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Week 3 Understanding Credit
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Week 3 Understanding Credit

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  • 1. Welcome to the Faith and Finances Series
    • UNDERSTANDING CREDIT
    • God has called us to be good stewards
    • “ Moreover it is required in stewards that one be found faithful”
    • 1Corinthians 4:2
  • 2. Purpose
    • Understanding Credit will:
    • Show you how to read a credit report
    • Help you understand how your behavior affects your credit health
    • Help you build and repair your credit history
    • Provide you with good credit practices
  • 3. Objectives
    • By the end of this course, you will be able to:
    • Describe the purpose of a credit report and how it is used
    • Read your credit report
    • Order a copy of your credit report
    • Identify ways to build and repair your credit history
  • 4. Understanding Credit: Week 3 of 4
    • Help you build and repair your credit history
  • 5. Week 1 in Review
      • We learned about…
      • Credit Reports
      • Three Credit Bureaus
      • FICO Scores and what affects them
      • Why your credit score matters
  • 6. Week 2 in Review
    • We learned how your behavior affects your credit health…
      • Making Payments on Time
      • Using Debt Reasonably
      • Establishing a credit history
      • Inquiries
      • Types of Debt
  • 7. Remember…
    • The credit score is:
    • A number that summarizes how much of a credit risk you could be
    • Calculated based on a snapshot of the information in your credit report at a point in time
    • ** Most commonly referred to as a FICO Score
  • 8. … ..Remember How Your Credit Report Is Used
    • Information in your credit report may determine whether you will:
    • Get a loan, credit card, car loan, or mortgage
    • Get a job
    • Rent an apartment
    • Get insurance
    • Determine how much you pay for credit
  • 9. …… And There 5 Factors That Affect Your Score
      • Past payment history – 35%
      • Amount owed – 30%
      • How long you've had credit -15%
      • New credit – 10%
      • Types of credit – 10%
  • 10. … .And The Most Important Factor: Payment History
    • How late your payments have been matters…..
    • 30 days 60 days 90 days Collection
    • Your score goes….
  • 11. This Week….
    • We will focus on building and repairing your credit history
      • How to Get a Copy of your Credit Report
      • Correcting Errors
      • Identity Theft
      • Credit Counseling
      • Credit Repair
  • 12. Credit Health Check Up
    • Managing your credit health is important.
    • Improving your score can help you get better credit terms, lower interest rates, and speed up credit approvals.
  • 13. Credit Health Check Up
    • It is important for you to know how lenders view your credit risk.
    • An critical time to check your FICO score is 6 months or so before you plan to make a major purchase….
    • A Car, A Home…..
  • 14. Credit Health Check Up
    • Why check your credit??
    • So you can…
    • Verify the information on your credit report
    • Correct any errors
    • Take action to improve your score, if necessary
  • 15. Credit Health Check Up
    • What’s a good FICO score??*
    • Generally speaking…
    • Below 630 – Bad
    • 631-699 – Not Good
    • 700 -720 – Good Score
    • 721- 760 - Very Good
    • Over 761 - Great
    • * Based on 9/19/07 FICO data
  • 16. Credit Health Check Up
    • Just like your physical health, you should check on your credit health regularly
    • Review your credit report least once a year……
  • 17. You Can Get a Free Credit Report
    • Each year you can get a FREE credit report from each credit bureau:
    • Equifax
    • Experian
    • TransUnion
  • 18. You Can Get a Free Credit Report
    • WRITE:
    • Annual Credit Report Request Service
    • P.O. Box 105281
    • Atlanta, Georgia 30348-5281
    • CALL: 1-877-FACT-ACT (1-877-322-8228)
    • GO TO THE WEBSITE: www.annualcreditreport.com
  • 19. You Can Get a Free Credit Report
    • If:
    • A company takes adverse action against you AND you ask for your report within 60 days of receiving notice of the action.
    • You are unemployed and plan to look for a job within 60 days.
    • You are receiving public assistance.
    • Your report is inaccurate because of fraud, including identity theft.
  • 20. What’s an Adverse Action
    • You are denied credit
    • Your credit line or credit card limit is reduced
    • Your interest rate is increased because the lender says you are a greater credit risk
    • Your credit line or credit card is cut-off
  • 21. You Can Also Get A Credit Report…
    • By purchasing it from one of the credit bureaus:
    • Equifax: 1-800-685-1111 www.equifax.com
    • Experian: 1-888-397-3742 www.experian.com
    • TransUnion: 1-800-888-4213 www.transunion.com
  • 22. Credit Health Check Up
    • Mistakes get on your credit report most often because of….
    • Incomplete information or the report contains information about someone else
  • 23. Credit Health Check Up
    • Mistakes typically happen because….
    • You applied for credit under a different name
    • There was a clerical error in reading information on a hand-written application
    • You gave an inaccurate Social Security number (SSN) or the number was misread by the lender
    • Loan or credit card information was inadvertently applied to the wrong account
  • 24. Credit Health Check Up
    • If there is a mistake on your credit report….
    • You can dispute any errors by contacting the credit bureaus directly:
    • Equifax: 1-800-685-1111 www.equifax.com
    • Experian: 1-888-397-3742 www.experian.com
    • TransUnion: 1-800-888-4213 www.transunion.com
  • 25. Credit Health Check Up
    • If there is a mistake on your credit report….
    • It is best to follow up any verbal error inquiry with a written letter. The credit bureau has 30 days to investigate and respond to you.
  • 26. Credit Health Check Up
    • In reviewing your credit report, you may detect identity theft earlier.
    • Identity theft is when someone steals your personal information – name, SSN, or credit card number
    • And uses it to:
      • Open a new credit card account
      • Write checks in your name
  • 27. Identity Theft Can Hurt Your FICO Score
    • The unpaid credit card bills or bad checks can damage your credit history.
    • If you suspect identity theft, you should take immediate action and keep a record of your conversations and correspondence.
  • 28. Identity Theft Can Hurt Your FICO Score
    • You should….
    • Call the toll-free number at any one of the 3 credit bureaus and place a fraud alert – you only have to call one to have an alert on all 3.
    • Contact the lender and close any accounts that have been tampered with or opened fraudulently.
    • File a report with your local police.
    • File a complaint with the Federal Trade Commission. Find more information at www.ftc.gov/bcp/microsites/idtheft.
  • 29. Identity Theft Can Hurt Your FICO Score
    • Tips….
      • Don’t send your SSN information in emails.
      • Don’t carry your SSN in your purse or wallet.
      • Keep all your credit tools in a safe place – credit cards, debit cards, checks, account statements.
      • Shred any documents that contain financial information if you no longer need them.
      • To correct an error on your credit report, work directly with the credit bureau and your lenders.
  • 30. Credit Health Check Up
    • We know our credit health is not good, so how do we make ourselves healthy again???
  • 31. Credit Health Check Up
    • Let’s understand the Truth about Credit Repair…..
    • No company, no individual can remove accurate information from your credit report.
    • No company, no one can create a new identity for you.
    • It can take years to repair your credit.
    • Legitimate companies provide a service BEFORE requesting payment.
    • You can order your credit report yourself.
  • 32. Credit Health Check Up
    • If you are going to use a Credit Counseling Agency…..
    • Interview several agencies Before signing any agreements
    • Ask questions regarding services, fees, and repayment plans.
    • Check with the State Attorney General , Better Business Bureau, and local consumer protection agency to find out if complaints have been filed.
    • Make sure your information will be keep confidential.
  • 33. Credit Health Check Up
    • Or you can enroll in a Debt Management Plan…..
    • It is NOT credit counseling. It is customized advice on managing your money
    • You deposit money each month with the credit counseling organization.
    • Your creditors may agree to lower your interest rates or waive certain fees.
    • You must make regular, timely payments.
    • You may have to agree not to apply for or use any additional credit will in the plan.
  • 34. Credit Health Check Up
    • Beware of Companies that:
    • Promise to erase bad credit or bankruptcies
    • Promise fast and easy credit repair.
    • Offer to create a new identity for you.
    • Want you to pay for repair services before providing the services.
    • Do not inform you of your rights and what you can do yourself.
  • 35. Credit Health Check Up
    • Remember…Only consistent efforts and making your payments on time will improve your credit.
  • 36. Remember…Your FICO Score Matters
    • Higher FICO Scores Result in Lower Interest Rates and $$$ Paid for Credit
  • 37. Remember the Example from Week 1 $25,000 – 4 Year Auto Loan * Estimated average over the life of the loan. Payments may vary. $699 15.26% 500-589 $675 13.33% 590-619 $637 10.22% 620-659 $617 8.57% 660-689 $599 7.03% 690-719 $589 6.19% 720-850 Monthly payment * Interest Rate Paid (APR) FICO® score
  • 38. Auto Loan Example
    • If Your Score is > 760, You Paid $5,280 Less Than the Someone with a Score < 579 Over the Life of the Loan…..
    • ……. Your Monthly Payment is $110 Lower
  • 39. Answers to Week 2 Quiz
    • The most important factor that affects your FICO score is
    • a) New Credit b) Amounts Owed c) Payment History d) Length of Credit History
    • T/ F Once you’ve had late payments, your score will always be low.
    • T/ F Only two factors affect your score at a time.
    • Maxing out on your credit cards could show
    • a) you are overextended b) you are not using credit responsibly c) you are a greater risk to the lender d) All of the above
    • T /F Poor payment history 3 years ago will have less of an impact on your credit score than recent payment history.
    • T /F God calls us to be good stewards over what he gives us.
  • 40. Short Quiz
    • You should check your credit report at least
    • a) Every month b) every year c) every 2 years d) only when you are applying for credit
    • T/F Checking your credit score will help you get lower interest rates and speed up credit approvals.
    • T/F A credit counseling agency can remove negative information from your credit report.
    • T/F Placing a fraud alert at one credit bureau will be sent to all three bureaus.
    • Which way does not protect your identity
    • a) Shedding financial documents b) Not sending your SSN in emails c) keeping your SSN in your wallet or purse d) Working directly with credit bureau to correct an error
    • T/F You can only get one free credit report a year from each credit bureau.
    • T/F You should be willing to pay for credit counseling services before you start the counseling.
    • T/F God calls us to be good stewards over what he gives us.
  • 41. Home Activities
    • Before Week 4:
    • Go to one of the credit bureau websites and get a free credit report.
    • Review your report for accuracy.
    • Identify any corrections you need to make and contact the credit bureau.
    • Does there appear to be any loans on your report that you were unaware of?
    • If yes, Take action, Contact the bureau now.
    • Look around your home and office and assess the protection of your financial data.
    • Are there any positive changes you can make?
  • 42. References
    • www.myfico.com
    • “Understanding Your FICO Score” (www.myfico.com/crediteducation)
    • “ To Your Credit”
    • ( www.fdic.gov/moneysmart )
    • Federal Trade Commission (www.ftc.gov/bcp/microsites/idtheft)
  • 43. Next Session: Week 4 of 4
    • Providing tips on good credit practices
      • Putting it all together: 1-2-3