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Unfold the Credit Mystery

A beginner's Guide

Joyce Leow

on 12 October 2012

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Transcript of Unfold the Credit Mystery

How credit score is calculated Higher credit scorers pay less insurance premiums. But why? Perks of Establishing Good Credit How does Credit Reporting work? Beginner's Guide to Credit Smart Financial decisions
for a bright financial future "This will go on your permanent record" Source: Fair Isaac and Consumer Federation of America, 2012 Payment History - 35% • Late payments
• Missed payments
• Public record eg. bankruptcy, judgments
• Collection items

• Accounts that have been paid on time • Balances
• Credit usage
• Installments Amounts owed (Debt) - 30% • Oldest to most recent
• The longer, the more stable Length of credit history - 15% • Account diversity
- mortgage, retail, installment, cards

• Experienced in various account types Types of Credit - 10% • Consumer disclosure
• Employment screening
• Insurance related
• Utility related Credit Inquiries - 10% • Inquiry is when credit information is requested No effect on score • Apply for new credit
• Loans
• Signals poor credit risk Source: Fair Isaac Corporation and Consumer Federation of America, 2012 (cc) photo by medhead on Flickr Increased credit limit
Lower interest rates
Increased negotiating power
Attractive credit card rewards, bonuses Low score = Poor financial decisions and situation. Poor car maintenance

More drivers Financial distress

Risky driving File claim on minor repairs Did You Know...? Usage of credit history in employment screenings has increased from 19% in 1996 to 42% in 2006 19% 42% 54% 91% Statistics provided by the Society of Human Resource Management (2005) Prevent theft Financial & fiduciary positions Credit Score Vs. Auto Insurance High Score = Less risky, greater responsibility Source: Report to Congress: Credit-Based Insurance Scores, Federal Trade Commission (2007) By: KeinHan Leow of how well you handle finances A REPUTATION $900 savings! Credit How is my Credit Report created?
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