Financial Wellness Curriculum
Good Credit: Get It
More information available at YouCanDealWithIt.com
Credit Objectives
 What is credit?
 Needs vs. Wants
 Good debt vs. Bad debt
 The dangers of credit cards
 Understanding your credit report and credit score
 Eliminating credit card debt
 Debt Repayment Calculator
 Identity theft
 Free credit report
What is Credit?
Key terms:
 Annual Percentage Rate (APR)
 Fixed
 Variable
 Introductory rate
 Default rate
 Grace period
 Minimum monthly payment
 Annual fees
 Finance charge
Needs vs. Wants
Needs are the basic things that are required for your safety and health,
including food to keep you alive, clothing to keep you warm, and a shelter to
protect you.
Wants, on the other hand, are items you desire but are not critical to life.
Needs
Wants
Food
Groceries, eating in the
cafeteria
Eating Out
Clothes
Basics
Designer
Transportation
Used car, bus, subway
New sports car
Shelter
Dorm room
Apartment, House
Good Debt vs. Bad Debt
Sometimes it makes sense to borrow -- but a lot
of times it doesn't.
 Good Debt – Items that will grow in value such as a home,
education or investments.
 Bad Debt - Includes debt you’ve taken on for things you
don’t need and can’t afford by using credit cards or store
charge cards.
The Dangers of Credit Cards
Are you only making the minimum monthly payment?
If so you will end up paying almost double for your
purchase.
Amount
Borrowed
Interest
Rate
Repayment Term
Interest Paid
True Cost
$1,000
18%
153 months / 12 years
$1,115.41
$2,115.41
$2,500
18%
244 months / 20 years
$3,365.51
$5,865.51
$5,000
18%
313 months / 26 years
$7,115.42
$12,115.42
Test Your Credit Card IQ
1.
Credit cards won’t hurt my credit report if I don’t carry a
balance.
2.
I don’t have to pay any interest during my grace period.
3.
A credit card company can’t increase the interest rate if my
payments to them are always on time.
4.
Your credit report and score is something you don’t need to
worry about until you buy a house or car.
5.
Credit and debit cards are the same.
6.
Good credit can help you get a better interest rate on loans,
car insurance and even a job.
Understanding your Credit Report
POTENTIALLY NEGATIVE ITEMS
Credit Items:
123 Visa
Status:
Past due 60 days
Date Opened
10/2/2005
Reported Since
2/20/2006
Date of Status
5/1/2006
Last Reported
7/1/2006
Type
Revolving
Terms
NA
Monthly Payment
$0.00
Responsibility
Individual
Credit Limit/Original Amount
$1,000.00
High Balance
$852.27
Recent balance
$745.39
Recent payment
$0.00
ABC Bank
Status:
Past due 30 days
Date Opened
11/20/2003
Reported Since
2/20/2006
Date of Status
5/1/2006
Last Reported
7/1/2006
Type
Installment
Terms
60 months
Monthly Payment
$225.00
Responsibility
Individual
Credit Limit/Original Amount
$9,350.00
High Balance
$9,350.00
Recent balance
$6,234.08
Recent payment
$225.00
Understanding your Credit Report
ACCOUNTS IN GOOD STANDING
ADS Retail
Status:
open/never late
Date Opened
10/1/2003
Reported Since
10/1/2003
Date of Status
10/1/2003
Last Reported
11/1/2003
Type
Revolving
Terms
NA
Monthly Payment
$0.00
Responsibility
Individual
Credit Limit/Original Amount
NA
High Balance
Unknown
Recent balance
Unknown
Recent payment
$100.00
DJL Dept Store
Status:
closed/never late
Date Opened
9/1/2002
Reported Since
3/1/2003
Date of Status
5/1/2003
Last Reported
5/1/2003
Type
Revolving
Terms
NA
Monthly Payment
$15.00
Responsibility
Individual
Credit Limit/Original Amount
$500.00
High Balance
$85.00
Recent balance
$0.00 as of 5/1/2003
Recent payment
$35.00
Understanding your Credit Report
REQUESTS FOR YOUR CREDIT HISTORY
Requests viewed by others
TLC Reality Co
900 Front St
Any town, PA 1111
Date of Request
5/14/2006
AAA Department Store
P O Box 700
Some town, PA 12222
Date of Request
3/26/2006
Requests Viewed by you
One Bank
999 Walnut St
Some town, PA 12222
Date of Request
38802
National Bank
123 River Rd
Main town, PA 11333
Date of Request
11/3/2005
Understanding your Credit Report
PERSONAL INFORMATION
Names
John J Smith
John Smith
J J Smith
Jon Smith
Date of Birth
7/4/1976
Spouse's Name
Jane
Employers:
ABC Architects
Address
123 Green St
Some town, PA 11111
104 Water St
Anywhere, NJ 33333
Fixing Errors on Your Credit Report
1.
Write to the consumer reporting company and
explain what information is inaccurate.
2.
Credit bureaus will review the documentation and
if further investigation is required, they will provide a
copy to the source that furnished the disputed
information to them.
3.
The source will then review the information and
report back to the credit reporting company.
Understanding Your Credit Score
10%
Payment History
10%
35%
Amount Owed
Length of Credit
History
New Credit
15%
30%
Types of Credit
Used
The Effects of Your Credit Score
•
•
•
•
•
Eligibility for future credit
Insurance
Employment
Housing
Interest rates on future loans
Credit Score
500-589
36-month new auto
loan
18.597
16.206
48-month new auto
loan
18.598
16.206
300
590-624
625-659
660-689
690-719
720-850
12.225
9.498
7.386
6.674
12.226
9.500
7.390
6.678
850
Improving Your Credit Score
• Make your payments on time.
• Establish a long term account with a reputable
credit card company.
• Don’t take on more debt than you can handle.
• Don’t get caught up in credit repair scams.
Eliminate Credit Card Debt
1.
Track your spending
2.
Stop using your credit cards
3.
Stop new credit offers
•
Call: 1-888-5-optout
4.
Consolidate your debt
5.
Use automatic bill pay
6.
Create a budget
•
Budget a specific amount to pay on your credit cards
until ALL are paid in full.
Eliminate Credit Card Debt
Account balance: $2,500
Interest rate: 15%
Monthly Payment
Term
Interest Paid
True Cost
Minimum payment
$35.00
179 months
$3,793.07
$6,293.07
Budgeted amount
$60.00
59 months
$1,053.42
$3,553.42
120 months
$2,739.65
Monthly Payment
Term
Interest Paid
True Cost
Minimum payment
$65.00
262 months
$12,047.77
$17,047.77
Budgeted amount
$95.00
86 months
$3,202.88
$8,202.88
176 months
$8,844.89
What you save by sending
the budgeted amount
Account balance: $5,000
Interest Rate: 15%
What you save by sending
the budgeted amount
Debt Repayment Calculator
Identity Theft
 Don’t give out your Social Security Number unless you are
absolutely certain of who you are giving it to, why they need
it and what they will do with it.
 Never give out personal information on the phone to
someone who initiated the call. If you are uncertain hang up
and call the company’s headquarters.
 Examine your financial statements to ensure all charges
made are yours.
 Review and monitor your credit reports regularly.
 Shred and destroy unneeded documents that contain
personal and financial information.
Identity Theft
 Immediately report lost or stolen credit cards.
 Do not carry your social security card or birth certificate.
 Keep your ATM and Debit Card receipts, do not leave these
behind.
 Bring in your mail daily.
 Keep important documents in a safe and secure place.
Reporting Identity Theft
1.
Contact the fraud departments of any one of the three
consumer reporting companies to place a fraud alert on your
credit report.
2.
Close the accounts that you know or believe have been
tampered with or opened fraudulently.
3.
File a report with your local police and in the community
where the identity theft took place.
4.
File your complaint with the FTC.
Free Credit Reports
Request your free credit report one of these two ways:
•
Go to: annualcreditreport.com
•
Call 1-877-322-8228
This is the only authorized source for consumers to access
their annual credit report online for free.
Be sure to order from the agency listed above. If you go
directly to the credit reporting agencies, you may be charged.
Credit Objectives Recap
• What is credit?
• Needs
vs. Wants
• Good debt vs. Bad debt
• The dangers
of credit cards
• Understanding
• Eliminating
• Debt
your credit report and credit score
credit card debt
Repayment Calculator
• Identity theft
• Free credit report
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