3. Welcome!
Understanding credit is an important
step toward making better financial
choices. With the Quicken Loans
Smart Credit Guide, you’ll understand
how credit works and how you can
get and maintain good credit.
At Quicken Loans, we believe that
when you know all your options and
how each one effects your credit,
you’re in a much better position to
make the right financial decision.
Quicken Loans is America’s #1 Online
Mortgage Lender, and one of the largest
home loan lenders in the country. We
help thousands of homeowners every year
realize their financial dreams with the right
home financing for their situation.
Quicken Loans and The Smart Credit Guide
will help you take care of your good credit.
If your credit has suffered for whatever
reason, we will give you the tools you need
to get back on track – all you will need is
discipline and desire.
3 SMART CREDIT GUIDE QUICKENLOANS.COM I 800-QUICKEN LOANS
4. What is credit?
Think of credit as a lender’s confidence Quicken Loans lends you money because
we believe you will pay it back. This belief
in your ability and intention to pay back is based on a number of things: your
income, the amount of debt you already
the money you’re asking to borrow have, how much you’ve borrowed in the
from them. past, and your payment history, to name a
few.
Like all lenders, we charge a fee to borrow
money. That fee is interest. The rate at
which we charge interest (interest rate)
also depends on your income, the amount
of debt you already have, etc. Because of
these variables, not everyone will get the
same interest rate, or be able to borrow
the same amount of money.
Credit makes it possible for you to pur-
chase things that you could not ordinarily
pay for with cash - big ticket items such
as cars and houses. Without credit, most
people would not be able to afford these
things without years of scrimping and
saving. Your credit is a valuable asset that
needs to be managed carefully.
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5. Credit Bureaus & Credit Reports
A credit bureau (also called a credit
reporting agency) gathers, maintains,
and sells information about your credit
history. It collects information about your
payment habits from banks, savings and
loans, credit unions, finance companies,
and retailers. That information is gathered
into credit reports that are used by
creditors or lenders.
Here are the three main credit bureaus or
Your credit report contains your credit history. It includes all
reporting agencies. Contact one of them
of your loan and credit card accounts and details specific ac-
for your report. You can easily order online.
count information, such as the date opened, credit limit or loan
amount, balance and monthly payment. It also includes late
Equifax
payments, bankruptcies, liens, and collection agency attempts
www.equifax.com
to collect past dues amounts.
Information Service Center
P Box 740241
.O.
It’s important to maintain a good credit history. (Financial experts
Atlanta, GA 30374-0241
advise to check your credit report once a year for inaccuracies.)
1-800-685-1111
A good credit history means you’re eligible for the best rates,
whereas a poor credit history subjects you to higher rates and
Experian (TRW)
possibly being turned down for credit.
National Consumer Assistance Center
www.experian.com
A 2004 Federal law now means that you’ll soon be able to get
P Box 949
.O.
a free copy of your credit report every year from each of the
Allen, TX 75013-0949
three major credit reporting agencies. Eligibility for free yearly
1-888-EXPERIAN (1-888-397-3742)
reports is being phased in on a state-by-state basis and should
be complete by September 1st, 2005.
Trans Union Corporation
www.transunion.com
Go to AnnualCreditReport.com for more information.
Customer Disclosure Center
P Box 390
.O.
Springfield, PA 19064-0390
1-800-888-4213
5 SMART CREDIT GUIDE QUICKENLOANS.COM I 800-QUICKEN LOANS
6. What is a credit score?
Your credit score, or FICO score, is a number that reflects your financial
responsibility and helps Quicken Loans decide if you’re a good credit
risk or not. Your score is based on – but not part of – your credit report.
It’s generated at the time of request, then included with the report.
What determines my credit score?
The five factors that determine your Credit Score are:
1. Payment History (approximately 35% of your score) 4. New Credit (approximately 10%)
The factor that has the biggest impact on your score is People today tend to have more credit and to shop for credit
whether you’ve paid past credit accounts on time. However, more frequently. But opening several credit accounts in a
an overall good credit picture can outweigh a few late pay- short period of time can represent greater risk - especially for
ments, and late payments will continue to have less impact people with short credit histories. Requests for new credit
over time unless the late payment is a mortgage payment. can also represent greater risk. However, FICO scores are
able to distinguish between a search for many new credit
2. Amounts Owed (approximately 30%) accounts and rate shopping. FICO scores generally do not
Having credit accounts and owing money doesn’t mean equate your rate search with higher credit risk.
you’re a high-risk borrower. But owing a lot of money on
numerous accounts can suggest that you are financially 5. Types of Credit in Use (approximately 10%)
overextended and more likely to make some payments late Your FICO score will reflect a combination of credit cards,
or not at all. Part of the science of scoring is determining retail accounts, installment loans, finance company ac-
how much debt is too much for a given credit profile. counts and mortgage loans. While a healthy mix will im-
prove your score, it is not necessary to have one of each,
3. Length of Credit History (approximately 15%) and it is not a good idea to open credit accounts you don’t
In general, a longer credit history will increase your FICO intend to use. The credit mix usually won’t be a key factor
score. It shows that you can responsibly manage your in determining your score, but it will be more important if
available credit over time. However, even people who have your credit report doesn’t have much other information on
not been using credit very long may get high scores, de- which to base a score.
pending on how the rest of their credit report looks.
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7. Interpreting Your Score
Your credit score lists up to four reasons
why your score is not currently higher.
These reasons can be very useful in
helping you determine how you might
improve your score over time, and whether
your credit report might contain errors.
How Quicken Loans
If you already have a high score (for example, in the mid-700s or
higher) some of the stated reasons for credit concerns may not be Interprets Your Credit Score
very helpful, as they may reference the factors that have the least
At Quicken Loans we try to match your
impact on your score, such as: length of credit history, new credit and
current FICO score with the best mortgage
types of credit in use.
possible out of over a hundred loan pack-
ages that we offer. Our mortgage bankers
Here are the ten most common explanations:
take the time to evaluate your financial
situation and offer expert advice.
• Serious delinquency – You have one or more accounts with late
payments
Quicken Loans wants to be confident that
• Serious delinquency, and public record of collectionfiled – you have
one or more accounts that have gone to a collection agency your credit score is accurate. This way we
can offer you the best rates available for
• Time since delinquency is too recent or unknown– Your have one or
your situation. We will work with you to
more accounts that are recently past due
clarify errors and offer you the products
• Level of delinquency on accounts – Your accounts are 60 to 90 days
and pricing that your accurate credit his-
or more past due
tory has earned you. We help clients every
• Number of accounts with delinquency – You have numerous past day who think they can’t qualify for a
due accounts
home loan because of lower credit scores.
• Amount owed on accounts – You have too much debt
• Proportion of balances to credit limits on revolving accounts is too
high – the balance on your credit cards is too high
• Length of time accounts have been established – your credit history
is not long enough to show responsible credit management
• Too many accounts with balances – concern over your debt load
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8. Ten Ways to Improve Your Score
There are no quick fixes for improving your credit score. But you can
raise your score over time by demonstrating that you consistently man-
age your finances responsibly. Here are ten ways to raise your score:
1. Pay your bills on time. 7 Don’t open new credit card accounts you don’t need.
.
It’s the best way to improve your score, and it’s never too This approach could backfire and actually lower your
late to start. Even if you’ve had serious delinquencies in score.
the past, these will count less over time.
8. Don’t close an account to remove it from your record.
2. Keep credit card balances low. A closed account will show up on your credit report and
High outstanding debt can pull down your score. may be still factored into the score. In fact, closing ac-
counts can sometimes hurt your score unless you also
3. Check your credit report for accuracy. pay down your debt at the same time.
There may be inaccurate information on your credit report
that can be easily cleared up. (See How To Clear Up Credit 9. Shop for a loan within a focused period of time.
Report Inaccuracies.) FICO scores distinguish between a search for a single loan
and a search for many new credit lines, based in part on
4. Pay off debt rather than moving it around. the length of time over which recent requests for credit
Consolidating your credit card debt onto one card or spread- occur.
ing it over multiple cards will not improve your score in the
long run. The most effective way to improve your score is 10. Contact your creditors or see a legitimate credit coun-
by simply paying down the amount you owe. selor if you’re having financial difficulties.
This won’t improve your score immediately, but the soon-
5. Keep your credit cards - but manage them responsibly. er you begin managing your credit well and making timely
In general, having credit cards and installment loans that payments, the sooner your score will get better.
you pay on time will raise your score. Someone who has
no credit cards tends to have a lower score than someone These tips won’t create a dramatic over-
who has managed credit cards responsibly.
night jump in your credit score. Develop-
ing a solid credit history takes time.
6. Don’t open multiple accounts too quickly, especially if
you have a short credit history.
This can look risky because you are taking on a lot of pos-
sible debt. New accounts will also lower the average age
of your existing accounts, something that your FICO score
also considers.
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9. Improving Your Overall Credit
If you have a history of poor credit or think
that you might, it’s important that you find
out and then take the steps to improve it.
It will take time, but with discipline, you
may expect to see improvement in as early
as six months. Creditors are interested in
a track record. You’ll have to prove that you
consistently pay your creditors on time
and that you can effectively pay down your
debt. Here’s the simple plan:
1. Know what’s on your credit report and resolve any discrepancies.
See page 10.
2. Develop an action plan to pay your bills on time and execute it.
You can start this today, even before you take a look at your credit re-
port. Contact your creditors to review your payment options and catch
up with any late payments. Focus on ways to reduce your spending.
(See suggestions below.)
3. Stop using credit cards now. Paying down your credit card bal-
ances will not only improve your credit rating over time, but you’ll be in
a better position to negotiate a lower interest rate for your cards.
4. Do not live beyond your means. Make paying your bills and buying
only essential items your main priority. Carefully weigh the importance
of all new purchases against the grater importance of reestablishing your
good credit.
Getting a handle on your spending, paying bills on time, and paying
down credit cards takes a long-term commitment and self-control. It
won’t always be easy, but the effort will pay off once you see your
credit improve.
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10. How To Clear Up
Credit Report Inaccuracies.
It can be time consuming to rid your credit
report of mistakes, but it’s worth doing.
Start by ordering a copy of your credit re-
port to review from one of the three credit
bureaus listed on page 5.
Although most national lending institutions report consumer credit
information to all three credit bureaus, smaller banks and other credit
grantors may report only to one or even none. Therefore, your credit
report may vary from one credit bureau to another. If you’ve occasion-
ally applied for credit from smaller creditors, check your report from
all three agencies.
Look carefully. Circle anything that seems wrong, keeping in mind
that balances may be off by a few payments because recent pay-
ments may not have been recorded at the time you ordered the re-
port. Make copies.
Disputes must be made in writing, on paper, through regular mail.
Use the letter on the next page as a guide. In your letter, give a de-
tailed explanation to the best of your ability as to why the information
in your report is wrong and should be changed. You must also include
documentation that supports your assertion. For instance, if your re-
port says that a credit card is active, but you know it’s closed, you
must show proof that it’s been closed, which you may have to obtain
in writing from the credit card company. This will all take time, but it
will be worth it when your score eventually goes up, and the interest
rates you qualify for in the future go down.
Be sure to send letters to all three credit bureaus whenever you clear
up an error and also to the original creditor, such as the credit card
company in the example above. Keep copies of everything for your-
self. By Federal law, the credit reporting agencies must help you re-
solve the issue within 30 days.
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11. Sample Dispute Letter
Credit reporting agencies require that
you dispute errors in writing. For your
convenience, here’s a sample that you
can modify to fit your needs.
Date
Your Name
Your Social Security Number
Your Address
Your City, State, Zip Code
Complaint Department
Name of Credit Reporting Agency
Address City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute items that are wrongly listed on my credit report. Please see the attached copy of my
report. I’ve circled the items I am disputing.
Here are detailed explanations as to why these items should be removed or the information changed.
1. (NAME OF ITEM. DETAILED EXPLANATION):
2. (NAME OF ITEM. DETAILED EXPLANATION):
I am requesting that the above items be changed or deleted as indicated.
Enclosed are copies of documentation to support my request. Thank you for taking care of this immediately.
Sincerely,
Your name
Phone Number
Enclosures: (List of what you are enclosing)
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12. Debt Danger Signs
To carry some debt is normal. The key
is to manage and control debt – not let
debt control you. How can you tell if
your debt has become out of control?
Here’s a list of debt danger signs.
• You spend more than you earn
• Creditors call you
• You live paycheck to paycheck
• You don’t know how much you owe on your bills
• You’ve paid late fees more than twice in the last year
• You occasionally make late payments
• You pay only the minimum on your credit cards
• You put off paying one bill so you can pay another
• You argue with family members about money
• You take cash advances from credit cards to pay bills
• You make purchases impulsively
• You’ve taken money from your retirement fund to pay bills
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13. 25 Suggestions For Trimming Your Budget
“Where did my money go?” That’s the big question that many can’t answer.
We spend money on many small things that we can’t remember, but they
do add up. To know where you need to trim your budget, it’s important to
first know your own spending habits. For a two to four week period, carry
a small notebook with you and keep track of every expense, no matter how
small. Then evaluate your spending to see where you can make cuts.
1. Write down everything you spend. The waste in your 7 Eat out less. A family of four can rarely get out of any
.
daily spending will soon become apparent. Do you have non-fast food restaurant for less than $30. Cut out one res-
personal financial software such as Quicken®? With taurant visit per week and you’ll save $1,560 per year.
Quicken, it’s easy to keep track of your spending because
the program does the math for you. 8. Bring your lunch to work. Spend $7 a day and “let’s do
lunch” turns into $1,750 per year.
2. Pay off your credit card debt as quickly as possible. It’s
much more difficult to get your finances in shape if you’re 9. Raise the temperature of your air conditioning in the
paying 18 percent interest rates on your credit cards. summer and lower your thermostat in the winter. Put in
storm windows and caulk around your interior windows.
3. If you have to carry debt for a while, switch to a less Energy efficiencies can save you hundreds of dollars per
expensive card. Take advantage of the introductory rate and year.
use your monthly savings to prepay your debt as fast as
possible. 10. Cancel your local newspaper. You can read it online,
free.
4. If you can’t pay in cash, don’t buy it. If you use a charge
card to gain cash back or miles, be careful not to charge 11. Read magazines at the library.
anything that you can’t pay off at the end of the month.
12. Join a Sam’s Club or Costco. But don’t buy more than
5. Bring coffee from home instead of buying it. $3 per you need just because it seems “cheap.
”
weekday adds up to $750 per year on coffee.
13. Shop the sales and clip coupons. Some stores still
6. Give up smoking (or at least cut back). At $4 per pack double or triple the value.
or more, cutting out one pack a day will save you at least
$1,456 per year - and perhaps even more in your health and 14. Plan out your holiday spending budget in advance, then
homeowner’s insurance premiums. stick to it. Clip a note card to your credit card and write
down every amount as you purchase gifts.
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14. 15. Give fewer gifts, and be more creative about them. Con- 22. Buy your next car, don’t lease. Unless you absolutely
sider giving magazine subscriptions as a gift, which will be have to have a new car every two years, you’re generally
less expensive and last longer than other gifts. Give home- better off purchasing a car rather than leasing. And, get
made baked goods. your financing in place before you show up at the dealer’s.
16. Take public transportation, if possible. 23. Buy a used car rather than a new car. A new car in-
stantly loses value the minute you drive it off the lot. If you
17 Seek out free activities for you and your kids. Museums
. purchase a pre-owned or pre-leased vehicle, you’ll save the
usually have one “free” day each week. Look in your local depreciation and the car will likely still be under warranty.
newspaper for free events and attractions. Or, you can al-
ways take a walk or ride your bicycle. 24. Use a bank with convenient ATMs. If you find your-
self paying ATM charges because your bank doesn’t have
18. Rent a movie instead of going to the theater. An eve- ATMs that are convenient, switch. At $1-$3 per withdrawal,
ning of movies (plus snacks) can run upwards of $50 for you’re paying too much.
a family of four. Renting a moving from your local library
might either be free, or cost just $1. 25. Keep your checkbook and other accounts balanced. It’s
easy to do with financial software like Quicken® or Quick-
19. Vacation at home. Take a week off and spend it at home Books®, and you’ll always know exactly how much you
as if you were a tourist, visiting local attractions. have and where it is. And, you’ll avoid bank charges.
20. Raise the deductible on your homeowner’s and car in-
surance premiums. You may be able to shave 15-20 percent
off your annual premium cost.
21. Purchase as much insurance from the same company
as possible. Some companies will give you an additional
discount for multiple purchases.
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15. Identity Theft.
What to do about it.
Identity theft is, disturbingly, all too common. 1. Contact the fraud departments of any
one of the three major credit bureaus (see
When someone steals your identity they are page 5). Ask them to place a fraud alert on
taking your personal information, like your your credit file. The fraud alert asks credi-
tors to contact you before opening any new
Social Security number, credit card numbers accounts or making any changes to your
existing accounts. As soon as the credit
or driver’s license number, and using it to
bureau confirms your fraud alert, the other
commit fraud, make purchases and access two credit bureaus will be automatically
notified to place fraud alerts, and all three
bank accounts.
credit reports will be sent to you free of
charge.
Identity theft is a serious crime. It’s one that leaves victims
2. If possible, close the accounts that you
spending months or even years and a lot of money picking
know or believe have been tampered with
up the pieces of their shattered credit. Victims can be denied
or opened fraudulently. Use the ID Theft
loans for houses, cars, lose out on job opportunities and
Affidavit when disputing new unauthorized
even get arrested for crimes they didn’t commit.
accounts. (Find a copy of the ID Theft Af-
fidavit on www.consumer.gov/idtheft/.)
What do you do if you think your identity has been stolen?
Here are some basics. For a more in depth look at preventing
3. File a police report. Get a copy of the re-
idenity theft and repairing identity that has been tampered
port to submit to your creditors and others
with, go to www.consumer.gov/idtheft/.
that may require proof of the crime.
4. File your complaint with the FTC. The
FTC maintains a database of identity theft
cases used by law enforcement agencies
for investigations. Filing a complaint also
helps them learn more about identity theft
and the problems victims are having so
that they can better assist you.
You might also consider one of the sub-
scription credit watch services that moni-
tor your credit report for unusual activity.
These services will alert you when they
suspect that your credit is being abused.
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16. Quicken Loans
Mortgage Programs
Quicken Loans’ exclusive mortgages
are powerful mortgage programs that
give you more refinance and purchase
options. Our mortgage programs can
also help you manage your debt. For
instance, we can show you ways to
consolidate high-interest debt into a
lower interest mortgage by refinancing.
With our exclusive selection of home
loans, you can get:
• Easy approval even with less-than-perfect credit
• Approved before you shop – giving you extra
negotiating power
• Fast approval for refinancing. Fast closing
• Easy access to your home equity
• Payments up to 45% lower with interest-only options
• Jumbo loans without jumbo rates
• Low or no down payment options
• Low or no cash at closing options
• No pre-payment penalties
16 SMART CREDIT GUIDE QUICKENLOANS.COM I 800-QUICKEN LOANS
18. How Quicken Loans Can Help You
Quicken Loans is America’s #1 online
lender and the country’s fastest grow-
ing mortgage company. Every year we
help put hundreds of thousands of dol-
lars back into our client’s pockets with
lower rates, lower payments and innova-
tive home financing that no other lenders
have. It’s no wonder that nine out of ten
of our clients say they’d refer us to their
friends and family.
Find out why the folks at Quicken Loans
Quicken Loans is ready to help you. We have expert advice, great
really are America’s Home Loan Experts.
rates and a mortgage process that’s exceptionally quick and easy
– from application to close. We can help you purchase a home,
1-800-QUICKEN LOANS
refinance your existing mortgage and access your home’s equity
– even if you have less-than-perfect credit. Homebuyer Customer Care Team
1-800-796-4711
Call Quicken Loans today. You’ll be sure of two things – you’ll have
Monday - Friday 8am - 6pm EST
an outstanding home mortgage experience, and you’ll be happy to
www.quickenloans.com
tell your friends and family about Quicken Loans.
18 SMART CREDIT GUIDE QUICKENLOANS.COM I 800-QUICKEN LOANS
