FICO and Your Financial Future

Understanding Your Credit Score and How to Improve It

www.usequityadvantage.com
A Bi-weekly Mortgage & Early Loan Payoff Service
Poorly understood by many, your credit score can impact your life in many ways beyond affecting your abil-
ity to qualify for a credit card. Did you know that bad credit might prevent you from getting your dream job,
disqualify you for a mortgage or rental, cost you more for insurance, and play a role when you apply for a
professional license? For all of these reasons and more, its imperative that you know your credit score and
understand how its determined, what it means and how to improve it if necessary.
In the following pages youll learn how to
obtain copies of your credit report and how
the three major credit agencies determine your
credit or FICO score, as well as how your credit
score might be used by lenders, employers,
landlords, and others. Youll fnd out whether
cancelling credit cards may impact your credit
score and how paying down your debt faster
can help improve your score.
Well also show you how AutoPayPlus
TM
the biweekly loan payment plan offered by US Equity Advantage

(USEA) can help you pay down your debt faster, save on interest payments and give your credit score a boost.
Dont let bad credit get in the way of reaching your fnancial and life goals. Armed with the right knowledge
and strategy, you can get started today on the path to better credit, lower debt and a brighter future.
Improve Your Credit Score and Pay Down Debt Faster
Your FICO score is one of the most important numbers in your fnancial life. Learn
how to make the most of yours.
Page 1 | US Equity Advantage | May 2014 | FICO and Your Financial Future
How much less high-FICO borrowers
may pay in interest rates for their loans
1.5%
The most commonly used credit rating system is based on a number of factors developed by Fair Isaac Corp.
abbreviated as FICO and ranges from 300 to 850. Monitoring and maintaining a high FICO score is an
important part of managing your fnancial future. And while there is no hard cutoff for what is considered a
good or bad FICO score, the better yours is, the better position youll be in when it comes to having the
ability to borrow money. Ahead, youll learn what factors are taken into account when calculating a FICO score,
and what you can do to improve yours.
Experian, Equifax and TransUnion are the three major credit bureaus, and your score can vary among them.
Thats why its very important to check your credit reports from all three bureaus on a regular basis, and make
sure your credit score is not being wrongly penalized by any inaccuracies in your fle. The credit bureaus are
bound by the provisions of the Fair Credit Reporting Act (FCRA), which outlines consumers rights and proce-
dures for handling disputes. You are entitled to one free credit report each year from all the bureaus. You can
obtain yours by visiting each of the bureaus websites or by visiting https://www.annualcreditreport.com/index.
action
Source: http://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act
A credit score is a calculation used to assess a persons
creditworthiness, giving potential lenders an indica-
tor of the risk of extending credit to an applicant. The
higher the score the lower the risk and vice versa. Your
credit score not only helps lenders determine whether
to offer credit, but how much and at what interest
rate. Considered by many an overall indicator of f-
nancial health, your credit score can also affect your
potential for getting a job as well as your ability to rent
an apartment, get a car loan, obtain a credit card and
much, much more. Credit scores can be calculated dif-
ferently depending on whether someone has a long or
short credit history, as well as other factors. Regardless
of how these factors are weighted, they are relevant
for everyone and important to consider whether youre
trying to maintain good credit or repair poor credit.
Whats a Credit Score?
FICO and Your Credit
The 3 Credit Bureaus
Page 2 | US Equity Advantage | May 2014 | FICO and Your Financial Future
The Main Ingredients
According to Fair Isaac Corp., there are fve important factors that contribute to your
credit score: payment history, amounts owed, length of credit history, types of credit
used and new credit.
payment history amounts owed length of credit history new credit types of credit used
Page 3 | US Equity Advantage | May 2014 | FICO and Your Financial Future
How Your Fico Score Is Calculated
If your fnancial life is relatively steady, with a stable number of credit accounts and a good track record of
paying your bills, your FICO score will likely be stable too. However, when you go through a transition
you move, suddenly open several new retail credit accounts to fx up your new home, sharply increase your
total debt in a short period of time or begin making late payments that can be refected in your FICO
score almost immediately.
FICO has developed a mathematical formula that takes these factors into account along with less obvious
information such as how long your credit accounts have been open and the type of lenders you owe money
to. So its not quite as simple as she has a new credit card, reduce her score or hes got a lot of new
debt, downgrade him.
The main ingredients of your score are well-known. How theyre applied and the resulting score, however,
can vary from person to person based on these extra factors.
The three major credit bureaus calculate your FICO score based on the information in their own credit his-
tory database. You may, and likely do, have different FICO scores at each of the major bureaus because the
bureaus dont get their information from the same sources.
10%
10%
15%
30%
35%
Chart 3
Credit risk analysts see it as easier
to manage small amounts of
credit than big amounts. For
example, if you have low
balances right now but
your history shows that, in
the past, youve had high
credit balances and paid
them off on time, that
would probably give you
an advantage over someone
who owes the same amounts
as you but has never had high
credit balances and paid them off.
The percentages shown in this chart
indicate how these factors are ap-
plied to the general public accord-
ing to MyFico.com, a site run by
Fair Isaac Corp. that provides
a wealth of useful information
about managing your credit.
The percentages may be dif-
ferent for you depending on
things such as how long you
have been using credit, whether
youve responsibly used credit in
the past and how much total credit you
are managing right now.
This one is obvious. Though not an automatic death sentence for your credit, even a few late payments can
impact your score. And those late payments could affect your score for years. Even after you pay off an ac-
count and close it, delinquencies may still be noted in your account summary. There is some nuance, here,
too. Older delinquencies and those for small amounts count less than recent ones and higher amounts. How
late the payments were 30, 60, 90 or more days matters as does how many payments were missed.
A bankruptcy, foreclosure, lien or judgment (called public records) can affect your score, too. The severity
and type of negative information determines how much a negative record affects you and for how long. Bank-
ruptcies will stay on your credit record for seven to 10 years, depending on whether theyre the Chapter 7,
Chapter 11 or Chapter 13 variety.
Even with a catastrophic record on your account, gradually re-establishing credit accounts and making those
payments faithfully will raise your score over time.
1. Payment History
Owing money doesnt mean youll get a low score. For example, owing signifcant amounts on a home mort-
gage or auto loan especially if youve made timely payments is considered differently from having several
credit cards that are near their credit limit. Having small balances on your credit cards and making the pay-
ments on time may be better than having a zero balance, because it shows you are using that credit responsi-
bly.
One thing that will consistently raise or lower your score is how much of your available credit youre currently
using. For example, if you have three credit cards, each with a $5,000 credit limit, your total credit limit is
$15,000. If you owe $4,500 on one, but nothing on the other two, your credit utilization is 30%. If you have
the same three cards and owe $1,500 on each ($4,500 total), your credit utilization is still 30%. If you can-
celed two of the cards and kept the one with the $4,500 balance open, your utilization would go up to 90%.
The higher the percentage of utilization, the riskier you appear, especially if you have multiple credit cards near
their limits.
2. Amounts Owed
Page 4 | US Equity Advantage | May 2014 | FICO and Your Financial Future
7-10 years
How long bankrupticies will stay on your credit score.
If your credit history is short youre recently out of school and just starting out fnancially, or recently di-
vorced and getting credit solely in your own name that doesnt mean youll automatically get a low score.
However, over time, having credit accounts that are open and used responsibly will help your score. For this
reason, if you have a credit account say a retail store card that youve had for several years but which
you no longer use, the fact that its been open for a period of time should help you. Keeping it open, if youre
not using it, is probably the best way to have it boost your score. Again, there are nuances, as the formulas
also take into account the type of credit and how recently it was used. But as a general rule of thumb, a longer
good history is better than a short history.
3. Length of Credit History
4. Types of Credit Used
5. New Credit
Not all credit is equal. A high balance on a 30-year mortgage loan is expected; a similar balance on a short-
term non-mortgage installment loan might be concerning. The same balance on a student loan if you just
got your medical degree for example might not be. Your FICO score takes into account the mixture of credit
types in your report and makes a judgment about whether it makes you more of a risk or less of a risk. There
are two basic favors of credit: installment and revolving. An installment loan means you borrowed a fxed
amount of money (to buy a house or a car, for example) and are paying it back over time. Credit cards and
retail store cards are revolving credit: You can borrow up to your limit, then keep borrowing as you pay the
balance down. Having some of each type of credit is best to show that youve successfully managed both, so
dont close all of your credit card accounts to try to boost your score.
Especially if you have a short credit history, applying for multiple new sources of credit in a short time will
likely drop your FICO score. This doesnt necessarily apply to rate shopping for a mortgage, for example, or
auto loans. Prior to scoring, getting three mortgage quotes in the space of a month will probably be consid-
ered as a single inquiry.
Inquiries that you make yourself, such as asking for your credit report, are ignored as are inquiries from poten-
tial or current employers.
Inquiries for other kinds of credit credit cards, personal loans and the like will have some impact. The
variety of businesses that make credit inquiries may surprise you: if you change cellphone carriers, expect an
inquiry; ditto with furniture stores offering extended-pay options. Inquiries remain on your credit report for two
years, but your FICO score only considers inquiries from the past 12 months. How long its been since you last
opened a new credit account is factored in too. Opening several accounts in a short period of time is a red fag
that may mean youre having trouble.
Page 5 | US Equity Advantage | May 2014 | FICO and Your Financial Future
Page 6 | US Equity Advantage | May 2014 | FICO and Your Financial Future
1
2
3
Improving Your Credit: All in Due Time
No matter what you may see or hear from credit repair services, there is no quick fx when it comes to
improving your credit score. This is because your score is based on your credit history, and negative infor-
mation in your history stays with you for a while. How long any specifc negative information will affect your
credit depends on what that information is. Typically, the credit bureaus continue to report credit inquiries
for up to two years (although theyre not used to calculate your FICO score after 12 months). Delinquent
payments may remain in your fle for up to 10 years, and a bankruptcy will stay with you for seven years
(for a Chapter 13 fling) to 10 years (for a Chapter 7 or Chapter 11 fling). And, be aware, a bankruptcy
wont clear your prior credit history.
Know your credit score and monitor your credit history. There are at least two reasons to do
this. First, knowing where you are keeps you on track with current obligations and youll begin
to see the changes, month to month, that affect your score. Second, identity theft is a growing
problem and if someone is using your identity to try to open credit accounts, youll know and can
intervene quickly to shut down any fraudulent activity. Consider purchasing a membership to a
credit monitoring service and opt in to their email alerts that notify you immediately when a credit
inquiry or negative information shows up on your history.
Analyze your credit history and pinpoint the items dragging down your score. Figure out which
ones you can do something about and create a plan to address them. For most people, this will
likely be in the areas of keeping all accounts current and paying down your debt. Consider sign-
ing up for USEAs AutoPayPlus to pay down that debt more quickly. If youve declared bankruptcy,
theres nothing you can do to change that, but you can work on building good credit in other
areas.
Scrutinize your credit history and, if there are negative items listed that are not accurate, use the
credit bureaus dispute process to correct them. Be patient the process for correcting your his-
tory isnt as easy as writing an email. But if you follow up diligently, you should be able to correct
inaccuracies. If there are questionable entries, challenge them; it may be easier for the credit
bureau (after being prodded repeatedly) to simply remove the item than to substantiate it.
Improving your credit is a process; if you do the right things consistently, you
should see your score rise over time.
Page 7 | US Equity Advantage | May 2014 | FICO and Your Financial Future
If you dont have an installment loan in your credit history, get a small personal loan or an auto
loan. Pay it on time. Part of your FICO score comes from showing that you know how to manage
both installment debt and revolving (credit card) debt. Lending standards for even modest loans
have tightened in recent years since the credit crisis. If you cant fnd a small loan at a decent
rate and youre a homeowner with equity in your house you may be able to get a small
home equity loan from your mortgage company or primary bank.
Pay down outstanding debt. How much you owe, especially on credit cards, will affect your score.
A steadily declining balance shows that you have both the will and the means to properly man-
age your credit. When fguring out what to pay frst, start with the accounts which will likely
be credit cards with the highest interest rate. Getting those accounts paid down will save you
money each month and give you more cash to work with and USEAs AutoPayPlus program can
help accelerate that process.
Adjust credit limits on accounts that you do have. If your combined credit limit on your accounts
is currently $10,000 and youre carrying a $5,000 balance, youre using 50% of your available
credit. Getting your lender to increase your limit to $12,000 even without lowering your bal-
ance will drop your utilization ratio to 42%, which looks better to the credit bureaus. Paying
that $5,000 down to $3,500 drops your ratio under 30%, which looks even better. This is why
many credit experts recommend that you not close accounts that youre not using. If you have an
open account with a zero balance, the credit limit on that account is lowering your overall utiliza-
tion ratio.
Even a credit card with a low limit can help if you consistently charge a small
amount and then pay it on time.
5
6
7
4
If youve had credit problems or are new to credit, start small and build up. Even a credit card
with a low limit can help you if you consistently charge a small amount and then pay it on time. If
you fnd you cant get any credit card at all, you may still be able to get a secured card by depos-
iting an amount equal to your credit limit with the card issuer. Over time (around six months to a
year), as you pay your balances promptly, you can ask that the security deposit be returned and
the card converted to a standard account.
Page 8 | US Equity Advantage | May 2014 | FICO and Your Financial Future
The Biweekly Loan Strategy
How to Save Money, Build Equity, Pay off Your Loans Faster and Improve Your
Credit Score
Paying off your loans on time and reducing your debt is important when it comes to keeping your credit in
good shape. After all, almost two-thirds of your credit score is determined by your payment history and the
amounts you owe relative to your available credit. And taking care of that FICO score is important if you hope
to qualify for additional loans at a good rate in the future.
It may seem like a daunting task, however, just staying on top of all the loan payments you may have car
loans, mortgage debt, student loans, and credit cards much less trying to pay them down faster. But heres
where USEA can really help. Our AutoPayPlus program makes it easy for you, and you wont believe how much
you can save. Heres how it works.
A Biweekly Loan Payment Plan accelerates payment on your debt by dividing your monthly payment in half,
and paying that amount every two weeks. By the end of one year you will have made one full extra payment.
And that one extra payment pays off big, especially on larger loans with higher interest rates.
Lets use a mortgage as an example. If your monthly mortgage payment is $1,500, instead of paying $1,500
each month youd pay $750 once every two weeks. How can that make a difference? Actually, its just simple
math:
Every time you make a payment, theres less principal against which the bank can charge interest. When
you make half payments every two weeks (instead of one full payment a month), you build equity as your
principal grows incrementally smaller twice a month instead of just once. Accordingly, interest charges
start shrinking almost immediately.
Because there are 52 weeks in a year but only 12 months, paying biweekly will result in 26 half payments
(13 full payments) instead of 12 full payments. Over 12 months, youre making an extra months worth of
payments, but because its spread out biweekly over the course of a whole year, you dont feel the sting.
However, you have to be extremely disciplined about making your biweekly payments consistently, without
fail. You also have to verify that your lender is applying the additional funds toward principal and not to
future payments theyll often do the latter by default, which is considerably less helpful.
A one-time fee of $399 gives you a lifetime membership in the AutoPayPlus service for use with an unlimited
number of loans, whether its a mortgage, student loan or credit card. Its even available for making utility
payments and other non-interest-accruing obligations. And because US Equity Advantage doesnt require an
upfront payment, the $399 can be deducted over time from the initial payments made toward your loan bal-
ances. Its an affordable and effective way to save money, build equity, and get out of debt faster, while pro-
tecting your credit score from potential damage resulting from late payments and high loan balances relative
to available credit.
Page 9 | US Equity Advantage | May 2014 | FICO and Your Financial Future
Why Choose USEA?
Most people simply dont have the time or resolve to see an early loan payoff strategy through on their own.
Many try with the best of intentions but end up stretching two weeks into three, and so on. Within months,
theyre right back to making month-to-month payments again, which wont get them anywhere fast.
US Equity Advantage will help get you on track to fnancial freedom and keep you there for the long haul.
USEA offers straightforward plans to help you meet your fnancial goals. Well automate the process and en-
able you to track your progress toward your loan payoff goals online. Well schedule and make your biweekly
payments for you and follow up with lenders after each payment to make certain that the funds are applied
toward principal as opposed to future payments. Once you sign up with AutoPayPlus, you can take your mind
off your debt, knowing youll pay it off faster and save money. And the programs PaymentPlus
TM
Guarantee
ensures that you never face a penalty for missed or late payments.
Save time, save money, build equity, get out of debt faster and protect your credit with AutoPayPlus.
Your Credit Score: The Good, the Bad and the Ugly
Your credit can affect you in more ways than you think. Here are some potential perks and punishments that
can result from your score. They illustrate why its so important to do all you can to safeguard your credit,
including paying down excessive debt as quickly as possible.
Sources:
http://www.forbes.com/pictures/eegk45gidm/credit-scores-dont-stop-with-credit/
http://www.bankrate.com/fnance/credit/bad-credit-score-impacts-senior-care.aspx
http://usmilitary.about.com/od/joiningthemilitary/a/enlcredit.htm
http://money.usnews.com/money/blogs/my-money/2012/02/21/6-benefts-and-rewards-of-having-awesome-credit
http://www.bankrate.com/fnance/debt/bad-credit-hurts-2.aspx
http://www.creditcards.com/credit-card-news/bad-credit-cell-phone-1265.php
http://www.creditcards.com/credit-card-news/bad-credit-cell-phone-1265.php
CREDIT PERKS (THE GOOD)
Lower interest rates on your
car loans, home mortgages
and credit cards.
Higher credit limits for your
revolving credit accounts.
Greater access to premium
credit products such as no-
fee credit cards, rewards
cards, and no-interest loans.
Lower automobile insurance
rates.
Deposit waivers, better deals
on vacation rentals.
CREDIT RISKS (THE BAD)
Potential employers may con-
sider your credit report in hir-
ing decisions.
Landlords may turn you down
on a rental.
You may have to post a de-
posit to get utilities turned on.
Mobile service providers may
deny you access to the better
cell phone plans and require
you to pay as you go.
It may be harder to start a
small business.
POOR CREDIT (THE UGLY)
Bad credit could cause a ro-
mantic partner to back off.
Some government agencies can
check your credit if youre under
investigation; a poor score may
lead to more scrutiny.
Your options may be limited for
assisted and senior living.
You may be ineligible for mili-
tary service, or have limits to
your security clearance.
You may be unable to fnance
elective medical procedures.
FICO and Your Loan Payments
Paying off your loans early can help your credit score and your fnancial bottom line. Your payment history and
loan balances combined can comprise almost two thirds of your credit score. Consistent on-time loan pay-
ments and decreasing the amount you owe relative to your available credit will get you out of debt faster and
protect your credit. USEAs AutoPayPlus offers an easy and affordable way to help you pay down your loans,
build equity, improve bad credit and protect good credit.
Guidance for a surefre, comprehensive payment plan
Faster payoff for your entire loan
Reduced interest charges (many people save thousands of dollars in total interest accrued)
A guarantee for on-time loan payments
Consistent follow-through with lenders to make sure theyre putting payments where they count
Bilingual customer service
Cancellation at any time with no fee
Customizable payment plans to meet your needs
Access to a USEA loan representative for advice
AutoPayPlus offers:
Page 10 | US Equity Advantage | May 2014 | FICO and Your Financial Future
Pay off your debt faster, save money, and safeguard your credit score... AutoPayPlus can
help protect your fnancial future.
Page 11 | US Equity Advantage | May 2014 | FICO and Your Financial Future
About US Equity Advantage
Founded in 2003, US Equity Advantage is the industry leader in biweekly and custom loan payment plan
services from home mortgage and student loans to credit cards, automobiles and more. USEAs custom-
ers enroll as lifelong members to have the ability to strategically eliminate an unlimited number of loans or
other debts. Members receive superior service with a fexible, customizable debt payment plan that dra-
matically reduces interest charges and rapidly pays down principal for faster debt elimination.
US Equity Advantage is the exclusive provider of AutoPayPlus, which administers members biweekly loan
payments, guaranteeing that they never miss a payment or get off track. To date, USEA has safely and se-
curely transmitted more than $700 million on behalf of its members. We are committed to helping consum-
ers reduce their debt, build equity, save for the future and reach their fnancial objectives. We have worked
with tens of thousands of members to do just that.
Try our free Biweekly Loan Calculator online and see what our commonsense, simple-math approach can
do for you. You may be surprised at just how much money you can save over the life of your loan.
For additional information, visit www.usequityadvantage.com, call 800.894.5000 or fnd USEA on Facebook
or Twitter (@AccelerateLoans).