American Debt Counseling, Inc. Credit, Risk Assessment Score and Budgeting www.americandebtcounseling.org

Credit Reports & CRA’s

What is a Credit Reporting Agency? A credit reporting agency (CRA) gathers and maintains credit data aka credit report/credit history shows payment history available to subscribers who have a “ permissible purposes” lenders employers landlords government agencies

A credit reporting agency (CRA)

gathers and maintains credit data

aka credit report/credit history

shows payment history

available to subscribers who have a “ permissible purposes”

lenders

employers

landlords

government agencies

Understanding Your Credit Report Credit Reports Contain: Identifying Information Name Current and former addresses SSN, Date of Birth, Employers Public Record/Collection Acct Information Tax or State Liens Bankruptcy Foreclosure Judgments

Credit Reports Contain:

Identifying Information

Name

Current and former addresses

SSN, Date of Birth, Employers

Public Record/Collection Acct Information

Tax or State Liens

Bankruptcy

Foreclosure

Judgments

Understanding Your Credit Report Credit Information Opening Date High Credit or Credit Limit Loan Amount Monthly Payment Balance Past Due Amount Type of Account and Rating O, R, I 1,2,3,4,5,7,8,9 Responsible Party Joint, Individual, Maker/Co maker

Credit Information

Opening Date

High Credit or Credit Limit

Loan Amount

Monthly Payment

Balance

Past Due Amount

Type of Account and Rating

O, R, I

1,2,3,4,5,7,8,9

Responsible Party

Joint, Individual, Maker/Co maker

Understanding Your Credit Report Inquiries (Hard) Credit Inquiries Automobile Mortgage Credit Cards Employment Inquiries Current or future employers (EMP)

Inquiries (Hard)

Credit Inquiries

Automobile

Mortgage

Credit Cards

Employment Inquiries

Current or future employers (EMP)

Understanding Your Credit Report Inquiries (Soft) Promotional Inquiries Pre-approved offers (PRM) Account Monitoring (AM) Account Review (AR) Consumer Copy (ECIS)

Inquiries (Soft)

Promotional Inquiries

Pre-approved offers (PRM)

Account Monitoring (AM)

Account Review (AR)

Consumer Copy (ECIS)

How Long Does Information Stay On File? Credit Accounts Accounts paid as agreed Up to 10 years from DLA Accounts not paid as agreed 7 years from DLA Collection Accounts 7 years from DLA (Date of Last Activity)

Credit Accounts

Accounts paid as agreed

Up to 10 years from DLA

Accounts not paid as agreed

7 years from DLA

Collection Accounts

7 years from DLA (Date of Last Activity)

How Long Does Information Stay On File? Bankruptcy and Judgments Chapter 7 – Liquidation of debts reported for 10 years Chapter 13 - Reorganization or Repayment reported 7 years Lawsuit or an unpaid judgment reported for 7 years or until the statute of limitations runs out, whichever is longer

Bankruptcy and Judgments

Chapter 7 – Liquidation of debts

reported for 10 years

Chapter 13 - Reorganization or Repayment

reported 7 years

Lawsuit or an unpaid judgment

reported for 7 years

or until the statute of limitations runs out, whichever is longer

How Long Does Information Stay On File? Tax Liens Paid IRS Tax Liens 7 years from date paid Unpaid IRS Tax Liens indefinitely Student Loans Defaulted Student Loans indefinitely cannot be included in bankruptcy

Tax Liens

Paid IRS Tax Liens

7 years from date paid

Unpaid IRS Tax Liens

indefinitely

Student Loans

Defaulted Student Loans

indefinitely

cannot be included in bankruptcy

How Do I Get A Copy of My Credit Report? Contact the three major credit reporting agencies: Equifax www.equifax.com Experian www.experian.com Trans Union www.transunion.com

Contact the three major credit reporting agencies:

Equifax www.equifax.com

Experian www.experian.com

Trans Union www.transunion.com

What Does It Cost? You’re entitled to a free credit report if: Your application has been denied for credit insurance employment AND You request your report within 60 days of receiving the notice of the adverse action.

You’re entitled to a free credit report if:

Your application has been denied for

credit

insurance

employment

AND

You request your report within 60 days of receiving the notice of the adverse action.

Ways to Obtain a Free Copy? You’re also entitled to a free copy of your credit report once a year if: You're unemployed and plan to look for a job within 60 days, You're on welfare, or Your report is inaccurate because of fraud.

You’re also entitled to a free copy of your credit report once a year if:

You're unemployed and plan to look for a job within 60 days,

You're on welfare, or

Your report is inaccurate because of fraud.

Ways to Obtain a Free Copy? Cont. Go to www.annualcreditreport.com To access this website you will need your address, social security number etc. Once access has been granted you will be able to separately access each CRA. Transunion and Equifax allow registration which will keep information for 30 days.

Go to www.annualcreditreport.com

To access this website you will need your address, social security number etc.

Once access has been granted you will be able to separately access each CRA.

Transunion and Equifax allow registration which will keep information for 30 days.

How Do I Correct Errors on My Credit Report? Get a copy of your credit report Highlight the error's Write a letter of dispute that includes an explanation of the error's Locate and photocopy documents to show items reported incorrectly Send everything to CRAs highlighted copy of your credit report, your letter of dispute, and a copy of any additional information

Get a copy of your credit report

Highlight the error's

Write a letter of dispute that includes an explanation of the error's

Locate and photocopy

documents to show items reported incorrectly

Send everything to CRAs

highlighted copy of your credit report,

your letter of dispute,

and a copy of any additional information

What Is The FICO ® Credit Score, Anyway?

FICO ® Credit Score What is a FICO ® Score? A generic risk score used by lenders, developed by Fair, Isaac Corporation in conjunction with Equifax, Experian and TransUnion. Predicts how likely you are to repay your debt; if you qualify for the loan; and what your interest rate will be.

What is a FICO ® Score?

A generic risk score used by lenders, developed by Fair, Isaac Corporation in conjunction with Equifax, Experian and TransUnion.

Predicts how likely you are to repay your debt; if you qualify for the loan; and what your interest rate will be.

FICO ® Credit Score CRA Product Names Equifax---------------- BEACON ® Experian-------------- Experian/Fair Isaac Risk Model TransUnion---------- EMPIRICA ®

CRA Product Names

Equifax---------------- BEACON ®

Experian-------------- Experian/Fair Isaac Risk Model

TransUnion---------- EMPIRICA ®

FICO ® Credit Score Score Ranges 300 to 900 The higher the score the better the credit The lower the score the riskier the credit

Score Ranges

300 to 900

The higher the score the better the credit

The lower the score the riskier the credit

FICO ® Credit Score Interest Rate What a Difference a Score Makes! Score APR 720-850 5.604% A+ 700-719 5.729% A 675-699 6.267% B 620-674 7.417% C 600-619 8.531% D 500-599 9.289% F

What a Difference a Score Makes!

Score APR

720-850 5.604% A+

700-719 5.729% A

675-699 6.267% B

620-674 7.417% C

600-619 8.531% D

500-599 9.289% F

What a FICO ® Score Considers Five types used to calculate a FICO ® score . (Each type counts as a percentage of a total FICO ® score) Payment history= 35% Amounts owed= 30% Length of credit history= 15% New credit= 10% Types of credit in use= 10%

Five types used to calculate a FICO ® score . (Each type counts as a percentage of a total FICO ® score)

Payment history= 35%

Amounts owed= 30%

Length of credit history= 15%

New credit= 10%

Types of credit in use= 10%

What A FICO ® Score Does Not Consider Race, color, religion, national origin, sex and marital status Age Employment salary occupation title employer date employed employment history Residence

Race, color, religion, national origin, sex and marital status

Age

Employment

salary

occupation

title

employer

date employed

employment history

Residence

What A FICO ® Score Does Not Consider Reported child/family support obligations Interest rate on existing accounts Consumer/CRA Inquiries Information not found in credit report Information not proven to be predictive of future credit performance Participant in credit counseling

Reported child/family support obligations

Interest rate on existing accounts

Consumer/CRA Inquiries

Information not found in credit report

Information not proven to be predictive of future credit performance

Participant in credit counseling

Tips For Improving Your FICO® Score Pay bills on time Bring past due accounts current and keep them current Keep balances low Contact creditors immediately if problems arise Pay debt off – don’t move it around Don’t open several new accounts Don’t have excessive inquiries Use caution when closing accounts

Pay bills on time

Bring past due accounts current and keep them current

Keep balances low

Contact creditors immediately if problems arise

Pay debt off – don’t move it around

Don’t open several new accounts

Don’t have excessive inquiries

Use caution when closing accounts

Credit Repair Companies Everything a credit repair company can do legally, you can do yourself ! Credit repair companies charge money—sometimes lots of money No one can legally remove accurate negative information from a credit report If you decide to work with a company, research its offer carefully

Everything a credit repair company can do legally, you can do yourself !

Credit repair companies charge money—sometimes lots of money

No one can legally remove accurate negative information from a credit report

If you decide to work with a company, research its offer carefully

Payday Loans Payday Loans Personal check in exchange for cash Held 15 days Fees range from $30 and up Rollovers Additional Fees added

Payday Loans

Personal check in exchange for cash

Held 15 days

Fees range from $30 and up

Rollovers

Additional Fees added

Be Patient the Payoff Is Worth It!

Be Patient

the Payoff Is Worth It!

The True Cost of Credit Card Debt

The True Cost of Paying the Minimum Payment! (For all details, see credit card disclosures) EXAMPLE $2,000 X 2% (minimum monthly payment %) = $40.00 $40.00 $2,000.00 - 30.00 Finance Charge Amt to Principal - 10.00 $10.00 Amt to Principal New Balance $1,990.00 How does interest work? A. Average Daily Balance $2,000 Maxed-0ut Credit Card! B. Annual Percentage Rate 18% APR Or 1.5% per month C. Minimum Payment Percentage 2% of balance 2% x $2000 = $40 E. Finance Charge $30.00 1.5% x $2000

(For all details, see credit card disclosures)

EXAMPLE

$2,000 X 2% (minimum monthly payment %) = $40.00

$40.00 $2,000.00

- 30.00 Finance Charge Amt to Principal - 10.00

$10.00 Amt to Principal New Balance $1,990.00

The True Cost of Paying the Minimum Payment!

The True Cost of Paying the Minimum Payment!

The True Cost of Paying the Minimum Payment!

Stretching Your Dollars

What is a budget/spending plan? Your budget/spending is the foundation for your financial success. It’s what you can do within your income. It’s not about denying yourself. Budget/Spending Plan

What is a budget/spending plan?

Your budget/spending is the foundation for your financial success.

It’s what you can do within your income.

It’s not about denying yourself.

Budget/Spending Plan What Do I Do First?: Get Organized File box Jar Shoe box Large manila envelope GET AND SAVE RECEIPTS

What Do I Do First?:

Get Organized

File box

Jar

Shoe box

Large manila envelope

Budget/Spending Plan Next, create the budget/spending plan by: using money management software using a paper a budget form using a budget workbook Then, complete the budget/spending plan in detail: be honest with yourself. it won’t work if your budget doesn’t truly reflect how you spend.

Next, create the budget/spending plan by:

using money management software

using a paper a budget form

using a budget workbook

Then, complete the budget/spending plan

in detail:

be honest with yourself.

it won’t work if your budget doesn’t truly reflect how you spend.

Developing A Spending Plan Expense Categories Fixed (Examples of Fixed Expenses) Child care Rent/mortgage Installment payments Car, home and personal-type loans Insurance premiums Tithes

Expense Categories

Fixed (Examples of Fixed Expenses)

Child care

Rent/mortgage

Installment payments

Car, home and personal-type loans

Insurance premiums

Tithes

Developing A Spending Plan Flexible (Examples of Flexible Expenses) Food Utilities Gas Home phone/cell phone Car maintenance Credit card payments Personal/Medical Needs

Flexible (Examples of Flexible Expenses)

Food

Utilities

Gas

Home phone/cell phone

Car maintenance

Credit card payments

Personal/Medical Needs

Developing A Spending Plan Luxury New Clothes Going out to eat Entertainment/Recreation Gifts

Luxury

New Clothes

Going out to eat

Entertainment/Recreation

Gifts

Budget/Spending Plan Savings included in your budget: Three types of savings: Emergency Reserve Three months of living expenses in the event laid-off medical reasons divorce Short-term Vacation, special occasion, special purchase Long-term Down payment on a home Buying a new car Retirement

Savings included in your budget:

Three types of savings:

Emergency Reserve

Three months of living expenses in the event

laid-off

medical reasons

divorce

Short-term

Vacation, special occasion, special purchase

Long-term

Down payment on a home

Buying a new car

Retirement

Budget/Spending Plan Review: Put in writing Keep it simple Stick to major categories Review plan and make changes Keep records and receipts Buy what you “need” Allow for relaxation/entertainment Save what is left

Review:

Put in writing

Keep it simple

Stick to major categories

Review plan and make changes

Keep records and receipts

Buy what you “need”

Allow for relaxation/entertainment

Save what is left

Credit Counseling

Credit Counseling Are you Knee-Deep In debt? Do you have more month than money? When debt becomes overwhelming: Talk with your creditors. Consult with a certified credit counselor.

Are you Knee-Deep In debt?

Do you have more month than money?

When debt becomes overwhelming:

Talk with your creditors.

Consult with a certified credit counselor.

Credit Counseling What can a certified credit counselor do? Review your finances and help you set up a budget. Review your credit situation. Look at the possibility of a Debt Repayment Plan (or debt management plan, aka DMP).

What can a certified credit counselor do?

Review your finances and help you set up a budget.

Review your credit situation.

Look at the possibility of a Debt Repayment Plan (or debt management plan, aka DMP).

Credit Counseling How does DMP work? May reduce interest rates and fees. Helps you begin making consistent, on-time payments payments made to the counseling agency. You will see results over time Credit Score/Credit History begins to improve.

How does DMP work?

May reduce interest rates and fees.

Helps you begin making consistent, on-time payments

payments made to the counseling agency.

You will see results over time

Credit Score/Credit History begins to improve.

Credit Counseling Review Is there a fee for their services? What are they? What services does the agency offer? Budget/Credit Counseling Debt Repayment Credit Report Review

Is there a fee for their services?

What are they?

What services does the agency offer?

Budget/Credit Counseling

Debt Repayment

Credit Report Review

Credit Counseling Review Is the agency truly accredited and, if so, by whom? Are the counselors certified and, if so, by whom?

Is the agency truly accredited and, if so, by whom?

Are the counselors certified and, if so, by whom?

Have A Nice Day!