Understanding & Restoring Credit

OWNERSHIP IS KEY TO FINANCIAL INDEPENDENCE

MONEY SMART WEEKUNDERSTANDING & RESTORING

CREDIT

ABOUT AC CLINTON

AC Clinton, Mortgage Closer is the founder and creator of OwnSomethingToday.com. AC has been in the mortgage industry for over 5 years and started investing in real estate shortly thereafter. After a life altering, bad investment, she set out to learn everything she could about real estate and real estate investing. She acted as the editor-in-chief of Invest With Passion Magazine, currently a blog at InvestWithPassion.com, which provides articles, educational material, and FREE/Paid events for real estate investors.

In her quest to become "the expert" in real estate, AC also positioned herself with a knowledgeable and experienced team at America’s Mortgage Choice. Therefore through personal experiences, AC's profound knowledge of the industry and her circle of influence, she is able to help homebuyers and investors make educated and informed real estate decisions.

InvestWithPassion.com Marki Lemons Unlimited OwnSomethingToday.com Personal Investment Corp

CONSUMER STATISTICS

• More than 40% of American families spend more than they earn• U.S. Visa cardholders alone conduct more than $1 trillion in annual

volume (1)

• At the end of 2008, Americans' credit card debt reached $972.73 billion, up 1.12% from 2007 (2)

• Average credit card debt per household was $8,329 at the end of 2008 (2)

• 92 percent of cards included a fee for exceeding the credit limit, including 100 percent of all student cards (3)

– The average amount of the overlimit fee is $39

(1) Source: Visa USA internal statistics, 4th quarter 2006(2) Source: Nilson Report, April 2009 (3) Source: Pew Safe Credit Cards Project, March 2009

WHO IS FICO?

• FICO is the mathematical credit scoring system used by Lenders to evaluate the risk associated with lending money to us

• We have 2 FICO scores, from two of the three major credit bureaus: TransUnion, and Equifax

• The FICO score range 300-850• The higher our FICO score, the better interest rate we will

receive• The median FICO score in the US is 723• Experian discontinued FICO Agreement 02/14/09, scores are

available directly from Experian & VantageScore

CALCULATING FICO SCORES

Source: www.myfico.com

CALCULATING FICO SCORES

• How payments are made and how long it’s been since any late payments– 1 x 30, 2 x 30, 1 x 60, 1 x 90

• Collections / delinquent accounts• Public Records – bankruptcy, judgments, liens, etc.Source: www.myfico.com

CALCULATING FICO SCORES

• Total amount owed on all accounts as well as how much is owed on different types of accounts– credit card, auto loan, mortgage, etc.

• Proportion of credit lines used– Balances should not exceed 30% of credit limit

Source: www.myfico.com

CALCULATING FICO SCORES

• Considers both the age of the oldest account and the average age of all accounts

• Time since account activity

Source: www.myfico.com

CALCULATING FICO SCORES

• Number of recent accounts opened & credit inquiries• Re-establishment of positive credit history following past

payment problems

Source: www.myfico.com

CALCULATING FICO SCORES

• Want a “healthy mix” of credit– Mortgage, Car Loan, Credit Cards

• Want at least 3 open accounts at all times

Source: www.myfico.com

VANTAGESCORE

• The Credit Bureaus’ new scoring system

• This new scoring system is currently being marketed to Lenders, however FICO is still the preferred model

• Unlike FICO, whose scoring range from 300-850, the VantageScore ranges from 501-990 with a grading system:

901-990 equals "A" credit

801-900 equals "B" credit

701-800 equals "C" credit

601-700 equals "D" credit

501-600 equals "F" credit

BALANCING CREDIT

7 STEPS TO RESTORING CREDIT

Obtain A Copy of Credit Report

Analyze Information

Dispute Inaccuracies

Cure Delinquent Accounts

Open Secure

Accounts

Reduce Credit

Balances

Pay Open Accounts As Agreed

STEP ONESTEP ONE

STEP TWOSTEP TWO

STEP STEP THREETHREE

STEP STEP FOURFOUR

STEP FIVESTEP FIVE

STEP SIXSTEP SIX

STEP STEP SEVENSEVEN

STEP ONE: OBTAIN A COPY OF REPORT

• According to the Fair Credit Reporting Act (FCRA), everyone is entitled to receive a FREE credit report from each of three credit bureaus:

– TransUnion www.transunion.com

– Equifax www.equifax.com

– Experian www.experian.com

• Order a copy of your credit report from all three credit bureaus at www.annualcreditreport or call 1-877-322-8228

– Note you will obtain a 10-digit report confirmation number (will be used in the

event of disputes)

• Know Your Rights!

STEP TWO: ANALYZE INFORMATION

• Make sure that the following information is correct such as:

– Your name (Jr., Sr)

– Social Security Number

– Birth Date

– Address

– Employer

– Account Types; Account Status; Account Limits; Account Dates

– Payment Histories

– Collection Accounts (if any)

– Public Records and Inquiries

STEP THREE: DISPUTE INACCURACIES

"79% of the credit reports surveyed contained either serious errors or other mistakes of some kind”- Public Interest Research Group

• If you have any inaccurate information on your credit report such as:

– Amount

– Account number

– Account types

– Account dates, etc..

• Notify all three credit bureaus of any discrepancies:

– A 30-45 day investigation begins

– After the 30 day investigation, you should receive a response

STEP THREE: DISPUTE INACCURACIES

• Dispute Equifax Online / Phone / Mail (you must have a copy of the report)– Online - www.investigate.equifax.com

– Phone - 866-585-9451 or see number on your report

– Mail – Equifax, P.O. Box 740256, Atlanta GA 30374

• Dispute TransUnion Online / Phone / Mail

– Online – www.transunion.com/investigate

– Phone - 800-916-8800 or see number on your report

– Mail - TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA 19022-2000

• Dispute Experian Online

– www.experianonline.com

SAMPLE DISPUTE LETTER[Date][Your Name][Your Address][Your City, State, Zip Code]

Dispute Department [Name of Credit Reporting Agency][Address][City, State, Zip Code]

Dear Sir or Madam: I am writing to dispute information on my credit report. The items I wish to dispute are listed below and also highlighted on the attached copy of my credit report [List the items that you feel are inaccurate including the type of accounts, names of the financial institutions, and full or partial account numbers. [Include what changes you feel should be made.]

Enclosed are copies of [payment records, credit report, letters from the creditor, court documents, etc.] supporting my dispute. Thank you for investigating this matter.

Sincerely,

[Signature][Your full name][Date of birth][Social Security number]

Enclosures: (List what documents are enclosed with your letter)

STEP FOUR: CURE DELINQUENT ACCOUNTS

• Don’t ignore collections or judgments

• Call the collection agency who is reporting the collection or judgment and ask to settle the account

– Sometimes the collection agency will even agree to settle the account with a

percentage off of the entire bill

– Make payment arrangements

• If you are able to settle, ask collection agency to report the account “paid satisfied” as opposed to “settled”

• Always get any resolutions/agreements in writing before making payments

• Negative records will remain on your credit report 7-10 years from the date of the filing, however it will show paid instead of a collection

STEP FIVE: OPEN SECURE ACCOUNTS

• If you need to create positive accounts (re-establish credit) – open secured accounts

• Bank of America Secured Credit Card

• Fifth Third Bank Secured Credit Card

• First Midwest Bank Believer’s Loan

STEP SIX: MAINTAIN CREDIT BALANCES

• All credit card balances should be under 30% of the credit card’s limit

– If your Visa Card has a $1000 limit, then you can use the credit as long as you

pay the balance down to at least $300 per month

• You should never go over your means, only use what you can afford to pay off each month

STEP SEVEN: PAY OPEN ACCOUNTS AS AGREED

• Paying your bills on time can establish a good credit report

– In the event of unforeseen financial adjustments, you have 29 days after the

due date to make payment before it is reported late on your credit report

• Lenders make money in (3) three of the following ways:

– The interest charged on any balances carried over

– Late fees

– Over the limit fees

CONTACT INFORMATION