Credit score presentation

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The Power Is Now First Time Home Buyer Live Seminar Eric L. Frazier MBA President and CEO CAL BRE 01143485 NMLS 461807 800-401-8994 x 703

The Power Is Now Inc. CAL BRE 1980407 NMLS 1435243

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Eric L. Frazier MBA President and CEO CAL BRE 01143485 NMLS 461807 800-401-8994 x 703 The Power Is Now Inc. CAL BRE 1980407 NMLS 1435243

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INTRODUCTION The Power Is Now Inc.  The Power Is Now is a multimedia company has been around since 2009  The Power Is Now Inc. is licensed to sale real estate CAL BRE 1980407

 The Power Is Now Inc. is license to broker mortgage loans NMLS 1435243  Founder and Broker Eric L. Frazier MBA CAL BRE 01143484 & NMLS 461807 As a Mortgage Brokerage, The Power Is Now Mortgage Services has access to many lenders that offer programs for first time homebuyers, move up buyers, investors, churches, non-profits and foreign nationals. We are a full service mortgage brokerage.

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MISSION The mission of the Power of Now Inc., is to inspire, educate, and empower real estate professionals, and consumers to build wealth through real estate with information, services and support that will give them the power to act now for their future.

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VISION The vision of the Power is Now is to be a powerful resource for real estate professionals, and consumers to buy and/or sell real estate to achieve their personal, family and business goals to build wealth and leave an inheritance and legacy for their family.

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OUR COMPANY SLOGAN IS OUR NAME The Power Is Now! We are at our best and we maximize our success when we act now.

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THE PATHWAY TO POWER AND WEALTH Is To Own Real Estate Now!

THE POWER IS NOW WEALTH INITIATIVE www.neverrentagain.com Building Wealth with Real Estate

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THE POWER IS NOW WEALTH INITIATIVE Changing your mindset toward financial literacy and wealth building. www.neverrentagain.com FIVE KEY OBJECTIVES

THE POWER IS NOW WEALTH INITIATIVE • 1.

Five Objectives: Knowledge - Knowledge is the Power you need to build wealth. 

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Commitment to Financial Independence – We must take Individual responsibility for our lives. 

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Knowledge always comes before money or the money will soon be gone.

Commitment requires disclipine and discipline requires a budget and accountability

Investment in real estate - We must prioritize ownership in real property as opposed to personal property. 

Real Property appreciates. Personal property depreciates.

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THE POWER IS NOW WEALTH INITIATIVE 4.

Financial and Credit Management - We must live within our means and not abuse credit.  

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Credit is not income - It is a convenience for cash.

Good credit is the beginning of building wealth. Good credit is a Fico Score of 720 to 799 higher. Great credit is 800 to 850.

Creating Wealth - We must save money to buy real estate & other assets that appreciate in value.  

Buy and Hold, or Buy, Sell and Buy again and hold - building a legacy of wealth.

We must be intentional about leaving a legacy of wealth and an inheritance for our family.

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10 POINT WEALTH BUILDING PLEDGE www.thepowerisnow.com 17

THE STATE OF HOUSING ON THE DECLINE FOR AFRICAN AMERICANS 18

Research Study on the Wealth Gap Brandeis University Institute of Asset and social Policy

RESEARCH AND POLICY BRIEF FEBRUARY 2013 The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide

Authored by: Thomas Shapiro Tatjana Meschede Sam Osoro 19

RESEARCH STUDY ON THE WEALTH GAP Data for this analysis was derived from the Panel Study of Income Dynamics (PSID), a nationally representative longitudinal study that began in 1968.

They followed nearly 1,700 working-age households from 1984 through 2009.

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RESEARCH STUDY ON THE WEALTH GAP â—? The goal of the study was to examine the effect of policy and institutional decision-making on how average families accumulate wealth.

â—? There was a insufficient number of Latino, Asian American, or immigrant households to include in this report but the results can be applied across communities of color.

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MEDIAN WEALTH In 2009, a representative survey of American household revealed That the median wealth of: White families - $113,149 Latino families- $6,325 Black families - $5,677 The Gross Domestic Product of African American is 1.3 Trillion dollars and 1.5 Trillion dollars for Hispanics.

Why is the median wealth so low?

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YOUR POWER IS NOW TO BUILD WEALTH You're not building wealth if you use all your money for consumption.

The GDP of African American is 1.3 Trillion dollars (13 out of 182 countries) The GDP for Hispanics is 1.5 Trillion dollars (10 out of 182 countries)

GREAT RECESSION AND GREAT GAP The Wealth Gap Research Report Traced the same 1700 families over a 25-year period (1984-2009) and found that the total wealth gap between White and African-American families nearly tripled, increasing from:

• $85,000 in 1984 to $236,500 in 2009

The Wealth Gap: $152,000 and growing 24

THE STATE OF HOUSING FOR MINORITIES •

The Black/Brown-White Economic Divide Real

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African American and Hispanic communities were hit the hardest by the Great Financial Crises from 2007 to 2009

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They have the farthest to climb to get back into the home ownership before home values get back to their pre-recession prices.

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It may be too late for many because interest rates will be rising and home prices are increasing now.

1994 Blacks & Hispanic Homeownership Rates: 40 & 42% respectively.

2004 Blacks achieved a high of 50% 2014 Blacks were at 42.5% and Hispanics 43.5% Hispanics.

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LESSONS LEARNED - GREAT FINANCIAL CRISIS 1. We must save money – Make it your #1 priority now and not later.

2. We must live on a budget – Do not live by hope & faith and beyond your means 3. We must establish an emergency fund – Plan for the worse & expect emergencies.

LESSONS LEARNED - GREAT FINANCIAL CRISIS 4. Stop financing vehicles - Pay cash or limit financing to 12 mos.

5. Become debt free – Save & Buy Stop Borrowing and Buying 6. Buy real property – Buy a house before you buy an expensive car/personal item.

THE STATE OF HOUSING FOR MINORITIES •

The homeownership rate in the U.S. is 63.5 percent overall. The rate among whites is 72.2%, Asians, 56.6%, Hispanic 46.3%, African Americans 41.7%

https://www.census.gov/housing/hvs/files/currenthvspress.pdf

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THE STATE OF HOUSING BY AGE •

The homeownership rate by Age of Householder. Under 35 - 34.7 percent, 35 to 44 - 58.7 percent, 45 to 54 - 69.8 percent, 55 to 64 - 74.8 percent, 65 and over - 79.5 percent.

https://www.census.gov/housing/hvs/files/currenthvspress.pdf

THE STATE OF HOUSING FOR MINORITIES •

If homeownership continues to be the primary vehicle that Minorities use to create wealth then Minorities are on the path to another Economic Crisis and homelessness!

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It’s time to take action and personal responsibility and build wealth.

WEALTH IS THE DIFFERENCE Wealth provides a measure of security when a job loss or personal crisis occurs.

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Great Recession further exacerbated the wealth gap as Blacks and Latinos disproportionally impacted by the bursting of the housing bubble.

Between 2007 and 2010, the average Black and Latino households lost three and four times more wealth, respectively, than the average White household.

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Extrapolating from past trends, we can estimate what the future of wealth inequality will look like in this country. Unfortunately, it doesn’t look good.

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WHY ARE WE BEHIND? •We have the highest unemployment rate of 8.1% compared to Latino at 5.6% and whites at 4.1%.

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WHY ARE WE BEHIND? •Today 71% of births outside of marriage is to black woman compared to 29% of births to white women.

•In 1970, 38% of all births to black women occurred outside of marriage.

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WHY ARE WE BEHIND? •50% of black children are being raised by a single parent as opposed to 19% among whites. •In 1970 35% of children where living with a black parent as opposed to 10% of white families.

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WHY ARE WE BEHIND? •We have highest level of high school drop outs, sexually transmitted disease and the highest crime than any other ethnic group in addition to the highest level of incarnation of men of any other ethnic group. •This is where we are. Today 2017.

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WHY ARE WE BEHIND? •Every freedom we enjoy today has been paid for by blood. It has been a fight for freedom for African American from our capture in Africa, the middle passage to the day we step foot on American soil we had to survive in country among people who viewed us as less than equal.

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WHY ARE WE BEHIND? In spite of these things: We are only 12% of the population, born out of slavery, poverty and our homeownership rate is 41.7 We are only12% of the population and our GDP is 1.3 Trillion 13 out of 182 Countries.

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WHY ARE WE BEHIND? •We are only 12% of the population and we leaders in sports & entertainment, business, science, medicine, education, law, engineering, computers, software development, space, military and have achieve the highest office in the land.

Can we buy a home? Of course we can!!

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CREDIT SCORES

By Eric L. Frazier MBA NMLS 461807 CA BRE 01143484

The information for the following presentation can be found on www.myfico.com. The purpose of this powerpoint is to present and elaborate on FICO Scoring as presented by Fair Isaac and Company.

AGENDA

• INTRODUCTION TO CREDIT SCORES • INFORMATION ON THE CREDIT REPORT • CREDIT SCORING MODELS • FICO • myFICO.com • FICO SCORE 8 • CREDIT SCORE FALLACIES AND FACTS • WHAT IS NOT IN MY FICO SCORE • TYPES OF CREDIT • GARDENING YOUR CREDIT • ECOA & FCRA

INTRODUCTION TO CREDIT SCORES

INTRODUCTIO N TO CREDIT SCORES

• A credit score is a numerical expression based on a statistical analysis of a borrower’s credit history to represent his/her creditworthiness, which is the likelihood that the borrower will pay his/her debts in a timely manner.

• A credit score is primarily based on credit report information obtained from credit bureaus and credit reference agencies.

INTRODUCTIO N TO CREDIT SCORES

• Lenders use credit scores to evaluate the potential risk posed by lending money and to mitigate losses due to bad debt. Lenders also use credit scores to determine who qualifies for a loan, at what interest, and what credit limits. • Credit scoring is not limited to lending. Other organizations, such as mobile phone companies, insurance companies, and potential employers are examples of other users of credit scoring.

INTRODUCTIO N TO CREDIT SCORES

• A credit score is primarily based on credit report information typically from the three credit bureaus: Experian, TransUnion and Equifax which are differing approaches to calculating credit scores

What Makes up a Credit Score?

Credit Scoring Models

• Vantage Score SM, a new credit scoring system developed by the three credit bureaus, ranges from 350 to 850.

• FICO® Scores were first introduced to lenders over 25 years ago in 1989. FICO scores had no real competition until 2006, when the three major credit reporting bureaus — Experian, TransUnion and Equifax — jointly developed an algorithm to produce a new score. Initially, their VantageScore was on a different scale than FICO, but the most recent revision has a 300-850 scale, just like FICO’s.

Credit Scoring Models

• How VantageScore and FICO scores differ: • If your credit report has little to go on, you’re more likely to have a VantageScore than a FICO score, because VantageScore uses alternative data and looks back 24 months for activity. (FICO 8, the most widely used version, looks back only six months.)

Credit Scoring Models

• Another difference is that some consumers who can’t be scored by FICO because of a limited credit history can still get a VantageScore, because the latter takes into consideration recurring payments such as utilities, rent or phone bills.

• However, FICO is working with partners Equifax and LexisNexis Risk Solutions on an alternative score called FICO XD, which will also factor in alternative data.

Credit Scoring Models

• VantageScore also: • Ignores paid collections (as does the new FICO 9, which is not as widely used as FICO 8) • Weights late mortgage payments more heavily than other late payments, though all can damage your score • Allows just 14 days for rate-shopping for a car or mortgage (counting all inquiries in that time as one), compared with 45 days for FICO • Makes allowances for consumers affected by natural disasters

FICO®

• In the time since 1989 those first versions of FICO® Scores were used by lenders, there has been a lot of changes in lender credit granting practices, consumer demand for and use of credit, as well as data reporting practices.

FICO®

• As a result, FICO has redeveloped its credit scoring models several times to make sure they are accurate predictors of credit risk.

• FICO new versions of FICO® Score models are an attempt to keep pace with changing consumer credit behaviors, include FICO's newest analytic technology, and data reporting enhancements.

FICO®

• FICO releases these new FICO® Score versions to the market and each lender then determines if and when it will upgrade to a new version of the score.

• Some lenders migrate relatively quickly while others can take several years to make the upgrade. As a result, there are lenders currently using different FICO® Score versions.

• FICO Score 9 is out now but the most commonly use Model FICO 8.

FICO®

• A great example phones and computer operating systems: • Everyone has a different versions of Microsoft Windows: Window’s 8 to Window’s 10.

• Everyone has a different generations of a smart phone. Samsung note 5 to note 8. All these versions have the same base functionality, but each version also has unique updated features to meet evolving user needs.

FICO®

• The various FICO® Score versions in use today have a similar underlying foundation.

• They identify higher risk people from lower risk people but every time a FICO Score is updated it incorporates unique features, leverages new risk prediction technology, and reflects more recent consumer credit behaviors.

• The result is a more predictive credit score that helps lenders make more informed credit decisions but it also hurt the consumer who could benefit from the changes because most lenders do not update immediately.

myFICO.COM

• So if you want to know what your real score is you have to go to myFICO.com and see all FICO’s products including FICO® Score 8, • Regardless of the FICO® Score versions, the keys to responsibly managing FICO® Scores remain the same: • Pay bills on time • Keep credit card balances low • Open new credit accounts only when needed

FICO® Score 8

• How is FICO® Score 8 different from previous versions?

• The foundation of FICO® Score 8 is consistent with previous versions, but there are several unique features that make FICO® Score 8 a more predictive score: High credit card usage • While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

• Keeping credit card balance low can help maintain or improve the score.

FICO® Score 8

Isolated late payments • If a lender reports to the credit bureau that you were at least 30 days late with your payment, it will likely result in a loss of points with all FICO® Score versions. If the late payment is an isolated event and other accounts are in good standing, FICO® Score 8 is more forgiving compared with previous FICO® Score versions.

• However, if the credit report shows numerous late payments, the reverse is true and FICO® Score 8 will likely lose more points.

Authorized user of credit card • All FICO® Score versions include authorized user credit card accounts when calculating a score. This can help people benefit from their shared management of a credit card account. It also helps lenders by providing credit scores that are based on a full snapshot of the consumer's credit history.

FICO® Score 8

Purchasing or Renting Tradelines • To protect lenders and honest consumers, FICO® Score 8 substantially reduces any benefit of so-called tradeline renting. Tradeline renting is a credit repair practice that entices consumers into being added to a stranger's credit account in order to misrepresent their credit risk to lenders.

Small-balance collections accounts • FICO® Score 8 ignores small-dollar "nuisance" collection accounts in which the original balance was less than $100.

Credit Score Facts and Fallacies

Credit Score Facts and Fallacies

• Fallacy: A score determines whether or not I get credit.

• Fact: Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history.

• Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your FICO® Scores are low, or decline your request for credit although your FICO® Scores are high.

http://www.myfico.com/CreditEducation/Fac tsFallacies.aspx

Credit Score Facts and Fallacies

• Fallacy: A poor score will haunt me forever.

• Fact: Just the opposite is true. A score is a “snapshot” of your FICO® Scores at a particular point in time. The FICO® Scores change as new information is added to your bank and credit bureau files and as you change the way you handle credit.

• For example, past credit problems impact your scores less as time passes. Therefore by taking the time to improve your scores now, you can qualify for more favorable interest rates later.

http://www.myfico.com/CreditEducation/FactsFallacies .aspx

Credit Score Facts and Fallacies

• Fallacy: Credit scoring is fair to minorities • Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included but the unintended consequences of FICO is that it discriminates against minorities.

• http://racism.org/index.php/articles/basicneeds/economic-issues-and-race/1722creditscoring001 • In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering gender, race, nationality and marital status when issuing credit.

But it is the Lenders utilization of FICO that is having a disparate impact.

• Scoring has proven to be an inaccurate and inconsistent measure of repayment for all people who have some credit history. What did lenders do before 1989?

Credit Score Facts and Fallacies

• Until only a few decades ago, communities and people of color were explicitly excluded from access to low-cost government and other mainstream loans.

• In the 1930s, the Home Owners Loan Corporation (HOLC) used blatant discriminatory rating systems and "residential security maps" to deem communities of color to be high risk.

• The Federal Housing Authority (FHA) and Veterans Administration (VA) continued this discrimination into the 1950s.

• Banks, real estate agents, appraisers, and others also perpetuated redlining and segregation in the housing markets.

Credit Score Facts and Fallacies

• The passage of the federal Fair Housing Act of 1968 improved conditions, but federal regulatory agencies refused to acknowledge their enforcement responsibilities under the Act until the mid 1970s. • It was not until civil-rights groups sued the agencies that the federal government began to collect information on the mortgage-lending practices of the institutions it regulated, and to establish and implement fair-lending examination procedures. • What does the HMDA reflect? That we are not lending to African American or Latinos.

Credit Score Facts and Fallacies

• Instead of accessing mainstream credit available to white borrowers and white neighborhoods, people of color were relegated to using fringe lenders and paying much more than they would have had to otherwise. Subprime lending and Great Financial Crisis was devastating the minority community. • While segregation and housing discrimination have abated somewhat, we still live in an extraordinarily segregated society. Access to credit is even now often based on where we live rather than our individual ability to repay that credit.

Credit Score Facts and Fallacies

• Fallacy: Credit scoring infringes on my privacy.

• Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information.

• Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.

Credit Score Facts and Fallacies

• Fallacy: A score will drop if I apply for new credit.

• Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report.

• Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

What's not in my FICO Scores

What's not in my FICO Scores

• Your race, color, religion, national origin, sex and marital status • US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act • Your age • Other types of scores may consider your age, but FICO Scores don't.

• Your salary, occupation, title, employer, date employed or employment history • Lenders may consider this information, however, as may other types of scores • Where you live

What's not in my FICO Scores

• Any interest rate being charged on a particular credit card or other account.

• Any items reported as child/family support obligations • Certain types of inquiries (requests for your credit report) • Your scores do not count: • “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it.

• They also do not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them • Requests that are marked as coming from employers are not counted either • Any information not found in your credit report • Any information that is not proven to be predictive of future credit performance • Whether or not you are participating in a credit counseling of any kind

Types of Credit

TYPE OF CREDIT

• Credit mix determines 10% of a FICO Score • FICO® Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It's not necessary to have one of each, and it's not a good idea to open credit accounts you don’t intend to use.

• The credit mix usually won’t be a key factor in determining your FICO Scores—but it will be more important if your credit report does not have a lot of other information on which to base a score.

• Have credit cards – but manage them responsibly • Having credit cards and installment loans with a good credit history will raise your FICO Scores.

• People with no credit cards tend to be viewed as a higher risk than people who have managed credit cards responsibly.

TYPES OF CREDIT

• What types of credit accounts you have?

• Do you have experience with both revolving credit and installment type accounts, or has your credit experience been limited to only one type?

• How many types of credit accounts • Your FICO® Scores also look at the total number of accounts you have. How many is too many will vary depending on your overall credit picture.

• Closing an account doesn’t make it go away • A closed account will still show up on your credit report, and related credit history will be considered by your FICO Scores.

What Makes up a Credit Score?

Gardening Your Credit

Gardening Your Credit

• We live in a world where credit is everywhere. We’re offered a credit card or new mortgage rate every time we turn on the TV, check email or even buy a new shirt.

• It’s so frequent and accessible, it’s easy to forget the potential impacts on your credit rating. Yes, getting approved can feel like an accomplishment worth celebrating.

Gardening Your Credit

• But immediately after you’ve been approved for new credit, it’s possible for FICO Scores to temporarily drop.

• This could be for a number of reasons, such as the fact that you have a new hard inquiry on your reports or because you now have a new loan or credit card with no history of payments yet.

• Applying for multiple new lines of credit at once can have an even more substantial impact.

• If this sounds like you, it might be a good time to focus on gardening your credit.

Gardening Your Credit

• What is gardening?

• Gardening your credit simply means that you are refraining from applying for new credit or taking any actions that might result in a hard inquiry. You’ve planted the seeds of new trade lines, now it’s time to water them and let them grow • It’s important to approach this tactic with a goal in mind. Are you hoping to establish a history of on-time payments? Are you waiting for negative information to “fall off” your credit reports? Are you simply waiting for your accounts to age?

• Once you’ve chosen a goal and timeline, all you have to do is stick with it! Don’t apply for new credit and keep an eye on your reports and scores.

Gardening Your Credit

• Why garden?

• The purpose of gardening is to nurture your new trade lines and, ultimately improve your FICO® Scores. Credit data is complex, so there is no guarantee that gardening will raise your scores the way you envision. Each credit profile is different, and FICO Scores consider many different behaviors.

• However refraining from new credit applications and waiting for new accounts to age can be a healthy choice for people who have a habit of applying for new credit often.

The Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA)

• The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant you credit.

• The ECOA protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law.

Businesses applying for credit also are protected by this law.

• Your rights under the Equal Credit Opportunity Act: • You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.

• You have the right to have reliable public assistance considered in the same manner as other income.

• If you are denied credit, you have a legal right to know why.

The Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA)

• The Fair Credit Reporting Act (FCRA) is designed to help ensure that credit bureaus furnish correct and complete information to businesses to use when evaluating your application.

• Your rights under the Fair Credit Reporting Act: • You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.

• You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.

• Any company that denies your application must supply the name and address of the credit bureau they contacted, provided the denial was based on information given by the credit bureau.

• You have the right to a free copy of your credit report when your application is denied because of information supplied by the credit bureau. Your request must be made within 60 days of receiving your denial notice.

• If you contest the completeness or accuracy of information in your report, you should file a dispute with the credit bureau and with the company that furnished the information to the bureau. Both the credit bureau and the furnisher of information are legally obligated to investigate your dispute.

• You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

CREDIT SCORES

By Eric L. Frazier MBA