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Protecting and Building your Credit

Protecting and Building your Credit. How does good credit help you?. Lower auto and homeowner insurance rates Lower rates on car loans Your credit may even affect your ability to get a job!. Why do companies charge more for people with bad credit?.

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Protecting and Building your Credit

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  1. Protecting and Building your Credit

  2. How does good credit help you? • Lower auto and homeowner insurance rates • Lower rates on car loans • Your credit may even affect your ability to get a job!

  3. Why do companies charge more for people with bad credit? • Insurance companies have found a correlation between risk of accidents/claims and credit scores • Credit card companies and banks look at your credit history to determine the likelihood you will repay the loan More risk = Higher rates

  4. Can I get a checking accountif I have bad credit? • Better chance with a credit union • Open a savings account first – can still get ATM card, receive direct deposits, etc. • May be able to open checking account at bank used by employer • Open an investment account; most investment banks will open a bank account for you without a credit check (but may cost $500 or more to open)

  5. Establishing and Building Credit • Apply for a credit card and make sure you pay it off each month • Discover.com has good cards for students with cash back incentives • Set up your credit card for automatic payments so you are never late

  6. Rebuilding Credit • Secured Credit Cards • Some people don’t quality for regular credit cards • Secured cards require a cash collateral deposit that determines your credit line • Banks may reward you for good payment history and add to your credit line without additional deposits

  7. Secured Credit Cards • People usually qualify for a regular unsecured credit card after a year with the secured card • Switch as soon as you can to an unsecured card as fees and rates are lower • Better than a prepaid card for rebuilding credit because a prepaid card = debit card (they are not reported to the major credit bureaus)

  8. Secured Credit Cards • Watch out for fees: • Don’t pay an application fee • Don’t pay insurance policies!! • Annual fees lower at credit unions • Read the fine print! • Ask how long the issuer will keep your deposit after card is closed • Make sure card issuer DOES report to three major credit bureaus • Ask the card issuer if they flag report to credit bureaus as a secured credit card

  9. Recommendations • Get the lowest annual fee you can • Just charge a few things each month and pay off entire balance each month • Don’t go into credit card debt! It can takes YEARS and YEARS to repay: Calculator • Compare credit cards at BankRate.com or look into cards through a credit union (i.e. Global)

  10. Check your Credit Reports • annualcreditreport.com is free • Can check for free once a year from each credit bureau • TransUnion • Experian • Equifax

  11. ChexSystems • Credit reporting agency used by 80% of banks • You can get one free report per year from their Web site • Some credit unions don’t use ChexSystems • If you owe one bank money, you may not be able to open account at another bank if they run report in ChexSystems • You can apply for account online to avoid embarrassment

  12. Global Credit Union • Location across from STA Plaza • They offer secured loans for $250 or $500 with no credit check and no fee at 5% interest. They are reported to Equifax as installment loan. • They offer two secured credit cards; to qualify, you can’t owe more than $500 to another bank. Annual fee is low ($12 or $18) and interest rate about12% or 18%.

  13. Global Credit Union • $20 to join (one-time fee) • After 6 months to a year, most qualify for a regular credit card (it depends on your credit history)

  14. Free Financial Help

  15. Your Questions • How do I pick a stock? • What are good investments? • What’s a Roth IRA?

  16. Choosing a Bank • What things should I look for?

  17. Owning a Home • What is equity? • How do I choose a bank for a home loan? • Compare, compare, compare! • Points vs. interest rate • Debt-to-income ratio? • Does it make sense to refinance? • Selling a home to limit taxes Tax Info • Best place to invest that money?

  18. Your FICO Score • You have to pay extra for it • Precise formula for calculating it is a mystery, but experts estimate it is calculated this way: • 35% based on your payment history • 30% based on credit utilization • 15% based on length of time you’ve had credit • 10% based on new credit • 10% based on the types of credit you currently have

  19. Budgeting • How do I estimate my power bill? • Track your expenses for a few months to develop a budget/see where your money goes • Consider using “money buckets” or envelope system STCU Web Site

  20. Strategies for Improving your Score • Limit the number of credit cards you have • Clean up your score • If a company no longer exists or a bank has merged with another, bureaus are required to remove information because it is no longer verifiable • Try to keep debt utilization rate low (people with best credit scores borrow 7% or less of limit) • All 3 credit bureaus allow you to add a brief statement to report, which may help with employers

  21. Stay Away from These Things!! • Credit repair offers • Some dispute all of your accounts, but after credit bureaus validate the accounts, they appear on your report again • Secured credit cards with monthly fees or application fees

  22. Miscellaneous • How do you have paid items removed from your credit? Info • How do you build your credit? • How can I get the best car loan deal? • How is interest calculated? Stay tuned! • Teaching kids they can’t buy everything • Choosing lowest car insurance • Considering bankruptcy

  23. How to Teach Teenagers (& yourself) Good Web Sites • Moneysavingmom.com • Clarkhoward.com • http://balancetrack.org/ AM Radio Shows • Clark Howard • Dave Ramsey

  24. Ways to Save Money • Groceries • Buy generic brands • Consider low-cost protein sources like beans • Get the Wednesday ads and stock up on good deals • Use leftovers

  25. Ways to Save Money • Clothes and furniture • Buy second hand • Craigslist • Consignment shops • Insurance • Get several quotes • Increase deductible • Check out books from the library • Download music for free with Freegal

  26. If you spend 30 minutes clipping coupons and you save $10.00 on groceries, that’s like earning $20 an hour tax-free!

  27. Good Web Sites • Moneysavingmom.com • Clarkhoward.com AM Radio Shows • Clark Howard • Dave Ramsey

  28. Other questions • Why do some rich people pay lower tax rates than middle-class taxpayers? • Capital gain taxes vs. ordinary income • Different tax structures in different states • Income taxes versus sales taxes

  29. Income Taxes • Use W-4 form worksheet to determine number of allowances

  30. Interest • Cost of using money • You pay interest when you borrow money • You earn interest when you invest money High interest rates are good for savers, bad for borrowers. 

  31. Mortgages • First and second mortgages • Refinances

  32. Certificates of Deposit (CDs) • Ties up your money for a period of time • Early withdrawal penalties, but higher rates than regular savings • No fee to purchase • Doesn’t help build your credit • Invest in bonus rate savings accounts first

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