to credit limit too high
Amount owed on revolving accounts is too high
Length of revolving credit history is too short
-10
-11
-12
-10
-11
-12
-10
-11
-12
Time since delinquent is too recent or unknown
Length of credit history is too short
-13
-14
-13
-14
-13
-14
Lack of recent bank revolving information
Lack of recent revolving account information
-15
-16
-15
-16
-15
-16
No recent non-mortgage balance information
Number of accounts with delinquency
-17
-18
-17
-18
-17
-18
Too few accounts currently paid as agreed
Time since derogatory public record or collection
Amount past due on accounts
Serious derogatory public record or collection
-19
-20
-21
-22
-27
-20
-21
-22
-19
-20
-21
-22
Too many bank or revolving accts with balances
No recent revolving balances
Proportion of balance to loan amounts too high
Lack of recent installment loan information
N/A
-24
-33
-32
N/A
-24
-33
-4
-23
-24
-33
-32
Date of last inquiry too recent
Time since last account opening too short
N/A
-30
-19
-30
N/A
-30
Page 1 of 4
This is a sample of how each bureau changed the formula and how many points can be reduced
by each category.
30
12/27/05 4:00 PM
Number of revolving accounts
Number of bank revolving or revolving accounts
Number of established accounts
No recent bankcard balances
Too few accounts with recent payment information
Thursday, October 10, 2013
-26
N/A
-28
N/A
-31
-26
-26
-28
-29
N/A
-26
N/A
-28
N/A
-31
31
Thursday, October 10, 2013
These are the percent of the population in each breakdown of the scores.
32
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ALL ABOUT FICO® SCORING (CREDIT SCORE)
Debt Management
Your credit score. You hear it all the time but what does it mean
to you? Your credit score comes from an algorithm that the
credit bureaus use or develop to gage how credit worthy you
are. Also known as FICO® (Fair Isaac and Co.) The credit score
is provided to lenders to give them an idea of how well you pay
your bills, the odds that you will default and your overall credit
performance. Many lenders rely on your credit score when considering loan
approval and a low credit score can squash your chances for approval. Credit
scores are important because they are used by almost all lenders and have a
direct impact on your credit. The higher your score the better your chance of
getting good loan rates and approvals. The lower the score the higher interest
rates you will pay because you are 'more of a risk'.
Below is the graph of scores. Remember the higher the better. Currently you can
get your credit score from the bureaus which some use their own formula and
some use Fair Isaac®. Also many websites offer credit scoring but the numbers
vary depending on which score you get. Generally it is a good idea to get the
credit score that the bureaus use and not a credit score that a credit website may
come up with. Where does your score fall?
FICO Score
Odds of a Delinquent Acct.
RATING
585
2.25 to 1
POOR CREDIT
600
4.5 to 1
POOR CREDIT
615
9 to 1
POOR CREDIT
630
18 to 1
POOR CREDIT
645
36 to 1
POOR CREDIT
660
72 to 1
POOR TO FAIR
680
144 to 1
POOR TO FAIR
700
288 to 1
FAIR TO GOOD
760
576 to 1
GOOD TO EXCELLENT
780 AND OVER
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EXCELLENT CREDIT LOW DEFAULT RATE
Thursday, October 10, 2013
33
If you are1.planning
on charging
interest on a sliding scale, these are your chances of an
What is a credit
score?
A
credit
score
is
a
sum
used
by
lenders
as an indicator of how likely you are to
account going delinquent.
repay your loans. Your credit score is generated by a mathematical formula
utilizing the data from your credit report. Lenders have been using credit scores
as part of the lending decision for more than 30 years.
2. What factors influence my credit score?
Various factors determine your credit score, including the following:
http://www.carreonandassociates.com/articles/washpostscore.htm
Page 1 of 3
How the credit score determines
interest rate.
Loan Amount - $150,000
Term – 30 year fixed, conventional
Your Credit Score Your Interest Rate
*myFICO.com
October 10, 2005
Thursday, October 10, 2013
Your monthly
payment
760 – 850
5.62%
$863
700 – 759
5.85%
$884
680 – 699
6.02%
$901
660 – 679
6.24%
$922
640 – 659
6.67%
$965
620 – 639
7.21%
$1019
560 – 619
8.53%
$1157
500 - 559
9.29%
$1238
34
Industry option models

Industry options

Auto loan

Bankcard

Installment loan


Personal finance
Credit Unions
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
An industry option score can be optionally selected in lieu of the general credit bureau risk score for all
modes: online, prescreen and account review.
They involve the same minimum scoring criteria, so a record that can be scored by the general credit
bureau risk score can also receive an industry option score, and vice versa.
The credit record does not have to contain a trade line from a particular industry in order to receive the
industry option score.
35
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
These are the score models available from Experian.
We recommend: Experian V2 or TU V4 or Equifax Beacon 5.
These are the only ones accepted by Fannie and Freddie.
36
36
VantageScore
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
VantageScore was developed by the three bureaus so they would not need to pay a fee to FICO.
The model is the same for each bureau.
Advantages: Score and be created in less then 6 months and rental accounts effect the scores.
37
VantageScore is the first score of its kind leveraging a consistent scoring
methodology across all three credit reporting companies to deliver a highly
predictive and easy to understand risk score. It is the first single credit scoring
model to be developed jointly by the national credit reporting companies. As a
result, it leverages the collective expertise of the industry's leading experts on
credit data, scoring and analytics to offer greater predictiveness and
consistency.
The power of choice
Given the lack of scoring solutions in the market today that capitalize on data
from all three credit reporting companies, choices were limited to risk decisioning
tools to create effective lending strategies. With VantageScore, make the best
risk management decisions with improved prediction power that is consistent
across all three national credit reporting companies.
Attention consumers
VantageScore is not yet
available directly to
consumers.
Click here to learn more
about your Experian score.
Contact us today to find out
how VantageScore performs
on your file.
or by phone at 888 414 1120
Limits score variability across credit reporting companies:
Leveled credit characteristics across all three national credit reporting companies
ensure that any score differences for the same consumer are attributable to
content differences, not the scoring algorithm. Scorecards were scaled
consistently across each credit reporting company to create a score range from
501-990 that accommodate natural A, B, C, D, and F grade intervals:
901
801
701
601
501
– 990 = A
– 900 = B
– 800 = C
– 700 = D
– 600 = F
Superior risk prediction:
Advanced segmentation techniques were used to create a stronger, more robust
model. This results in a stronger separation of good and bad accounts and the
ability to classify more bad accounts into the worst-scoring ranges.
Effective Risk Management:
VantageScore is able to more effectively provide predictive scores on thin-file
consumers which delivers more useful risk management for this segment.
Capitalize on Experian's freshest data
By combining the consistent predictive power of VantageScore with Experian's
robust database, achieve the most accurate outcome of risk assessment with the
most up-to-date information available on the market today.
Features
Unprecedented in implementing the same score at all three national credit
reporting companies.
Uses a common score range of 501-990 (high scores equal low risk)
Incorporates revolutionary multiple scorecard technology
Score differences across the three companies are attributed to content
differences, as opposed to the scoring algorithm itself
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
1 of 2
3/15/06 9:57 AM
The original
versions of VantageScore ranged from 501 to 990.
Obviously, this created much confusion when most banks & CUs scores ranged from
300 to 850.
38
VantageScore V2
VantageScore Calculation Categories
Category
Description
Weight
Payment History
how timely and consistent your payments are
32%
Credit Utilization
debt-to-credit ratios and how much credit is available
23%
Credit Balances
what your total debt is; most likely, delinquent debt is counted more
harshly than current debt
15%
Depth of Credit
length of credit history
13%
Recent Credit
how recent and many new hard inquiries and new accounts there are
10%
Available Credit
how much credit can be accessed, for example, could you spend
$50,000 of credit tonight or within the next week
Thursday, October 10, 2013
VantageScore has 6 major scoring factors (FICO has 5).
Payment History: 32% (FICO 35%) Credit Utilization: 23%
Credit Balances: 15% Length of Credit History: 13% (FICO 15%)
Recent Credit Inquiries: 10% (FICO 10%)
Available Credit: 7%
7%
39
Vantage Score V3
Thursday, October 10, 2013
The new Version is substantially different from the previous versions.
This starts at 300 to 850, to more closely resemble the FICO Scores.
40
VANTAGESCORE FACTOR CODES
There are over 170 score factors that reduce the score.
These are a few that have appeared on our members credit reports:
15
20
21
22
30
32
52
61
91
Newest Del/Derg. too recent
No Usable Revolving Outstanding
No Open Accounts
NO REVOLVING ACCOUNTS WITH A VALID CREDIT AMOUNT
No Usable Bankcards
NO BANKCARD ACCOUNTS WITH A VALID CREDIT AMOUNT
NO REAL ESTATE ACCOUNTS WITH VALID CREDIT AMOUNT
No R/E Open
& 98 PRESENCE OF A BANKRUPTCY
BN! SUM OF BALANCE ON BANKCARD ACCOUNTS IS TOO HIGH
BP! AVAILABLE CREDIT ON OPEN BANKCARD ACCOUNTS IS TOO LOW
ME! AVERAGE CREDIT AMOUNT ON OPEN REAL ESTATE ACCOUNTS IS TOO LOW
MF !AMOUNT PAID DOWN ON OPEN REAL ESTATE ACCOUNTS IS TOO LOW
RP! TIME SINCE OLDEST REVOLVING ACCOUNT OPEN IS TO RECENT
RL! AVALIABLE CREDIT ON OPEN REV. ACCOUNTS TOO LOW
T1! TOO LOW PROPORTION OF ACCOUNTS PAID ON TIME IN RECENT MONTHS
TS! TIME SINCE OLDEST ACCOUNT OPENED IS TOO RECENT
TQ! OPEN ACCOUNT BALANCE/CREDIT AMOUNT RATIO IS TOO LOW
TV! NEWEST DELINQUENCY/DEROG STATUS ON ACCOUNTS IS TOO RECENT
TX !RATIO OF ACCOUNTS CONSISTENTLY PAID ON TIME TO ALL ACCOUNTS IS TOO LOW
Thursday, October 10, 2013
VantageScore has over 140 reasons a score will be reduced (FICO has less then 40)
41
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
42
Experian
Bankruptcy Model
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
The Bankruptcy Model is the reverse of the FICO models. The lower the score the better.
The score ranges from 100 to 1200.
43
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
44
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
45
<
<
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
Here are examples of FRAUD SHIELD, PROFILE SUMMARY, FICO V2 AND BANKRUPTCY SCORE.
46
46
CREDIT SCORES
Almost daily, we get questions regarding the scores on different bureaus and differences from the same bureaus. Each bureau has ten to twenty five types of credit score
models. Some models look at length of time credit has been established differently then other models. Industry models, such as the Auto Models, put more weight on
consumers who have had auto loans. Most all have different score ranges.
While we offer all the score models, we recommend Experian/FICO V2, TransUnion FICO V4 Classic and Equifax Beacon 5. These are the versions accepted by Fannie,
Freddie, VA and all the major mortgage companies.
Score Model
Experian FICO Risk Model
Experian FICO Model V2
Experian/FICO Adv Score
Experian FICO Auto Mode l
Experian Bankruptcy Model
Scorex PLUS
National Risk Model
National Equivalency Score
Range
In use by
360 – 840 Experian
300 – 850 Experian
150 – 950 Experian
350 – 850 Experian
108 – 1200* Experian
300 – 900 Experian
0 – 1000 Experian
360 – 840 Experian
BEACON 5.0
Pinnacle
Beacon Auto
Beach Bankruptcy (BNI)
Risk Score 3.0
300
150
250
1
280
–
–
–
–
–
850
950
900
600
850
Equifax
Equifax
Equifax
Equifax
Equifax
Developed by
Fair Isaac
Fair Isaac
Fair Isaac
Fair Isaac
Experian
Experian
Experian
Experian
Score group
FICO Score
FICO Score
FICO NextGen Score
FICO Score
Proprietary Model
Proprietary Model
Proprietary Model
Proprietary Model
Fair, Isaac
Fair, Isaac
Equifax
Equifax
Equifax
FICO Score
FICO NextGen Score
Proprietary Model
Proprietary Model
Proprietary Model
New Account Model 2.0
150 – 950 Trans Union Trans Union
FICO NextGen '03
150 – 950 Trans Union Fair, Isaac
FICO Classic '04
336 – 843 Trans Union Fair, Isaac
Auto Model
300 – 900 Trans Union Trans Union
Bankruptcy Model
0 – 900 Trans Union Trans Union
VantageScore
501 – 990 ( From all three bureau)
VantageScore V3
300 – 850 ( From all three bureau)
*Higher score is worse. With all others, the higher the score, the better.
Proprietary Model
FICO NextGen Score
FICO Score
Proprietary Model
Proprietary Model
Most auto dealers will pull the TU, Experian or Equifax Auto model, probably because they return a higher score.
When consumers get their free credit reports, the bureaus try to sell them a VantageScore. Notice that VantageScore starts 200 points higher then the normal FICO scores and
it goes 140 point higher. The last time I checked, Equifax did offer the Beacon Score to consumers.
Another reason for the difference in scores would be the data and inquiries on file. Of the 85 banks and credit unions who pull from us, 41 report only to Experian or Experian
and Equifax. Also, with the exception of the six or seven of our member banks that pull two or three bureau reports, you will not see inquiries from those 75 banks and CU's
on TU or Equifax credit reports.
Lastly, a major reason for the difference in scores, is the purpose of the inquiries. FICO looks for the Purpose Code. If the Purpose Code is missing or not correct, ie: auto or
mortgage or Account Review, FICO can't score the file correctly. Experian and Equifax allow the AUTO Purpose Code, TU does not! Therefore, every inquiry
from TU, even for auto loans, will count against the consumer's score, while multiple inquiries for Autos with Experian and Equifax will not
reduce the credit score,( if the creditors reported the correct Purpose Codes)
Thursday, October 10, 2013
47
© Experian 2003. All rights reserved. Confidential and proprietary.
Thursday, October 10, 2013
48