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Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
Managing Your Credit
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Managing Your Credit

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  • Let’s compare two credit card offers.
  • Saving vs. paying down debt– from purely numbers perspective, paying down debt first is better. But saving will help you in case an emergency occurs, so that you don’t have to pull out credit card.
  • You can request only last 4 digits of SSN. Don’t worry if employer info isn’t current.
  • Bankruptcy – 10 yrs from filing date (Ch 13 – in practice, 7 years) tax liens- paid: 7 yrs, unpaid: 15 yrs. Collection accounts- 7 yrs; positive information – indefinitely Paid-for closed accounts – 10 years
  • adverse info (late payments)- 7 yrs Joint accounts, authorized user- adverse activity by one person affects credit of both people Should you keep an account open if you don’t use it?
  • There has to be a valid reason for someone asking for your credit report. Under FCRA, if a person requests access to your credit files under false pretenses (no permissible purpose), he could go to jail.
  • Dispute with creditor first: 1) may have original records, 2) must share mistake with ALL credit bureaus, 3) may not be as efficient as credit bureau Dispute with credit bureau first: 1) provide your proof to creditor, 2) must provide free copy of report if corrections, 3) doesn’t share corrections with other bureaus
  • FICO score is a measure of your credit risk. Range is 300-850. Payment history and amounts owed make up 2/3 of the FICO score, so paying loans on time and not maxing out credit are best ways to increase FICO score.
  • Experian has PLUS Score. TransUnion has TrueChoice score. Equifax uses FICO on its website.
  • ACCC has live chat, and MMI has Ask the Expert feature on website.
  • Transcript

    • 1. Managing Your Credit Isaias Sarmiento Financial Literacy/IDA Coordinator Quincy Community Action Programs
    • 2. What is credit? <ul><li>Credit means you are using someone else’s money to pay for things. It also means you are making a promise to repay the money (the debt) to the person or company that loaned you the money (with interest most of the time). </li></ul>
    • 3. What is secured debt? <ul><li>When you buy something like a car, jewelry, appliances, or a home, that debt is “secured” by the item you purchased. If you don’t make the payments, the lender has the right to take back the property, or foreclose on the debt. </li></ul>
    • 4. What is unsecured debt? <ul><li>Unsecured debt is not tied to any purchase item you may possess. For example, credit card debt is unsecured. When you charge something on a credit card, the financial institution that issued the credit card can’t take back that vacation, dinner, suit, or dress. </li></ul>
    • 5. What are the costs associated with credit cards? <ul><li>Annual fees </li></ul><ul><li>Balance transfer fees </li></ul><ul><li>Cash advance fees </li></ul><ul><li>Over-the-limit fees </li></ul><ul><li>Late payment fees </li></ul><ul><li>Returned payment fees </li></ul><ul><li>Purchasing fees </li></ul><ul><li>Foreign transaction fees </li></ul><ul><li>Interest charges </li></ul>
    • 6. Reading a Credit Card Offer <ul><li>Interest Rate and Interest Charges </li></ul><ul><li>Fees </li></ul><ul><li>Other information </li></ul>
    • 7. Smart Credit Card Use <ul><li>Remind yourself that credit cards are loans. </li></ul><ul><li>Only apply for credit you need. </li></ul><ul><li>Make a list of all of your debts: Issuer, Balance, Interest rate, Due dates </li></ul><ul><li>Tackle each debt one at a time. </li></ul><ul><ul><li>Pay off debt with the highest interest rate OR the debt with the lowest balance. </li></ul></ul>
    • 8. Smart Credit Card Use <ul><li>Pay cash. </li></ul><ul><li>Mail payments at least 5 business days before due date. </li></ul><ul><li>If you move, notify creditors at least 30 days before you move. </li></ul><ul><li>Save money while paying down debt (to get into the habit of saving). </li></ul>
    • 9. Smart Credit Card Use <ul><li>Don’t constantly apply for new credit cards, especially just before applying for a big loan. </li></ul><ul><li>Check your credit card statement against your receipts at least every month. </li></ul><ul><li>Pay off credit cards every month. </li></ul>
    • 10. Smart Credit Card Use <ul><li>Avoid “maxing out” credit cards. </li></ul><ul><li>Keep track of bills and past due notices. </li></ul><ul><li>Spend less than you earn. </li></ul><ul><li>Look for ways to decrease expenses and increase income. </li></ul>
    • 11. Credit Reports <ul><li>Why should you get your credit report? </li></ul>
    • 12. When Can You Get Your Credit Report for FREE? <ul><li>Once every 12 months, from each credit reporting agency. Get your report from www.annualcreditreport.com . </li></ul><ul><ul><li>Equifax </li></ul></ul><ul><ul><li>TransUnion </li></ul></ul><ul><ul><li>Experian </li></ul></ul>
    • 13. When Can You Get Your Credit Report for FREE? <ul><li>You are denied credit, employment, insurance, or rental housing based on info on your report AND you ask for your report within 60 days of receiving notice of denial. </li></ul><ul><li>You are unemployed and plan to look for a job within 60 days. </li></ul><ul><li>You are receiving public assistance. </li></ul><ul><li>Your report is inaccurate because of fraud, including identity theft. </li></ul>
    • 14. What’s in Your Credit Report? <ul><li>Identifying Information </li></ul><ul><ul><li>Your name </li></ul></ul><ul><ul><li>Current and previous address </li></ul></ul><ul><ul><li>Birth date </li></ul></ul><ul><ul><li>Social Security number </li></ul></ul><ul><ul><li>Current and previous employers </li></ul></ul>
    • 15. What’s in Your Credit Report? <ul><li>Public records </li></ul><ul><ul><li>Bankruptcies </li></ul></ul><ul><ul><li>Foreclosures </li></ul></ul><ul><ul><li>Tax Liens </li></ul></ul><ul><ul><li>Monetary court judgments </li></ul></ul><ul><li>Collection accounts </li></ul>
    • 16. What’s in Your Credit Report? <ul><li>Credit accounts (car, mortgage, lines of credit, credit cards, student loans) </li></ul><ul><ul><li>Date opened and closed </li></ul></ul><ul><ul><li>Payment history </li></ul></ul><ul><ul><li>Balance </li></ul></ul><ul><ul><li>Credit Limit or loan amount </li></ul></ul><ul><ul><li>Payment terms </li></ul></ul><ul><ul><li>Account status: open vs. closed </li></ul></ul><ul><ul><li>Account type: Individual, Joint, authorized user </li></ul></ul><ul><ul><li>Age of account </li></ul></ul>
    • 17. What’s in Your Credit Report? <ul><li>Inquiries </li></ul><ul><ul><li>Organizations that obtained copy of report </li></ul></ul><ul><ul><li>How often consumer applied for credit in past 2 years </li></ul></ul><ul><ul><li>Pre-approved credit offers </li></ul></ul>
    • 18. What’s in Your Credit Report? <ul><li>Hard Inquiry (these affect your credit score) </li></ul><ul><ul><li>Applications for a new credit card. </li></ul></ul><ul><ul><li>Requests to activate a pre-approved credit card offer. </li></ul></ul><ul><ul><li>Activations of new cell phone contracts. </li></ul></ul><ul><ul><li>Opening a new bank checking or savings account at some institutions. </li></ul></ul><ul><ul><li>If multiple credit inquiries are done by auto or home lenders within a short time, then it would only count as 1 inquiry. </li></ul></ul>
    • 19. What’s in Your Credit Report? <ul><li>Soft Inquiry (does not affect your score) </li></ul><ul><ul><li>Credit report and score that you request yourself. </li></ul></ul><ul><ul><li>Initial credit checks by credit card companies that want to solicit you for a pre-approved credit card. </li></ul></ul><ul><ul><li>Initial credit checks by mortgage companies to pre-approve you for a loan. </li></ul></ul><ul><ul><li>Credit background checks by a potential employer. </li></ul></ul><ul><ul><li>Periodic credit checks by your insurance or credit card company to keep tabs on you. </li></ul></ul>
    • 20. What’s NOT in Your Credit Report? <ul><li>Race </li></ul><ul><li>Religion </li></ul><ul><li>Medical history </li></ul><ul><li>Personal lifestyle </li></ul><ul><li>Political preferences </li></ul><ul><li>Criminal record </li></ul><ul><li>Any other information not related to credit </li></ul>
    • 21. Disputing an Item on a Report <ul><li>Contact the creditor or credit bureau. </li></ul><ul><li>Write a letter of dispute. </li></ul><ul><li>Creditor/credit bureau must respond to you within 30 days. </li></ul><ul><li>If you disagree with finding, you can submit a 100-word explanation. </li></ul>
    • 22. What is a credit score? <ul><li>A number generated by a computer model to predict how likely an individual is to repay a new loan. </li></ul><ul><li>The score is based on experience with millions of consumers. </li></ul><ul><li>A computer model assigns points to information on a credit report. </li></ul>
    • 23. Why are credit scores used? <ul><li>Fast </li></ul><ul><li>Objective </li></ul><ul><li>Assigns risk to the borrower (the lower the score, the riskier the borrower) </li></ul>
    • 24. What is a good credit score? <ul><li>It depends on the scoring model and the lender. </li></ul><ul><ul><li>FICO model’s score range: 300 to 850 </li></ul></ul><ul><ul><li>Vantage model’s score range: 501 to 990 </li></ul></ul><ul><li>Check with the lender for clarification on how the credit score relates to the final decision. </li></ul><ul><li>Example: Making payments on time adds points to your score. Charging the maximum amount available on a credit card reduces points from your score. </li></ul>
    • 25. FICO Score <ul><li>What determines a FICO score: </li></ul><ul><li>Payment history - 35% </li></ul><ul><li>Amounts owed - 30% </li></ul><ul><li>Length of credit history - 15% </li></ul><ul><li>New credit - 10% </li></ul><ul><li>Types of credit used - 10% </li></ul><ul><li>C opyright © 2001-2007 Fair Isaac Corporatio n </li></ul><ul><li>www.myfico.com </li></ul>
    • 26. VantageScore <ul><li>Introduced in March 2006 to compete with FICO. </li></ul><ul><li>The 3 credit bureaus use same scoring system. </li></ul><ul><li>Idea is to replace proprietary scores of the 3 credit bureaus. </li></ul><ul><li>Scores range from 501 to 990. </li></ul><ul><li>Letter grade- A, B, C, D, F- assigned to score. </li></ul><ul><li>www.vantagescore.com </li></ul>
    • 27. How to Improve Your Credit History <ul><li>Check your reports on a regular basis </li></ul><ul><li>Dispute errors on credit report. </li></ul><ul><li>Pay bills on time. </li></ul><ul><ul><li>(At least pay the monthly minimum, but you should be paying more.) </li></ul></ul><ul><li>Pay down debt. </li></ul>
    • 28. When debts are out of control… <ul><li>First, call creditors to try to negotiate lower interest rate or payment plan. </li></ul><ul><li>Access good credit counseling organizations. </li></ul><ul><ul><li>American Consumer Credit Counseling www.consumercredit.com </li></ul></ul><ul><ul><li>Money Management International www.moneymanagement.org </li></ul></ul><ul><li>Avoid credit repair companies. </li></ul>
    • 29. Credit Repair Companies <ul><li>No one can remove accurate information from your credit report. </li></ul><ul><li>It can take several years to repair your credit. </li></ul><ul><li>No one can create a new identity for you. </li></ul><ul><li>Legitimate companies provide a service BEFORE requesting payment. </li></ul>
    • 30. Debt Management Plan (DMP) <ul><li>A DMP is NOT credit counseling. </li></ul><ul><ul><li>You deposit money each month with credit counseling agency. </li></ul></ul><ul><ul><li>Your creditors may agree to lower your interest rate or waive certain fees. </li></ul></ul><ul><ul><li>You must make regular, timely payments. </li></ul></ul><ul><li>American Consumer Credit Counseling and Money Management International offer DMP. </li></ul>

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