Understanding Credit and Debt

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Topics Covered: Debt & How To Handle It, …

Topics Covered: Debt & How To Handle It,
Your Credit Score & How To Raise It, Credit Reports & How To Obtain One, Credit In The Current Tight Market, & Talking To Kids About Credit.

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  • BadCreditChannel.com Bad Credit Education Presentation: Understanding Credit and Debt.

Transcript

  • 1. Understanding Credit & Debt Bad Credit Channel
  • 2. Benjamin Franklin’s Thoughts On Debt
    • “ Creditors have better memories than debtors.”
  • 3. Topics
    • Debt & How To Handle It
    • Your Credit Score & How To Raise It
    • Credit Reports & How To Obtain One
    • Credit In The Current Tight Market
    • Talking To Kids About Credit
  • 4. Not All Debt Is Evil
    • Credit is a valuable tool, yet many people misuse and overuse it.
  • 5. Excessive Debt Six Warning Signs
    • Signs of someone who may be in trouble:
    • Making only the minimum payment
    • Maxing or nearly maxing out credit cards
    • Not knowing how much is owed
  • 6. Debt Warning Signs, cont.
    • Signs of someone who may be in trouble:
    • Using credit cards to purchase items that used to be purchased with cash
    • Paying off one card with another card
    • Phone calls or letters from creditors
  • 7. Lowering Your Debt
    • Ask Your Credit Card Company To Lower Your Interest Rate
    • If Your Card Company Wont Lower – Shop For A Lower Rate Card
    • Set up a tight budget and stick to it. Find ways to save money – America Saves
    • Set realistic goals
  • 8. If You Are In Trouble
    • Stop Borrowing
    • Contact Your Creditors
    • Know your rights. Review the Fair Debt Collection Act
    • Speak with a credit counselor
  • 9. Where To Turn For Help
    • Credit Counselors
      • National Foundation for Credit Counseling www.debtadvice.org
      • Debt Management Plans
    • Friends or Family
      • Ask to borrow money from a friend or family.
  • 10. Protect Yourself
    • Be wary of organizations or individuals that:
      • Promise to solve your problem overnight
      • Charge high up front fees
      • Won’t disclose the costs for their services
  • 11. Credit Reports & Credit Scores
  • 12. Common Knowledge
    • Only 49% of Americans have obtained their credit score in the past two years. Have you?
  • 13. Credit Scores
    • What Is A Credit Score?
      • The score given to an individual to determine their credit worthiness. FICO and Vantage.
    • Who checks your credit score?
      • Credit card companies
      • Lenders (Auto Loans, Home Loans, Personal Loans)
      • Insurance Companies
      • Employers
      • Phone companies
  • 14. Credit Scores
    • How your score can affect you:
      • Interest Rates
        • If your rate goes up on 1 card it can go up on another
      • Insurance Rates
      • Some Employers Use It When Hiring
  • 15. An Example
    • On a $225,000 home:
      • 6% Interest Rate
        • 30-year fixed = $1348/mo
      • 5% Interest Rate
        • 30-year fixed = $1207/mo.
        • $141.14/mo. difference
        • $50,810 over 30 yrs
  • 16. How Your Score Is Calculated
    • FICO® scores are calculated based on your rating in five general categories :
    • 1) Payment History 2) Amounts Owed 3) Length Of Credit History
    • 4) New Credit 5) Types Of Credit Used
  • 17. What’s A Good Score?
    • FICO Scores Range From 300 – 850
    • In the eyes of most lenders, FICO credit scores above 700 (750) are very good .
    • Recent changes in the economy have changed what lenders as a very good score
  • 18. Your Credit Report
    • A credit report is a report containing a detailed credit history of an individual.
    • What’s On Your Credit Report?
      • Personal Information (Name, SSN, Etc.)
      • Public Records & Collection Accounts (Bankruptcies, Foreclosures, Etc.)
      • Your Credit History & Current Obligations
      • Credit Inquiries
  • 19. How To Check Your Credit Report & Score
    • You are entitled to 1 free credit report a year from each of the 3 major credit bureaus .
    • To request your free credit report visit www.annualcreditreport.com
    • You can also request your credit score. A small fee may apply.
  • 20. Improving Credit Scores
      • Pay Bills On Time. Get current & stay current.
      • Pay Off Debt – Don’t Move It Around or Ignore it.
      • Don’t Close Unused Credit Cards As A Short-Term Strategy To Raise Your Score
      • Don’t Open New Credit You Don’t Need.
  • 21. More Tips For Improving Credit Scores
      • Repair Errors (Outstanding Debts You Paid)
      • Pay Down Balances To 20-30% Of Credit
      • If You Have 1 Or 2 Old Cards You Haven't Used Put A Little On The Card And Then Pay It Off
      • Do This About 1 Every 6 Months
  • 22. Credit In Today’s Tight Market
    • Lenders are lowering credit limits
      • 20% banks lower on prime borrowers
      • 60% banks lower on subprime borrowers
    • Lenders are tightening their requirements.
      • Good Score - 750 or higher
    • Lenders are closing inactive cards
      • Less liability
  • 23. Talking to Kids about Credit
  • 24. Key Talking Points
    • Communicate the following key ideas with your students/children
      • They should charge only what they can afford to pay back.
      • Credit cards shouldn't be a money substitute for items they can't afford.
      • They need to pay their bills on time and not just the minimum amount.
      • Credit companies specifically target college students.
  • 25. Resources for Students
    • DFI’s Right on the Money – Financial Know-How For College Students
      • www.dfi.wa.gov/consumers/collegebookorder.htm
    • FTC Credit Web Site
      • www.ftc.gov/credit
    • AICPA
      • www.360financialliteracy.org/Life+Stages/College/
    • Bad Credit Hotel
      • www.controlyourcredit.gov/
  • 26. For More Credit Info…
    • This presentation is brought to you by
    • >> BadCreditChannel.com
    • The Go-To Information Source for Individuals Living with Bad Credit