Presentation Transcript

1. CREDIT DEFINITIONS Credit Trust given to another person for future payment of a loan, credit card balance, etc. Creditor A person or company to whom a debt is owed. 1 Slide 1 – Credit Definitions Lesson Reference: Credit, Activity 1 – Handout 1
2. Slide 2 - The Five Cs of Credit Lesson Reference: Credit, Activity 1 – Overhead 1 THE FIVE Cs OF CREDIT C = Capacity C = Capital C = Collateral C = Conditions C = Character 2
3. WHAT IS A CREDIT SCORE? A credit score is a number that helps a lender predict how likely an individual is to repay a loan, or make credit payments on time. A credit score is a number that changes as the elements in a credit report change. A credit score has broad use and impact. Your credit past is your credit future. FICO® scores, one of the most common credit scoring systems, vary between 350 and 850. VantageScoreSM, a new credit scoring system developed by the three credit bureaus, ranges from 501-990. 3 Slide 1 – What Is a Credit Score? Lesson Reference: Credit, Activity 2 – Overhead 1
4. WHAT MAKES UP A TYPICAL CREDIT SCORE? Source: Fair Isaac and Consumer Federation of America, 2005 4 Slide 2 – What Makes Up a Typical Credit Score? Lesson Reference: Credit, Activity 2 – Overhead 2
5. IMPROVING YOUR CREDIT SCORE Pay bills on time. Get current and stay current. Don’t open a lot of new accounts too rapidly. Correct mistakes. Shop for loan rates within a focused period of time. Keep balances low on revolving credit. Pay off debt. Check your credit report. 5 Slide 3 – Improving Your Credit Score Lesson Reference: Credit, Activity 2 – Handout 2
6. TYPES OF CREDIT Cash Credit Sales Credit Secured Credit Revolving Credit I.O.U. Single Payment Credit Installment Credit Other Types of Credit 6 Slide 1 – Types of Credit Lesson Reference: Credit, Activity 3 – Handout 1
7. Slide 2 - Sources of Credit Lesson Reference: Credit, Activity 3 – Overhead 1 SOURCES OF CREDIT Banks Mortgage & Loan Companies Retail Stores Finance Companies Credit Unions & Caisses Populaires Internet Stores What are other sources of credit? What sources of credit should be avoided? Why? 7
8. STEPS TO TAKE TO AVOID ABUSIVE LENDING Have you shopped around for the best deal? Do you feel the lender pressured you to take the loan? Do you understand the terms of the loan? 8 Slide 3 – Avoiding Abusive Lending Lesson Reference: Credit, Activity 3 – Handout 2
9. COMMON PARTS OF A CREDIT APPLICATION Reason for Loan Personal Identification Information Employment Information Mortgage/Rental Information Documentation Required (for some applications) Current Debts Credit References Collateral (for some applications) Bank References Signature and Date 9 Slide 4 – Parts of a Credit Application Lesson Reference: Credit, Activity 3 – Handout 3
10. SAMPLE CREDIT APPLICATION 10 Slide 5 – Sample Credit Application Lesson Reference: Credit, Activity 3 – Handout 3
11. QUESTIONS TO ASK WHEN APPLYING FOR CREDIT What is the annual fee? What is the annual percentage rate (APR)? When are payments due? What is the minimum payment required each month? Is there a grace period? Are there other fees associated with the credit, such as minimum finance charges? What is the credit limit? What are the penalties for late or missed payments? What are the terms and conditions of the credit? What else is included in the fine print? 11 Slide 6 – Questions to Ask Lesson Reference: Credit, Activity 3 – Handout 5
12. Slide 1 – Debt-to-Income Thermometer Lesson Reference: Credit, Activity 4 – Overhead 1 DEBT-TO-INCOME THERMOMETER 12
13. Slide 2 - The Credit Process Lesson Reference: Credit, Activity 4 – Overhead 2 THE CREDIT PROCESS CREDIT HISTORY • CREDIT BUREAU • CREDIT REPORT • CREDIT SCORE • CREDIT RATING 13
14. SAMPLE CREDIT REPORT 14 Slide 3 – Sample Credit Report Lesson Reference: Credit, Activity 4 – Handout 2
15. Slide 1 - Types of Credit Cards Lesson Reference: Credit, Activity 5 – Overhead 1 TYPES OF CREDIT CARDS Private Label Issued by a single source Can only be used at a single source Examples: Department Stores, Gasoline Companies General Label Issued by a single source Can be used in many places Examples: Bank Card, Major Credit Card 15
16. WARNING SIGNS OF DEBT PROBLEMS Delinquent Payments Default Notices Repossessions Collection Agencies Judgment Lien Garnishment 16 Slide 2 – Warning Signs Lesson Reference: Credit, Activity 6 – Handout 2
17. CORRECTING CREDIT PROBLEMS Take responsibility for actions. Communicate with creditors. Use certified mail. Debt Consolidation Credit Counseling Bankruptcy 17 Slide 5 – Correcting Credit Problems Lesson Reference: Credit, Activity 6 – Handout 5
18. IDENTITY THEFT This information may include: Social Security Numbers Name Address Date of birth Mother’s maiden name Passwords PINs 18 Slide 1 – Identity Theft Lesson Reference: Credit, Activity 7 – Overhead 1
19. HOW TO AVOID IDENTITY THEFT Monitor your credit report. Don’t give out personal information to unknown persons or companies. Protect your credit and debit cards. Protect your mailbox. Protect your wallet. Use passwords and PINs that can’t be easily guessed. Use anti-virus software on your computer. Notify your bank when you change your address or phone number. Other suggestions? 19 Slide 2 – How to Avoid Identity Theft Lesson Reference: Credit, Activity 7 – Handout 2
20. Federal Student Loans Private Student Loans Pay before graduation Variable Interest No subsidization Credit Check Will cover full debt Payment Deferred Fixed Interest Potentially Subsidized Interest No Credit Check May not cover all of your debt 20 Slide 1 – Prime and Subprime Lending Lesson Reference: Credit, Activity 8 – Overhead 1
21. Stafford ($31,000 - $57,500) Direct (From Gov) Family (From Bank) Perkins ($27,500) Parent PLUS