Can I have your number?
Understanding your credit score...and why it matters.
OV E RV IE W
Even if you don’t know your credit score, it could be helping or
hurting your attempts to reach your grownup goals. In this class,
you’ll get an overview of different types of debt, as well as a good
look at credit scores, credit reports, and why you should care
about them (hint: they’re extremely important). You’ll also learn
about free tools and resources to help you manage your credit
and debt.
TAKEAWAYS
• Understand credit scores and reports, including the biggest factors that influence your score.
• Get tips for understanding different types of debt.
• Leave with a list of free resources to help you keep tabs on your
credit.
SOCIETYOFGROWNUPS.COM
SOCIETYOFGROWNUPS
SOCIETYGROWNUPS
MY R ELATIONSHIP WITH DEBT
KEEPS ME UP AT NIGHT
I THINK ABOUT IT EVERY NOW AND THEN
IS CONSTANTLY NAGGING ME
I DON’T HAVE ANY WORRIES ABOUT DEBT
DEBT MYTHS
TRUE
FALSE
I SHOULD BUY A CREDIT MONITORING SERVICE.
I SHOULD SHOP AROUND FOR RATES WHEN I AM BUYING A HOME
OR A CAR.
ONCE I PAY OFF MY CREDIT CARD, I SHOULD CLOSE
THE ACCOUNT.
I SHOULD JUST ALWAYS AVOID CREDIT CARDS.
INSTEAD OF CREDIT CARDS, I CAN USE MY DEBIT CARD —
IT’S SAFER THAT WAY.
CASH BACK, POINTS, OR MILES MAKE USING CREDIT CARDS
WORTH IT.
MY CORPORATE CARD AT WORK HAS NO BEARING ON MY CREDIT.
IF I HAVE A REALLY OLD DEBT THAT I FORGOT TO PAY, I SHOULD
JUST IGNORE IT.
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IMPORTANCE OF CREDIT SCORE – CAR LOAN
FOR A 60
MONTH CAR
LOAN OF
$25,000
CREDIT SCORE
INTEREST RATE
MONTHLY PAYMENT
720 – 850
3.175%
$451
690 – 719
4.347%
$464
660 – 689
6.136%
$485
620 – 659
8.251%
$510
590 – 619
13.544%
$576
500 – 589
13.578%
$576
CREDIT SCORE
INTEREST RATE
MONTHLY PAYMENT
760 – 850
3.538%
$1,354
700 – 759
3.761%
$1,391
680 – 699
3.939%
$1,422
660 – 679
4.155%
$1,459
640 – 659
4.588%
$1,536
620 – 639
5.137%
$1,636
IMPORTANCE OF CREDIT SCORE – MORTGAGE
FOR A 30
YEAR FIXED
MORTGAGE
OF $300,000
Data for Massachusetts as of January 19, 2016 from myfico.com
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CREDIT SCORE INGREDIENTS
30%
PAYMENT HISTORY
AMOUNTS OWED
10%
LENGTH OF CREDIT HISTORY
NEW CREDIT
35%
10%
TYPES OF CREDIT
15%
Source: myfico.com as of January 3, 2015
COMMON TERMS
APR (ANNUAL PERCENTAGE RATE)
DEBT
INTEREST RATE
The APR is the annual rate charged
for borrowing money. It is shown as a
percentage and includes all fees or costs
associated with the transaction.
In the simplest terms, the amount of
money you owe on credit cards, loans
(student, car, etc), your mortgage, in
taxes, child support or alimony.
The rate charged for borrowing someone else’s money, usually from Uncle
Sam, a bank, or a credit card company.
MORTGAGE
CREDIT REPORT
DEBT AVALANCHE
This is just an historical transcript of all
of your personal credit decisions; both
good and bad (and maybe even ugly).
A method of debt repayment in which
the person owing money initially
devotes only enough funds to cover the
minimum payments on each debt. Any
other available funds from the debt
repayment budget are spent on an additional payment to the debt bearing the
highest interest rate.
CREDIT SCORE
This is essentially a grade given to
your credit report that indicates your
financial reliability, or credit worthiness. It’s a three digit number ranging
from 300-850. Higher numbers indicate
better credit.
CREDITOR
The person who is lending you money,
usually Uncle Sam, a bank, or credit
card company.
DEBT SNOWBALL
A method of debt repayment in which
the person owing money initially
devotes only enough funds to cover
the minimum payments on each debt.
Any other available funds from the
debt repayment budget are spent on an
additional payment to the debt with the
lowest balance.
Debt taken out to pay for a piece of real
estate. This is usually paid back in regular payments over a long term.
PRINCIPAL
The amount borrowed or still owed on
a loan.
REFINANCE
Paying off an existing loan with the
proceeds from a new loan, usually for
the same amount, and using the same
property as collateral.
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RECOMMENDED RESOURCES
THE GROWNUP BLOG
societyofgrownups.com/blog/topic/credit-and-debt
Explore a variety of articles on strategies to help you eliminate
debt.
LOAN REPAYMENT CALCULATOR
societyofgrownups.com/calculators/loan-repayment
Ready to pay off debt? Use our Loan repayment calculator to
learn how to tackle your debt.
CREDIT KARMA
creditkarma.com
Get a free break down of your Transunion and Equifax scores.
You can check as often as you like.
ANNUAL CREDIT REPORT
annualcreditreport.com
Free credit reports from all three credit reporting bureaus on a
yearly basis.
Any third party resources or websites referenced above are not under our control. We cannot guarantee and are not responsible for the accuracy of the resources, websites, or any products
or services available through such resources or websites. While we hope the information in these materials are useful, it’s only intended to provide general education. It’s not legal, tax, or
investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with one of our
financial planners.
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