Fact, Fiction & FICOs: Presented by: Vance Edwards, CMB Certified FICO Professional MGIC Marketing Program Director

Fact, Fiction & FICOs: Presented by: Vance Edwards, CMB Certified FICO Professional MGIC Marketing Program Director

Agenda What makes up a credit score (and what doesn t) What causes that score to move (for good and bad) Fact or Fiction: Some common beliefs about credit scores

Legal Disclaimer The information presented in this presentation is for general information only, and is based on guidelines and practices generally accepted within the mortgage finance industry and is not intended to be all-inclusive. MGIC makes no representations or warranties of any kind with respect to the accuracy, completeness or suitability for any purpose of the information contained in this presentation. MGIC expressly disclaims any and all warranties, express or implied, including without limitation warranties of merchantability and fitness for a particular purpose regarding these materials and this presentation. In no event will MGIC be liable for any direct, indirect, incidental, punitive or consequential damages of any kind with respect to the presentation or materials provided. All examples are hypothetical and are for illustrative purposes only. This presentation is not intended and should not be interpreted or relied upon as legal advice. We encourage you to seek advice from a qualified professional.

Total Debt Balance and Its Composition Trillions of Dollars 15 Mortgage HE Revolving Auto Loan Credit Card Student Loan Other 2016Q4 Total: $12.58 Trillion 2016Q3 Total: $12.35 Trillion 15 12 (3%) (10%) (6%) 12 9 (9%) (4%) 9 6 6 (67%) 3 3 0 0 Source: FRBNY Consumer Credit Panel/Equifax

Credit Score vs. Credit Report

National credit reporting companies P.O. Box 740241 Atlanta, GA 30374-0241 1 800 685 1111 1 888 397 3742 www.experian.com P.O. Box 1000 Chester, PA 19022 1 800 888 4213

The Credit Cycle Consumer opens an account Credit reporting companies share with new lenders Lender updates records Lender shares history with credit reporting companies

What is in a credit report? Identifying information Credit Accounts (known as Credit History or Tradelines) Inquiry information Public record and collection information Source: TransUnion

What s NOT in a credit report? Race, ethnicity, religion or political affiliations Criminal background Medical information or history Buying habits / transaction data Bank account information Major purchases made by cash Credit scores

50+ 300-850 300-850 FICO Score General Score Mortgage Score Auto Score Bankcard Score Installment loan Score Personal finance Score Vantage Score Source: CreditSesmae.com

Your FICO Score Depends on Their FICO Model Experian Equifax TransUnion Most widely used version FICO Score 8 FICO Score 8 FICO Score 8 Newly release version FICO Score 9 FICO Auto Score 9 FICO Bankcard Score 9 FICO Score 9 FICO Auto Score 9 FICO Bankcard Score 9 Version required by Fannie Mae and Freddie Mac Experian /Fair Isaac Risk Model V2SM Equifax Beacon 5.0 FICO Score 9 FICO Auto Score 9 FICO Bankcard Score 9 TransUnion FICO Risk Score, Classic 04

What does NOT impact FICO Score? Race, color, religion, national origin, sex and marital status Age Salary, occupation, title, employer, employment history Where person lives Interest rate being charged on a particular account Child/family support obligations or rental agreements Certain types of inquiries Any information not found in your credit report Participation in credit counseling of any kind

Payment history - 35% Amounts Owed - 30% Credit History - 15% Types of Credit - 10% New Credit - 10%

Late payments: 35% How late they were How much was owed How recently they occurred How many there are

Amount owed on all accounts Amount owed on types of accounts 30% How many accounts have a balance How much of the total credit line is being used How much of installment loan amount is still owed

15% How long credit accounts have been established age of oldest account age of newest account an average age of all your accounts How long have specific credit accounts been established How long it has been since certain accounts

Does the person have experience with both revolving debt and installment accounts How many accounts are there in each type 10% Revolving credit Credit cards Home equity lines of credit Installment credit Mortgages Car loans Personal loans

How many new accounts does the person have 10% How many inquiries have been made Length of time since inquires were made How long has it been since a new account was opened

How inquiries affect FICO Scores Inquiries are not a factor for at least 57% of consumers Only 14% of consumers lose more than 10 points because of inquiries Soft inquiries A person checking their own credit report won t impact their score Hard inquiries Occur when a person excessively applies for credit, especially in a short time span

Mortgage inquiries

What s a good score?

Median FICO Scores by State FICO Score Ranges 730-745 723-729 711-722 691-719 650-690 Source: American Reporting Company

Trended credit data will impact credit scores.

Boy

Girl

Couple

Credit check About 30% of women won t marry a person with a low credit score

57% of men and 75% of women say credit scores play into dating decisions

Credit score can cost you a job.

Carrying balance builds credit.

Paying on time is all you need to do.

Paying off debts remove them from a person s credit report.

Closing accounts improves credit. Source: Credit Sesame

More income = higher credit score

Getting married merges credit reports/scores.

Using prepaid credit cards and debit cards can boost credit score.

Age of person impacts credit score.

Not having any credit cards or credit card debt will help have good credit score.

Young Americans living without a credit card has doubled since the recession.

63% of adult millennials don t have a credit card. By comparison, only 35% of consumers over age of 30 don t have credit cards 21% of millennials have never written a physical check to pay a bill

73% of young adults say they have never been added to another person s account. Source: Credit Sesame

Authorized User An authorized user is any person who has permission to use your credit card account, but is not responsible for paying the bill. Co-signer/Guarantor A co-signer or guarantor is a person who signs an agreement to pay off a credit card balance for someone else if that person does not pay. Joint Account A joint account is a credit card account equally shared by two individuals. Parties involved all share the associated rights and liabilities of the account and are regarded by law as co-owners of the account.

Fastest, easiest way to get MI Max LTV/CLTV: 97% / 105%; Max cash out: $150,000

Improving a Credit Score Pay bills on time Get current and stay current Don t open a lot of new accounts too rapidly Shop for loan rates within a focused period of time Keep balances low on revolving credit Pay off debt Check & Correct

For a fraud alert, you only need to contact one bureau and that bureau will notify the other two: Equifax, 1-888-766-0008; Experian, 1-888-397-3742; TransUnion, 1-800-680-7289 Equifax Information Services P.O. Box 740256 Atlanta, GA 30348 1-866-349-5191 Experian Information Solutions P.O. Box 4500 Allen, TX 75013 1-866-200-6020 TransUnion Consumer Solutions P.O. Box 2000 Chester, PA 19022 1-800-916-8800

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To get a copy of today s slides contact: Karen Maierle karen_maierle@mgic.com Thank You!