"Unlocking the Confusion of Credit"
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"Unlocking the Confusion of Credit"

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  • 1. Unlocking The Confusion of Credit! Provided by: The Credit Education Bureau 585-256-6080
  • 2. Keys to understanding credit:
    • Why having good credit matters.
    • What is APR?
    • How to use your credit wisely.
    • The rules of the road: What happens when…
    • How to protect yourself.
    • How credit card companies work.
  • 3. The First Key: Knowing Why Good Credit Matters
  • 4. Good Credit is the best way to prove to lenders you’re trustworthy.
    • Having good credit is like having a 4.0 GPA.
      • Everybody trusts you.
    • Having bad credit is like having a few F’s.
      • Everyone can’t help but wonder.
  • 5. Lenders Will Look at Three Things:
    • How much you earn versus how much it costs you to live.
    • What loans you already have or had.
    • If you pay your bills on time.
  • 6. How do Lenders Figure it Out?
    • They contact the credit bureaus.
      • Agencies who compile your credit history information.
    • The bureaus then supply a credit report.
      • A transcript of your personal payment history.
    • The credit report has a credit rating .
      • A system developed to determine how credit worthy you are based on your history .
    Credit report
  • 7.
    • A Credit Report
    • 4 Basic Elements
    • Personal identification
    • Public records
    • Payment history
    • Inquiries
    • Reporting Periods
    • 2 years - Inquiries
    • 7 years - Negative information
    • 10 years - Bankruptcy (CH. 7)
  • 8. The Good News…
    • You Can Get a Copy!
    • Call one of the three major credit bureaus:
      • Experian: 800-422-4879
      • Trans Union: 800-916-8800
      • Equifax: 800-685-1111
    • Each copy is $8.50.
  • 9. The Second Key: Knowing About APR
  • 10. Figuring Out the Combination:
    • APR = Annual Percentage Rate.
    • APR calculates The total annual cost of a loan.
    • APR consists of:
      • The principal
      • The interest rate
      • The finance charges
  • 11. Here’s How APR Will Affect You:
    • Lets say your credit card has an APR of 18%
    • You purchase a new computer for $750
    • You only pay the minimum payment of $15
    • The interest owed would be $12
      • The APR of 18% = 1.5% interest per month
    • You still owe $747
  • 12. How Credit Cards Work “The Imaginary Card”
    • Big Bank USA Mastercharge credit card.
    • $500 limit.
    • 20% APR.
    • What would you like to buy?
  • 13. How Long Will it Take to Pay Off?
    • Minimum Payment $10 each month.
    • 9 years to pay off.
    • $584 in interest.
    = =
  • 14. How Long Will it Take to Pay Off?
    • Twice the minimum payment $20 each month.
    • 2 years and 8 months to pay off.
    • $152 in interest.
    = =
  • 15. The Third Key: Knowing How to Use Your Credit Wisely
  • 16. Everything You Need to Know, But Didn’t Know to Ask. Looking at the fine print!
  • 17. What kind of APR am I being charged?
    • Variable rate
      • Changes as the economy changes
    • Fixed rate
      • You are given a precise number that doesn’t change without notification
  • 18. What are the rules about fees?
    • Fees are usually charged if a customer violates their agreement terms
    • Companies may charge for things like: late payments, returned checks, or going over credit limits
  • 19. What is a “grace period”?
    • It’s the period of time between your purchase and when your payment is due
    • It’s also the period of time when no finance charges are added
  • 20. How is my minimum payment calculated?
    • It’s different for each issuer
    • For the most part, it is 2% to 3% of your balance
  • 21. The Fourth Key: Knowing What Happens When…
  • 22. …You’re late?
    • Being as little as 30 days late can affect your credit
    • In most cases you will be charged a late fee
    • And it will be reported to the credit bureaus
  • 23. …You can’t even pay the minimum?
    • They may suspend your charging privileges
    • They may turn you over to their collection department
    • They may report you to the credit bureaus
    • Advice: Call the credit card issuer
  • 24. …You lose a credit card?
    • The most they can hold you liable for is $50 of any unauthorized charges
    • Call the credit card issuer
    ?
  • 25. …You get charged for something you didn’t buy?
    • You must dispute the item
    • Call or write your credit card company
    • You can withhold payment on the disputed amount
    • You will not be charged interest if the dispute is correct
    Oops!
  • 26. The Fifth Key: Knowing How To Protect Yourself.
  • 27. Being Credit Wise:
    • Understand the terms of your credit cards: APR, fees, fine print, etc.
    • Don’t leave credit card receipts in the open
    • Keep your issuer’s phone numbers in a file in case you lose your card
    • Check your statement each month for erroneous charges
  • 28. Also:
    • Don’t give your account number out over the phone to callers you’re not familiar with
    • If you get in over your head, call your creditors to make arrangements
    • Tear up pre approved credit card solicitations before throwing them away
  • 29. The Sixth Key: Knowing How Credit Card Companies Work The road to shopper awareness
  • 30. Understanding The Industry:
    • Networks
      • Visa, Master Card, American Express, Discover
    • Issuers
      • Banks and financial institutions (They carry the loan)
  • 31. How Do They Make Money?
    • By charging cardholders interest
    • By charging cardholders an annual fee
    • By charging penalty fees: late payments, cash advances, etc
    • They charge stores for each sale
  • 32. Final Summary
    • Know that your credit history will affect your future.
    • Know the pitfalls of credit cards- APR, fees, penalties, etc.
    • Know how to protect your personal information.
    • Understand how the industry works.