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  • 1. Credit Use and Consequences of Credit Abuse
  • 2. <ul><li>How can good credit help you? </li></ul><ul><li>Buying a home </li></ul><ul><li>Renting an apartment </li></ul><ul><li>Charge goods and services </li></ul><ul><li>Get a job </li></ul><ul><li>Finance a car </li></ul><ul><li>Avoid cash deposits when subscribing to utility services </li></ul><ul><li>Texas Utility Company </li></ul>
  • 3. <ul><li>Information contained within a </li></ul><ul><li>credit report: </li></ul><ul><li>Credit Items: </li></ul><ul><li>Loans </li></ul><ul><li>Credit cards </li></ul><ul><li>Cars </li></ul><ul><li>Mortgages </li></ul><ul><li>(Balance, avg. balance, payment history) </li></ul>
  • 4. Information contained within a credit report: Asset Accounts: Bank accounts, investment accounts. Requests for Credit: Listing of companies that have requested your credit report. (lasts up to 2 years) Collection Information: Account balances, recoveries, taxes. (Lasts 7 years) Public Records: court data about monetary judgments (bankruptcy)
  • 5. Information contained within a credit report: Personal information: SS number, addresses, employers, phone numbers. Personal Statement: You can submit a <100 word statement to your credit file to explain any inconsistencies.
  • 6. Three major credit scoring agencies: Equifax: (800) 685-1111 Experian (formerly TRW): (888) EXPERIAN (397-3742) Trans Union: (800) 916-8800
  • 7. <ul><li>What determines your credit score? </li></ul><ul><li>Have you paid your bills on time? </li></ul><ul><li>What is your outstanding debt? </li></ul><ul><li>How long is your credit history? </li></ul><ul><li>Have you applied for new credit recently? </li></ul><ul><li>How many and what types of credit accounts do you have? </li></ul>
  • 8. <ul><li>Credit Scoring </li></ul><ul><li>Credit Agencies use the same scale. </li></ul><ul><ul><li>(FiCO, </li></ul></ul><ul><li>However, weighting can be different </li></ul><ul><ul><li>35% punctuality of payment in the past </li></ul></ul><ul><ul><li>30% capacity used </li></ul></ul><ul><ul><li>15% length of credit history </li></ul></ul><ul><ul><li>10% types of credit </li></ul></ul><ul><ul><li>10% amount of credit obtained in the recent past </li></ul></ul>
  • 9. <ul><li>Credit Scoring </li></ul><ul><li>Range: 375 to 900 </li></ul><ul><li>However, weighting can be different </li></ul><ul><ul><li>>700 = very high- easy credit approval </li></ul></ul><ul><ul><li>600-700 = Some rejections </li></ul></ul><ul><ul><li>500-600 = difficulty obtaining credit </li></ul></ul>
  • 10. Request your Credit Report!!! 25% of credit reports have a mistake! FACT: Fair and Accurate Credit Transactions Act How do you get your credit report: Be careful: credit agencies entice you with a “free report” but a paid service.
  • 11. <ul><li>Facts about Credit Card Usage: </li></ul><ul><li>Americans charge $1.5 trillion per year on credit cards. (US debt: $7.7 trillion) </li></ul><ul><li>Average US household credit card balance: </li></ul><ul><li>1990: $2,550/HH </li></ul><ul><li>2003: $7,250/HH </li></ul><ul><li>Credit card company profits have grown 350% over this same time period. </li></ul>
  • 12. <ul><li>Facts about Credit Card Usage: </li></ul><ul><li>Since 1999, American households have a deficit (spending more than they make). </li></ul><ul><li>Average American has 11 credit cards! </li></ul><ul><li>85 million Americans are rollers, transferring balances back and forth. </li></ul>
  • 13. Ideas about Maintaining Good Credit: 1. Pay off your balance!!!!! 2. Recognize when you are over-stretched. 3. Pay bills when they arrive. Discover has started raising to 19.99% after one single late payment. Pay your bill on time and then request a lower rate. 4. Request that credit card companies stop sending your card offers. 5. Put a credit alert on your accounts.
  • 14. Consequences of paying Late? Paying late allows the credit cards to raise your rate. Discover has started raising to 19.99 % after one single late payment. Pay your bill on time and then request a lower rate Not paying utility bills can trigger higher credit card rates. Shred those Credit Card Checks!!!!