Credit and the Interest Insomniac

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Credit and the Interest Insomniac

  1. 1. Credit and the Interest Insomniac<br />Using Credit Wisely<br />
  2. 2. Housekeeping<br /><ul><li>Silence Cell Phones
  3. 3. Water
  4. 4. Restrooms</li></li></ul><li>Why We’re the Experts<br />Nationwide, non-profit<br />Established in 1996<br />Financial educators<br />
  5. 5. Overview<br />What Is Credit?<br />Credit Reports & Scores<br />Power of Interest<br />Using Credit Wisely<br />
  6. 6. What is Credit?<br />
  7. 7. What is Credit?<br />Free Loan!<br />Status Symbol!<br />Free Money!<br />Helps Me Buy What I Can’t Afford<br />EVIL!<br />
  8. 8. What is Credit?<br />NOT<br />Money!<br />
  9. 9. What is Credit?<br />NOT<br />a Loan!<br />
  10. 10. What is Credit?<br /><ul><li>A Privilege, Not A Right.</li></li></ul><li>What is Credit?<br /><ul><li>A Privilege, Not A Right.
  11. 11. Recognition</li></ul> Capability & Responsibility<br />
  12. 12. What is Credit?<br /><ul><li>A Privilege, Not A Right.
  13. 13. Recognition</li></ul> Capability & Responsibility<br /><ul><li>Binding Agreement</li></ul>Your Promise (“Character”)<br />
  14. 14. What is Credit?<br /><ul><li>A Privilege, Not A Right.
  15. 15. Recognition</li></ul> Capability & Responsibility<br /><ul><li>Binding Agreement</li></ul>Your Promise (“Character”)<br /><ul><li>A Financial Tool</li></li></ul><li>Credit Reports and Scores<br />Credit Report:<br /><ul><li>History record
  16. 16. Credit Bureaus (“for profit” companies)</li></ul>= Credit History = Credit Record = Credit File = “Credit”<br />
  17. 17. Credit Reports and Scores<br />Genuinely Free<br />No Strings Attached<br />No Credit Card Required<br />www.AnnualCreditReport.com<br />
  18. 18. Credit Reports and Scores<br />Report includes:<br />Identifying information<br />Employer information (not income)<br />Details of all credit lines and loans<br />Public record<br />Inquiries<br />Personal Statement<br />
  19. 19. Credit Reports and Scores<br />Credit Score:<br />300 - 850<br />Based on report<br />Indicates risk<br />
  20. 20. Credit Reports and Scores<br />Credit Score:<br />300 - 850<br />Based on report<br />Indicates risk<br />Higher is better<br />
  21. 21. National Distribution of FICO Scores<br />Excellent Credit generally from 750-775 on up<br />Source: My FICO (a division of Fair Isaac): www.MyFICO.com<br />
  22. 22. Disputing Errors<br />At Credit Bureau Websites<br />TransUnion, Experian, Equifax<br />Credit Repair Companies?<br />
  23. 23. Disputing Errors<br />Dispute Errors<br />Cannot Remove Accurate Negative Information<br />
  24. 24. 5<br />7<br />8<br />The 5 Areas a FICO Score Considers<br />FICO = “Fair Isaac Company”(pioneer in the scoring formula)<br />
  25. 25. What is Interest?<br />%-based fee of balance owed<br />“Rent” on money<br />Related to RISK<br />Fixed or Variable<br />
  26. 26. The Power of Interest<br /> Purchase Furniture: $2,000<br /> 3 years at 25% APR<br />
  27. 27. The Power of Interest<br /> Purchase Furniture: $2,000<br /> 3 years at 25% APR<br />No Interest:<br />$55.56/Month<br />
  28. 28. The Power of Interest<br /> Purchase Furniture: $2,000<br /> 3 years at 25% APR<br />No Interest:<br />$55.56/Month<br />With Interest:<br />$79.52/Month<br />Total = $2,880<br />$880 in Interest!!!<br />44% More!!!<br />
  29. 29. The Power of Interest<br /> Purchase Furniture: $2,000<br />No Interest/No Payments<br /> For 3 Years<br />
  30. 30. The Power of Interest<br /> Purchase Furniture: $2,000<br />No Interest/No Payments<br /> For 3 Years<br />Balance @ 3 Years<br />$4,233!!!<br />$2,233 in Interest!!!<br />112% More!!!<br />
  31. 31. What is Interest?<br />The Main Thing to Remember About Interest…<br />
  32. 32. Interest Never Sleeps<br />
  33. 33. EVER<br />Interest Never Sleeps<br />
  34. 34. Interest Never Sleeps!<br />Is that Good?<br />
  35. 35. Interest Never Sleeps!<br />Is that Good?<br />Savings Plans & Investments<br />
  36. 36. Interest Never Sleeps!<br />The Second Thing to Remember About Interest!<br />
  37. 37. Make Interest Work FOR You…<br />Not AGAINST You!<br />
  38. 38. Basics of Credit Cards<br />Drive at speedometer’s top speed?<br />
  39. 39. Basics of Credit Cards<br />Drive at speedometer’s top speed?<br />Max credit card’s limit?<br />
  40. 40. Basics of Credit Cards<br />Minimum payments 2-5%.<br /><ul><li>Lower minimum = longer pay off(20+ years)
  41. 41. Watch for FeesAnnual Program, Late, Balance Transfer, Over-Limit, Bounced Check, Card Replacement, Additional Card, Cash Advance, Pay by Phone, Activation, Account Maintenance, Foreign Exchange, Account Set Up, Membership, Insurance, Statement Copy, Expedited Card …</li></li></ul><li>Basics of Credit Cards<br />Grace periods =No Interest<br />Balance Carry-Overs, Cash Advances & Convenience Checks-CANCEL GRACE PERIOD<br />
  42. 42. Basics of Credit Cards<br />Universal Default<br />
  43. 43. Basics of Credit Cards<br />Payment Holiday<br />InterestNEVERSleeps<br />
  44. 44. Dangers of Credit Cards<br /><ul><li>60% of collegefreshmen MAX OUTcredit cards
  45. 45. US households pay $1,100 in credit card interest annually
  46. 46. Prepaid cards = Lots of Fees</li></li></ul><li>Who Cares About Your Credit?<br />Home & Auto Lenders<br />
  47. 47. Who Cares About Your Credit?<br />Landlords<br />
  48. 48. Who Cares About Your Credit?<br />More Employers<br />
  49. 49. Who Cares About Your Credit?<br />Car, Home &Life Insurance<br />
  50. 50. Who Cares About Your Credit?<br />Utilities &<br />Cell Phone Providers<br />
  51. 51. Living without a Major Credit Card<br />Checking and savings accounts<br />Have phone and utility report your payment history<br />Retail and gas cards<br />Secured Card<br />Cosigner<br />
  52. 52. Tips for Strengthening SCORE<br />Dispute errors<br />Budget<br />Stay under 33% of credit limit!<br />Contact creditors<br />Avoid applying for a lot of new credit within a short period<br />
  53. 53. Tips for Strengthening SCORE<br />Shop for best rates<br />Don’t close old accounts<br />Pay down balances<br />Get accounts “current”<br />Pay bills on timeand in full.<br />
  54. 54. Thank You for Attending!<br />We are ALWAYS open to your Questions<br />

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