Credit
Married My Dream Girl
Credit Quiz
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Credit Sources
Credit Cards
Mortgage/Real Estate
Bank & Savings Loans
Borrowing Against Equity
“Pay Day Loans”
Pay Day Loans – How they work
from the Federal Trade Commission alerts
Borrow $100 for two weeks
Write a personal check for $115 ($15 the fee to borrow the
money)
Lender agrees to hold your check until your next payday.
Payday comes, lender either deposits check or you roll-over
the loan and are charged $15 more to extend the
financing for 14 more days.
The cost of the initial $100 loan is a $15 finance charge and
an annual percentage rate of 391%.
If you roll-over the loan three times, the finance charge
would climb to $60 to borrow the $100.
Types of Loans
Installment Loan – Closed Credit
Repaid with interest in equal periodic
payments, ex. Car loan
Revolving Loan – Open Credit
Borrower takes out and repays loan on own
timing, ex. Credit cards
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Why do we use credit?
Convenience
Safety
Establish credit rating
Emergencies
Debt consolidation
Meet today’s needs
Permits buying when the price is right
Use goods/services while paying for them
Disadvantages of Credit
Ties up future income
Tempts overspending
Costs money
Reduces ultimate buying power
Creates a false sense of security
Goods may be lost
Repossessed
Ability to get credit - 3 C’s
Character
Capital
Capacity
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Credit Capacity
Amount you can afford to pay
each month on credit
purchases.
Evaluate your
assets and liabilities
Rule of 78s
Used to determine how each
month’s payment is broken down
into interest and principal
Rule of 78s
Based on 12 month loan
You have use of all of the money the first
month
During the second month you have the
use of only 11/12 of the money
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Credit Cards
Types of Credit Cards
Limited purpose credit cards
National credit cards
Bank credit cards
Travel & entertainment charge
cards
Things to look for:
Annual fee
Interest rate
Additional perks
insurance, discounts, cash back bucks
Cash advance
Hidden fees
transaction fees
cash advance fees
over credit limit fee
late fee
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CAUTION!
“No payment for 6 months”
“Low introductory offer - 4.9%”
“No
No fee”
fee
Credit Disability Insurance
Repays the outstanding loan balance if the
borrower becomes disabled
Average Interest Rates
⌧Low Interest 11.41%
⌧Bad Credit 12.81%
⌧Cash Back 13.13%
⌧R
⌧Reward
d Cards
C d 13.66%
13 66%
⌧Business 13.95%
⌧Instant Approval 14.18%
⌧Airline 15.08%
⌧Student Approvals 17.88%
(www.bankrate.com)
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Tips to lower costs
Switch to a lower rate card
No annual fee
Take advantage of your grace period
Ask for lower interest rate
Pay more than the minimum balance
If paying interest, mail check as soon as
you receive your statement
Use savings to pay credit card bills
Credit Card
Repayment Calculator
Credit Problem Signs
Not knowing how much you owe
Making minimum payments
Making
g cash advances to pay
p y bills
Working 2nd job to keep up with
spending
Being consistently late with bill
payments
Being denied credit
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Reliable Help
Financial Education Resource Center
581-7786
Student Services Building
Free
Consumer Credit Counseling
Service
1-866-889-9347
http://www.cccsgrchicago.org/
Non-profit
Now You’ve Heard it. . . .
Straight from the Federal Trade Commission
The truth about debt relief services
There is no easy repair for credit
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Credit Reports
C di Scores
Credit
S
Question
How many of you have
accessed your credit report?
Credit Score
Three digit score
Credit bureaus assign it
Score is based on a formula that
predicts consumer spending
behaviors and determines a
person’s credit worthiness
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Credit Bureau
Known as a credit reporting agency
Collects and distributes consumer credit
information in the form of individual credit
reports.
Big 3:
Experian - www.experian.com
Equifax - www.equifax.com
TransUnion - www.transunion.com
Credit and Your Credit Score
Empowers you during credit, job, and other
application processes
A Federal Reserve Study found
⌧70% of credit reports had errors
⌧25% of those had serious errors that led to denial of credit
Improper use of credit cards now = Poor credit later= Bad credit report
What is a Credit Report
Record of how you have paid your debts.
It tells lenders:
Who you are
How much debt you have
Whether you have made payments on
time
Whether there is negative information
about you in public records
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What’s On My Credit Report?
Personnel Information:
Name
Social Security number
Current and previous addresses
Telephone number
Birth date
Current and previous employers
If married, spouse’s name
Personal Account Information
Credit Cards
Loans
Mortgages
Payment Histories
Inquiries
Public Record Information
Public Record Information
Negative Information
Time on Credit Report
General civil judgments
7 years from date filed
Tax liens
Collection accounts
7 years from date paid
7 years from last activity
Chapter 13 bankruptcy
7 years from date of
discharge
Chapter 7 bankruptcy
10 years
Personal Bankruptcy
Chapter 13
debtor keeps all of his or her property and makes
regular payments on debts
Chapter 7
debtor must give up certain property to the
creditor
Can keep property that the law says is needed for
support of the debtor and his or her dependants.
Income restrictions apply
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What is Not on a Credit Report
Checking and Savings Account Balances
Income
Medical History
Purchases Made with Cash or Check
Business Account Information
Race, Gender, Religion, or National Origin
Driving Record
How Your Credit Report Is Used
Information in your credit report may determine
whether you will:
Get a loan or other form of credit
Get a job
Rent an apartment
Get insurance
Where to Go to Check Your
Report?
www.annualcreditreport.com video
Or go to www.annualcreditreport.com and
Complete the Annual Credit Request Form and
mail to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA
30348-5281
Or Call Toll Free- 1-800-322-8228
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What Does a Credit Report Look Like??
Reasons a Loan Application
May Be Denied
No credit history
Past credit problems
Negative information in public records
FICO Score
(Fair Isaac Corporation)
Credit rating
Range: 300-850
higher
g
is better
Most lenders base approval on
scores
Higher scores mean lower
interest rates
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FICO
Percentage Breakdown
15
%
30
%
10
%
10
%
35
%
Types of Credit
in Use
New Credit
Payment
History
Amounts Owed
Length of
Credit History
Interest Rates/ Monthly Payments
Example
FICO® score
APR [?]
760-850
5.426%
700-759
5.653%
$866
660-699
5.944%
$894
620-659
6.772%
$975
580-619
9.251%
$1,234
500-579
9.978%
Monthly payment
$845
$1,314
www.myfico.com
Inquiries - Your Credit Score
When you apply for credit, you authorize the
lender to ask for a copy of your credit report
— an inquiry.
Your credit score mayy drop
p if you
y apply
pp y for
new credit.
Most credit scores are not affected by multiple
inquiries from auto or mortgage lenders within
a short period of time.
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Fair Credit Reporting Act
September 2005
– Up to 3 credit reports free per year
– Right to ask for score
– Right to dispute incorrect information
– Consumer reporting agencies must
correct wrong information listed on
report
– You must give consent (Ex: Potential
Employer
Federal Trade Commission
How to avoid being sent
credit applications
1-888-5optout
www optout com
www.optout.com
www.donotcall.gov
Stop the Madness!!
Get credit debt under control NOW
Credit Card Worksheet
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