Dec 11, 2015
Keys to Credit
Keys to Credit
What is Credit?What is Credit?
• Buy now – pay later
• Financial tool
• Binding contract
• Buy now – pay later
• Financial tool
• Binding contract
Advantages of Using Credit Advantages of Using Credit • Establish credit history
• Use of item now• Safety• Take advantage of bargains
• Convenience• Emergency funds• Consolidate bills• Spending record
• Establish credit history
• Use of item now• Safety• Take advantage of bargains
• Convenience• Emergency funds• Consolidate bills• Spending record
Disadvantages of Using Credit Disadvantages of Using Credit
• Tend to overspend
• Credit history damaged if misused
• Fees
• Interest (APR)
• Commits future income
• Tend to overspend
• Credit history damaged if misused
• Fees
• Interest (APR)
• Commits future income
Ways to Minimize Credit CostsWays to Minimize Credit Costs
• Shop for the lowest APR
• Borrow only amount really needed
• Pay more than minimum monthly
• Shop for the lowest APR
• Borrow only amount really needed
• Pay more than minimum monthly
Ways to Minimize Credit CostsWays to Minimize Credit Costs
• Pay cash whenever possible
• Take out a loan for the shortest time possible
• Pay bills on time
• Pay cash whenever possible
• Take out a loan for the shortest time possible
• Pay bills on time
The 3 C’s of CreditThe 3 C’s of Credit
• Character
• Capital
• Capacity
• Character
• Capital
• Capacity
Types of CreditTypes of Credit
• Installment credit
• Non-Installment credit
• Installment credit
• Non-Installment credit
Paycheck LoansPaycheck Loans
• Borrow money against your future paycheck
• Always a loan fee
• Interest is very high
• Borrow money against your future paycheck
• Always a loan fee
• Interest is very high
Information on Credit ReportsInformation on Credit Reports
• Identification & employment data
• Payment history• Inquiries• Public record information
• Identification & employment data
• Payment history• Inquiries• Public record information
Sample Credit Report
Sample Credit Report
Credit reports used by:Credit reports used by:
• Banks• Landlords• Car dealers• Insurance companies
• Retail stores
• Employers
• Banks• Landlords• Car dealers• Insurance companies
• Retail stores
• Employers
Major Credit Reporting AgenciesMajor Credit Reporting Agencies
• Equifax
• Experian
• Trans Union
Offer free report every 12 monthswww.annualcreditreport.com
• Equifax
• Experian
• Trans Union
Offer free report every 12 monthswww.annualcreditreport.com
FICO ScoresFICO Scores
Sample Credit Report
Sample Credit Report
Sample Credit Report
Sample Credit Report
Sample Credit Report
Sample Credit Report
If there are mistakes…If there are mistakes…
• Write CRA
• Explain error
• Include copies of documents
• CRA must check into
• Write CRA
• Explain error
• Include copies of documents
• CRA must check into
Building a Credit RatingBuilding a Credit Rating• Open checking & savings account
• Apply for credit with your bank
• Buy something on time from a store
• Apply for a gas card
• Get a co-signer
• Open checking & savings account
• Apply for credit with your bank
• Buy something on time from a store
• Apply for a gas card
• Get a co-signer
Most Important!!!Most Important!!!
Pay your bills on time
Pay your bills on time
Misuse of credit can:Misuse of credit can:
• Ruin credit history & chances of qualifying for future credit
• Make it hard to find a place to live or get a job
• Result in bankruptcy
• Ruin credit history & chances of qualifying for future credit
• Make it hard to find a place to live or get a job
• Result in bankruptcy