Wise Use of CreditO It’s about behavior, not dollars!O To purchase assets O Home O EducationO For convenienceO To take advantage of salesO Emergencies (convenience)O “Big Ticket” items
Unwise Use of CreditO To purchase consumablesO Impulse buyingO Spending for statusO Retaliatory spending (couples)O Spending to feel goodO Everyday living expenses
Credit ScoresO What Is A Credit Score? O The score given to an individual to determine their credit worthiness. FICO and Vantage.O Who checks your credit score? O Credit Card Companies O Lenders O Insurance Companies O Employers O Cell Phone and Utility Companies
How Your Score Is CalculatedFICO® scores are calculated based on your ratingin five general categories:2)Payment History3)Amounts Owed4)Length Of Credit History5)New Credit6)Types Of Credit Used
What’s A Good Score?O FICO Scores Range From 300 – 850O Recent changes in the economy have changed what lenders view as a very good score.O In the eyes of most lenders, FICO credit scores above 760 receive the best rates. 700-759 are considered very good.
Your Credit ReportO A credit report is a report containing a detailed credit history of an individual.O What’s On Your Credit Report? O Personal Information (Name, SSN, Etc.) O Public Records & Collection Accounts (Bankruptcies, Foreclosures, Etc.) O Your Credit History & Current Obligations O Credit Inquiries
How To Check Your Credit Report & ScoreO You are entitled to 1 free credit report a year from each of the 3 major credit bureaus.O To request your free credit report visit www.annualcreditreport.comO You can also request your credit score. A small fee may apply.
Credit ReportsO Accurate Negative Information O Pay up and wait O Two years for inquiries and payments O Seven years for most information O Ten years for bankruptcies O Criminal Convictions—no limit O The seven-year period starts from the date that the event took place
Credit ReportsO Correcting Wrong Information 1. Inform one of the Credit Reporting Agencies: Equifax, Transunion, or Experian in writing. Dispute forms included on websites. 2. Credit Reporting Agency investigates, usually within 30 days. 3. Credit Reporting Agency provides you with written results and a copy of Credit Report. 4. Credit Reporting Agency sends notices to the other two Agencies. 5. If not resolved, you can have a statement of dispute included in your file. Also, tell creditor that you disputed an item. *You have the right to put a statement of up to 100 words on your Credit Report*
Debt: How Much is Too Much? Calculate your debt-to-income ratio Debt toInco Hand me Ratio out
Warning SignsO Not paying off each monthO Making only minimum paymentsO Gradually more income committed to debt repaymentsO Falling behind on paymentsO Using cash advances to meet monthly living expenses
Other IndicatorsO Little or no money in savingsO Dependent on second job to make ends meetO Paying over 20% of net income per month to creditorsO At or near credit limits most of the time
Critical PointO Rotating bills (paying some this month, some next month)O Using credit to pay creditO Being denied additional creditO Dishonesty with spouse about debtsO Use of consolidation loans to reduce payments
Recovering from DebtO Take Charge! Construct a budget and spending plan, prioritize debtsO Construct a “power payment” planO Talk to Your Creditors
Improving Credit ScoresO Pay Bills On Time (Get current, stay current)O Pay Off Debt – Don’t Move It AroundO Don’t Close Unused Credit Cards As A Short-Term Strategy To Raise Your ScoreO Don’t Open New Credit You Don’t Need.
SummaryO Keep your budget up-to-dateO Calculate your Debt-to-Income RatioO Plan purchasesO Shop for creditO Check credit report annuallyO Build wealth, not debt