Understanding and Using Credit

1. Understanding and Using Credit

2. Overview • Credit • Credit Reports and Scores • Identity Theft • Credit Trouble

3. Credit

4. What is Credit? • The benefit of being able to pay at a later date for the goods and/or services that one enjoys today • Privilege • Responsibility

5. Types of Credit • Secured • Repayment is backed by some form of collateral • Car loan (secured by the car) • Mortgage (secured by the property) • Secured loan (secured by cash or other property) • Unsecured • Simply the promise to repay • Alternative (private) education loan • Revolving credit card • Personal loan

6. Benefits of Good Credit • A person with “good credit” is someone considered most likely to repay a loan • Makes it more likely that you will receive the credit you want when you want it • Car rentals • Apartment rentals • Utilities and phone service • When financing education costs (particularly postgraduate education), good credit is needed to obtain an alternative student loan

7. Create a Good Credit History • Pay your bills on time • Keep your debt load reasonable • Understand the basics • Know the terms and conditions of all credit • Review your credit history every year

8. Applying for Credit • Print clearly • Use your complete name • Only apply for the credit you want • Review your credit report before making a major purchase

9. Credit Reports and Scores

10. Your Credit Report • Your financial resume

11. Information on Your Credit Report • Personal Information • Name, address (current and prior), SSN, DOB, employment • Credit Information • Current open accounts, closed accounts, rating and number of day(s) delinquent, timeliness of repayment, installment or open ended • Public Record Information • Bankruptcy, legal judgment, property lien, warrants

12. Information on Your Credit Report • Inquiries • Creditors and agencies who have requested your credit report • Statements of dispute

14. Your Credit Report • Visit annualcreditreport.com • One free credit report per year from each reporting agency • Additional reasons for free reports • Unemployed and plan to apply for employment in the next 60 days • Denied credit within 60 days on public assistance • Denied employment or insurance in the past 60 days • A victim of identity theft

15. Credit Reporting Agencies • Equifax, 1-800-685-1111 • www.equifax.com • Trans Union, 1-800-888-4213 • www.transunion.com • Experian, 1-888-397-3742 • www.experian.com

16. Fixing Credit Errors • Document discrepancies in your credit report in a letter to the credit reporting agency, detailing: • Name, address, social security number • Account and account numbers in dispute • The information you are disputing and why • Any documentation to support your claim • A request for an updated credit report reflecting the correct information

17. Credit Scoring • Credit scoring rates your risk as a borrower • Developed by Fair, Isaac & Co.: FICO® Score • It is a system creditors use to help determine • Whether or not to give you credit • Interest rate to charge for credit • Awards points for each factor that helps predict who is most likely to repay a debt • Your credit score is based on information in your credit report – make sure your it is accurate

18. What is Your Credit Score? • A forecast of how likely you are able to repay a debt as agreed during the next 24 months • The higher the score, the better the score, and the better the forecast that you will repay • A snapshot of your credit history at a particular point in time • Whether or not to give you credit • Interest rate to charge for credit • Only includes factors related to your credit • Always changing

19. Information Considered in Scoring

20. Credit Scoring Does Not Consider • Race, color, religion, national origin, sex or marital status • Age • Employment history, occupation, salary • Where you live • Non-credit inquiries

21. Why Credit Scoring? • More than 70% of the top 100 financial institutions use FICO® scoring to make billions of credit decisions annually because it is: • Fast • Consistent • Objective • Cost Effective • Reliable and updated regularly

22. FICO® Scores: Ranges & Grades 760 & above Excellent A++ 700 to 759 Very Good A+ 680 to 699 Good A 660 to 679 Above Satisfactory B 640 to 659 Satisfactory B- 620 to 639 Below Satisfactory C

23. Improving Your FICO® • Make loan/credit payments on time • Pay down your debt and consider charging less often • Keep balances low • Don’t close old, paid-off accounts • Don’t be afraid of credit counseling • Stay out of bankruptcy

24. Identity Theft

25. Identity Theft • Identity theft is the deliberate assumption of another person’s identity • Unauthorized use of personal information, such as date of birth, mother’s maiden name and social security number • Usually used to gain access to credit and commit fraud • Often committed by people we know, like friends, family, or co-workers

26. Protect Yourself • Check financial statements promptly • Review your credit report annually • Be careful with personal information • Say NO • Opt out of credit offers • Minimize the number of credit cards you carry by calling 1-888-567-8688

27. Protect Yourself • Shred and destroy • Protect your mail • Beware of strange ATMs • Watch “shoulder surfing” • Keep your eye on your card at restaurants and gas stations

28. Steps to Take if You Are a Victim • Place a fraud alert with credit bureaus • Start your research • File police report • File identity theft affidavit • Call 1-877-ID-THEFT or mail to: Identity Theft Clearinghouse Federal Trade Commission 600 Pennsylvania Ave, NW Washington, DC 20580 • Document everything

29. Credit Trouble

30. Signs of Credit Trouble • Rising credit balances, decreasing income • Paying just the minimum monthly payment • Too many credit cards • Near, at, or over credit limit • Charges exceed monthly payments • Using credit for food or gas • No job • Receiving letters and calls on debts • Using credit cards in place of cash

31. Steps Toward Resolving Trouble • Contact your lenders immediately • Stop using credit • Pay your bills when they are due • Consolidate • Get help from the professionals

32. Credit Counseling Resources • National Foundation for Credit Counseling (NFCC) and its member agencies • Member agencies known as Consumer Credit Counseling Services (CCCS) • To locate, visit: www.nfcc.org or call (800) 388-2227

33. QUESTIONS

34. THANK YOU!