BETTER SCORE = LOWER BORROWING COSTS Higher credit scores can mean lower interest rates—and big cost savings—for buying big-ticket items such as cars. Here’s an example. For a five-year, $20,000 car loan, Think Again! a good credit score may get you a lower annual interest your rate—say 8 percent. But if your credit score is low, your THERE’S ANOTHER SCORE THAT’S IMPORTANT AS YOU GO THROUGH loan may cost you more—say a 14 percent interest rate. Know LIFE. IT’S CALLED A CREDIT SCORE. AND WHETHER YOU KNOW IT OR NOT, What’s the difference? With the higher interest rate, you’ll wind up paying about $3,600 ($60/month) in

Did You Know? SOMEONE IS ALREADY KEEPING TRACK. additional interestA+ costs. SCORE WHAT IS A CREDIT SCORE? HOW TO GET YOUR CREDIT SCORE AND MORE n simplest terms, a credit score is a single Your credit score changes over time. Your credit score: For a fee, you can order your FICO® credit score and learn more about credit scoring by going to: www.myfico.com number that helps lenders and others Every time you apply for, use, make or miss decide how likely you are to repay a payment on a loan or credit card, you Your credit report: To obtain a copy of your credit report or to I report errors, you can contact the three major credit repositories: your debts. It is based on build another entry on your credit an analysis of the information report—and raise or lower your Equifax: (800) 685-1111 www.equifax.com in your credit report, which credit score. More recent Experian: (888) 397-3742 www.experian.com lists your debt and activity carries more weight. Trans Union: (800) 888-4213 www.transunion.com repayment history. Do you have any WHAT GOES INTO In some situations, such as when you’ve been denied credit, you can get your report for free. Otherwise, there may be a fee. credit cards? A car loan? A CREDIT SCORE? A student loan or bank For more information about how you can successfully manage Your credit score is based SM loan in your name? credit, go to www.freddiemac.com/creditsmart. CreditSmart on several types of information is a new Freddie Mac educational program to help consumers A department store charge is a service mark of Freddie Mac. is a service of Freddie mark

SM contained in your credit report: use credit wisely. account? If you answered “yes,” For more information about credit, debt and savings, go to you likely have a credit report. Your payment track record. www.consumerfed.org, the website for the Consumer If you have a credit report, then Federation of America. you likely have a credit score The amount of debt you owe. To access “Know Your Score” online, go to that goes with it. www.freddiemac.com/knowyourscore How long you’ve used credit. How often you’ve applied for new credit Credit scores are based solely and whether you’ve taken on new debt. THINK YOUR GRADE POINT AVERAGE on credit history and don’t include The types of credit you currently use, in the calculation factors like such as credit cards, retail accounts,

is a registered trademark of Fair, Isaac and Company, Inc. CreditSmart Inc. and Company, Isaac of Fair, trademark is a registered race, religion, national origin, ® installment loans, finance company www.freddiemac.com www.consumerfed.com IS YOUR ONLY SCORE THAT MATTERS? gender, age, education level accounts and mortgages. or marital status. Did You Know?

750 Know your Score! BROUGHT TO YOU BY THE CONSUMER FEDERATION OF AMERICA AND FREDDIE MAC © 2002 Freddie Mac FICO Mac © 2002 Freddie use similarmethods andfactorstodeterminescores. Other scoring systemsmayusedifferent numerical scales,butmost Most people score inthe600sand700s. most commonlyusedscoringsystem—can rangefrom 300to850. scores—developed by Fair, Isaac and Company, Inc., andtoday’s Know The higherthenumber, thebetteryour credit score. FICO yourA “GOOD”CREDITSCORE? WHAT ISCONSIDERED whether you have topayadeposit. companies maycheckitbefore deciding Phone andelectriclineset-up: Score!rent toyou. check itbefore decidingwhetherto Renting anapartment: limit ifyour credit score improves. cantly worse.Or, theymayraiseyour credit interest rateifyour credit scoresignifi- gets issue acredit card to y continue to Keeping creditaffordable: cardfor anew andifyou shouldgetalow interest rateonthatcard. use credit scores tohelpdecidewhetherapprove your application Getting affordablecreditwhenyouneedit: how muchinterest tochargeyou ifyou gettheloan. whether you are agoodriskforcarloanorhomemortgage—or Buying acarorhome: of themostimportantfinancialeventsyourlife. Because yourcreditscorecanbeafactorinsome MATTER RIGHTNOW? WHY DOESMYCREDITSCORE look atyour credit scores afterthey ou—they mayraiseyour Landlords may Lenders maylookatitbefore deciding Credit card issuers Utility Credit card issuers ® credit

Did You Know? Pay yourbillsconsistentlyandontime. card—in your name,anduseitwisely. Establish acreditrecord. AND AGOODCREDITSCORE? HOW CANIBUILDASTRONGCREDITRECORD this brochure.) reporting error-free. Finally, checkyourcreditreportregularlyto makesureitis credit score. can leadtomore debt,andtoomanyopenaccountsmaylower your 480 10 yearstopayoffthatdebt. a totalof$6,154.Moreover, itwouldtakeyoumorethan interest rate,andpaid$50eachmonth,you’dwinduppaying debt. students carryanaverageofalmost One recentstudyfromNellieMaefoundthatundergraduate pay asmuchyou can,butnever lessthantheminimum to othercards. gnis (P agencies. If youowedthatmuchonacardwithan18percent You candothatby contactinganyofthe three major amount due.Alwaysfollow thetermsyou agreed Pay offcardbalancesinsteadofmovingdebt to whenyou openedtheaccount. the account. hone numbersare ontheback panelof Opening new accountsyouOpening don’t new really need Remember thatalittlelateisbad— and keepwell withinthecredit limiton and alotlateisworse. a goodIdea. due dateonapayment,senditassoon “Maxing out”creditlinesisnever as possible—thelatefees,interest penalties as thepaymentbecomesmore overdue. and harmtoyour credit score increase Open acredit account—suchasacredit Use your credit sparingly BEFORE theduedate, $2,800 increditcard If you missthe completed application. giving awayfreeT-shirts forevery first weekatschool,wherethey are new creditcardatthebookstoreher credit ofherown.Shesignsupfora has neverhadaloanorlineof our hypothetical story. decisions affect hercreditscorein Here ishowhercreditmanagement Want an Example? for thesemester, andthusfar She’s gothermoneysavedup new lifefullofopportunities. at collegereadytotakeona example. Tina hasjustarrived her creditscoreisarealistic person, butwhathappensto it score.Tina isafictitious ups anddownsofTina’s cred- Meet Tina. B- Take alookatthe EAIRO CINI CR IOSOESCORECURVE FICOSCORE INSCORE BEHAVIOR ORACTION two years, her credit is once again excellent. two years,hercredit isonceagain paid herbillsontimeforasolid also has she since and, graduation, to usethemspontaneously. Tina pays offalmost all of her debt by urge the limit her credit.Shetapescreditcards into herwalletto Tina doessomeself-reflection anddecidestotakebettercontrol of her cardssparinglyfortherestof schoolyear. the minimumpaymentoneachcreditcardeverymonthandbyusing Tina worksveryhardtopaydownherdebtsbypaying$50morethan due ontimebothcardsfortherestofyear. She makesupthelatepaymentandpaysjustminimumamount takes thebusuntilshecansaveenoughmoneytobuyanothercar. “no” andtheotheroffersherahighinterestloanat29%APR.She look athercreditscoreandrecord.Onelendersimplysays To buyacar, Tina needsaloan.Sheapplieswithtwolenderswho In December, Tina’s old,uninsuredcaristotaledwhen atreefallsonit. is $100and30dayspastdue. has moved,soherpaymentonaccount,includinglatefees, In October, Tina forgetstotellonecreditcardcompanythatshe get toherjob.Thebillmaxesoutbothcards. In September, Tina’s carneedsmajorrepairssoshecan She workshardandpaysoffherbalanceonfirstcard. SUMMER Tina appliesforandgetsasecondcreditcard. the yearends. She paystheminimumbalanceeverymonthontimeuntil for allherfriendsandmaxesoutcard. Tina startsSpringBreakinagreatmood.Shethrowsparty every month. She paysatleasttheminimumdueassoonbillarrives She breaksitinbybuyingherbooksandsuppliesoverthesemester. Her newcreditcardarrivesinthemailwitha$1000limit. The FICO Credit scoring informationusedhere isprovidedcourtesy ofFair, Isaac andCompany, Inc. ® scores cited inTina’s story aresimplifiedforpurposes ofillustrationand are hypothetical.Your actual scores maydiffer. HNECRETTHE CREDIT CHANGE CURRENT 10800 +180 10770 +100 670 +70 600 +110 10490 -130 620 -180 10600 -180 3 630 +30 1 620 -10 780 — 490 0