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2) Scores help to forecast specific risk levels associated with individuals. On a

national level, credit scores are as follows;

a. 700 and above - 60% of population
b. 650-699-16% of population

c. 600-649-11% of population

d. Under 600-13% of population

There are about 50 factors that contribute to credit scores, but the most important factors that contribute to credit score are as follows1:

1) Repayment History - 35% of score

a. Payment information on specific types of accounts.

b. Severity of delinquencies.

c. Time since last past due item.

d. Number of past due items.

e. Number of accounts paid as agreed.

2) Amount of credit owing – 30% of score
a. Includes amount due on loans.

b. Amount on specific types of loans.

c. Numbers of loan accounts with balances.

d. Lack of a specific type of account in some cases.

e. Proportion of balances due compared to original loan amounts.

f. Proportion of credit lines used and capacity to borrow.

3) Credit History - 15% of score

a. How long have you had credit.

4) New Debt - 10% of score

5) Credit Mix - 10% of score

Impact of Credit Scores

Credit scores can be used in several ways. At the Summit Federal Credit Union we use them as follows:


Automatic Approval - At The Summit Federal Credit Union we use credit scores to facilitate automatic approval of loans (no loan officer interaction), but do not use credit scores as an automatic rejection of loans. If a score is lower, it guarantees that the application must be reviewed and handled by a loan officer.

'U.S. News & World Report, February 5, 2001, Personal Finance: Credit Score Card

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Loan Rate - We have used credit scores to predict risk and to assign loan rates for over five years, and have a significant statistical sample to use in the evaluation of the success of this program. Those members with higher scores will get lower loan rates. In general, members who have historically paid their debts, and managed credit well will get the best rates. We use a combination of our actual experience and national data for those borrowers with similar scores to set rate margins annually.

a. Loan Rates offered as of May 31, 2003:

i. "A" Rates - 680 and up - best rate

ii. "B" Rates - 660-679 - best rate + 1.00%
iii. "C" Rates - 620-659- best rate + 1.75%
iv. "D" Rates - 580-619 - best rate + 3.00%

v. "E" Rates - 580 and below - best rate + 8.00%

b. Statistically Valid

Our top scoring members have delinquent ratios, as

i. "A" rates - 680 + up -0.13% Delinquency; 0.11% Charge Offs
ii. "B" rates - 660-679 -0.23% Delinquency; 2.11% Charge Offs
iii. "C" rates - 620-659-1.65% Delinquency; 1.73% Charge Offs
iv. "D" rates -580-619-1.65% Delinquency; 3.75% Charge Offs
v. "E" rates - under 580 - 20.29% Delinquency; 11.31% Charge Offs

Consumers and Credit Score

In general, people know that when they do not manage their debts properly, that fact will show up on their credit report and hurt their "credit rating". But, there is very little knowledge on the part of consumers regarding the existence of credit scores, how they are used in determining rates, and how they can be improved upon. Even lenders cannot tell consumers all of the specifics, as some of the information is proprietary. We have sent people from our staff to seminars, and we have passed such information on to our members in response to inquiries.

Ideally, we would like to establish a new program at The Summit Federal Credit Union to educate our members to some degree on their credit scores. Today it is only being done on a case-by-case basis as members ask for an explanation. Our vision is to educate staff and then to advertise the service.


NAFCU believes that the state of the credit union community is strong and the safety and soundness of credit unions is unquestionable. Nevertheless, we urge the Subcommittee to carefully assess this issue and reauthorize the preemptions included in the FCRA. We understand that there is much work to be done by the Subcommittee and we urge the Subcommittee to undertake a careful examination of what other measures fall within the scope of this legislation that will address the concerns we have articulated.

NAFCU thanks the Subcommittee for the opportunity to make this statement before you today and commends the House Financial Services Committee for examining these important issues. We look forward to working with you on this important piece of legislation and would welcome your comments or questions.

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House Committee on Financial Services
Subcommittee on Financial Institutions
and Consumer Credit



"The Role of FCRA in the Credit Granting Process"

Good morning, Chairman Bachus, Ranking Member Sanders, and Members of the Subcommittee. My name is Martin Wong and I am the General Counsel of Citigroup's Global Consumer Group. Citigroup thanks Chairman Bachus and Chairman Oxley for their leadership in holding these hearings on the Fair Credit Reporting Act ("FCRA") and I appreciate the opportunity to speak before you today to discuss how FCRA impacts our ability to operate efficiently and serve our over 200 million customer accounts.

As one of the largest diversified financial services companies in the United States, Citigroup has extensive experience with FCRA and has a significant interest in seeing that it continues to operate successfully. Citigroup currently serves customers in all fifty states and over 100 countries across the globe. Citigroup has long been a leader in using the information available through the credit reporting system to provide credit opportunities to customers of all different income levels through a diverse range of financial products and services, including credit cards, mortgages, consumer finance, student loans, and auto loans. We also offer non-credit products, including retail banking, private banking, life insurance and annuities, asset management, and investment products.

Today, I want to emphasize the importance that Citigroup attributes to reauthorizing the national standards contained in FCRA. FCRA provides a national framework for the credit reporting system, which has been shown to work well and to provide substantial economic benefits to consumers. It appropriately balances a wide range of consumer protections with the crucial need for creditors to have access to a uniform national database on which to make credit decisions. It is essential, therefore, that Congress act to preserve the national framework that is scheduled to expire at the end of this year.

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