Creditthe impact of today’s economy on approvability

The Problem:

Consumers are being squeezedConsumers are being squeezed

The Problem:

Consumers are being squeezedConsumers are being squeezedReduced Qualification

The Problem:

Consumers are being squeezedConsumers are being squeezedReduced Qualification

Reduced Lines

The Problem:

Consumers are being squeezedConsumers are being squeezedReduced Qualification

Reduced Lines

Tighter Guidelines

The Solution

• Do Your Homework

The Solution

• Do Your Homework

• Develop a Plan

The Solution

• Do Your Homework

• Develop a Plan

• Monitor your Results

So What are Lenders So What are Lenders really looking for?really looking for?

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ ScoreLenders today look at much more than just your credit.

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ Score

MD

S™ Score

MD

S™ Score

Lenders today look at much more than just your credit.

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ Score

MD

S™ Score

MD

S™ Score

Lenders today look at much more than just your credit.

Time i

n Biz

Time i

n Biz

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ Score

MD

S™ Score

MD

S™ Score

Lenders today look at much more than just your credit.

Time i

n Biz

Time i

n Biz

Public RecordsPublic Records

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ Score

MD

S™ Score

MD

S™ Score

Lenders today look at much more than just your credit.

Time i

n Biz

Time i

n Biz

Public RecordsPublic RecordsU

tilizationU

tilization

What DeterminesWhat Determines Perfection? Perfection?

FICO™ Score

FICO™ Score

MD

S™ Score

MD

S™ Score

Lenders today look at much more than just your credit.

Time i

n Biz

Time i

n Biz

Public RecordsPublic RecordsU

tilizationU

tilization

PayDex™

PayDex™

What is the What is the importance of importance of

FICO®?FICO®?

FICO™ is all about managing riskFICO™ is all about managing risk

FICO™ accurately predicts defaultsFICO™ accurately predicts defaults

FICO™ accurately predicts defaultsFICO™ accurately predicts defaults

The national average The national average FICO score is currentlyFICO score is currently

850

800

750

700

650

600

550

500

450

400

350

300

The national average The national average FICO score is currentlyFICO score is currently

850

800

750

700

650

600

550

500

450

400

350

300

678678

What about other scoring models?What about other scoring models?

What about other scoring models?What about other scoring models?

300-850The FICO™ score range is copyrightedThe FICO™ score range is copyrighted

What about other scoring models?What about other scoring models?

Only the FICO™ is currently used by

300-850The FICO™ score range is copyrightedThe FICO™ score range is copyrighted

Are Credit Bureaus all the Same?

Are Credit Bureaus all the Same?

• CRAs provide raw data, resellers package it

Are Credit Bureaus all the Same?

• CRAs provide raw data, resellers package it• Not everyone reports to every bureau

How is FICO® How is FICO® Calculated?Calculated?

FICO Calculation - WeightsFICO Calculation - Weights

10% - New Credit

FICO Calculation - WeightsFICO Calculation - WeightsFICO Calculation - WeightsFICO Calculation - Weights

15% - Age of Credit

10% - Types of Credit Used

FICO Calculation - WeightsFICO Calculation - Weights

FICO Calculation - WeightsFICO Calculation - Weights

30% - Amounts Owed30% - Amounts Owed

FICO Calculation - Weights

35% - Payment History35% - Payment History

FICO Calculation - Scorecards

A series of “Scorecards” are run through to determine a final score.

FICO Calculation - Scorecards

Scorecards start at zero and points are added, not the other way around.

FICO Calculation - Scorecards

There are scorecards for different topics, such as inquiries, delinquency, and utilization.

Here’s a Here’s a ProblemProblem

Limit Reductions

You have a net credit limit of $30,000.

You pay on time and have a total balance of $10,000.

Limit Reductions

You have a net credit limit of $30,000.

You pay on time and have a total balance of $10,000.

You have a utilization rate of33%

Limit Reductions

To minimize risk, your bank reduces your limit from $30,000 to $20,000.50%.

Limit Reductions

To minimize risk, your bank reduces your limit from $30,000 to $20,000.50%.

Your utilization rate is now50%

Because of your higher utilization rate, your FICO® score drops.

Because of your higher utilization rate, your FICO® score drops.

Because of your lower score, other lenders reduce their lines as well.

Because of your higher utilization rate, your FICO® score drops.

Because of your lower score, other lenders reduce their lines as well.

Your utilization spikes, so now you are not only maxed out on your lines, but you cannot apply for

new lines because your credit has dropped.

Here’s a Here’s a SolutionSolution

Consumers need a new STRATEGY

Home Equity has dried up, friends and family have Home Equity has dried up, friends and family have limited funds, and lines of credit are too difficult to get.limited funds, and lines of credit are too difficult to get.

• Old

Get what you Get what you WWANTANT

• Short-Term financing is the new option

Get what you Get what you WWANTANT

• Short-Term financing is the new option–Merchant Cash Advance

Get what you Get what you WWANTANT

• Short-Term financing is the new option–Merchant Cash Advance– Factoring

Get what you Get what you WWANTANT

• Short-Term financing is the new option–Merchant Cash Advance– Factoring– Showroom Financing

Get what you Get what you WWANTANT

• Short-Term financing is the new option–Merchant Cash Advance– Factoring– Showroom Financing– Short-Term Loans

Get what you Get what you WWANTANT

• Short-Term financing is the new option–Merchant Cash Advance– Factoring– Showroom Financing– Short-Term Loans– SBA/ARC Loans

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Manage exposureManage exposure

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Manage exposureManage exposureKnow your best time to strikeKnow your best time to strike

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Manage exposureManage exposureKnow your best time to strikeKnow your best time to strike

Check your utilization trends

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Manage exposureManage exposureKnow your best time to strikeKnow your best time to strike

Check your approvability

Rest Easier

Regularly check your approvabilityRegularly check your approvability

Manage exposureManage exposureKnow your best time to strikeKnow your best time to strike

Check what you may qualify for

About the AuthorScott Rowland is the Managing Partner of The Highly Trained Eye™, which specializes in providing training support services to businesses and training departments worldwide.

The Highly Trained Eye, LLPThe Highly Trained Eye, LLPwww.highlytrainedeye.com

603-418-0983 603-418-0983 scott@highlytrainedeye.comscott@highlytrainedeye.com