The Importance of Credit

1. The Importance of Credit Brought to you by M&T @ Work

2. The Importance of Credit • Good credit is important in today’s world. • Credit puts power in the right hands…yours. • Making time sensitive purchases • Buying big ticket items • Pay for major expenses • Make certain purchases possible • Meet emergency expenses • Some employers view credit reports on potential employees before hiring.

3. How to Build Credit • Start with what you can handle • Develop what you’ve attained • Once you’re in good shape, you can take on more

4. You are responsible for the quality of your credit! • Pay on time, avoid late fees • Pay more than the minimum due, if possible • Use cash advances only for emergencies • Borrow only what you can afford

5. Good credit pays off • Helps you get credit in the future • May qualify you for lower rates • Frees up money for other things • Gives you peace of mind

6. What is credit? • Credit is an extension of money to a person for personal, family or household purchases • Credit is the amount you’re approved to use • The debt – or amount you owe – must be repaid to the lender by the terms set forth in the legal agreement between the borrower and the lender • Types of credit: • Mortgages, credit cards, personal loans, home equity loans, auto loans, lines of credit, etc.

7. Credit can work to your advantage • The benefits of credit • Offers convenience • Lets you do more with what you have • The importance of a credit plan • Reduces worries • Keeps debt manageable • Makes credit work for you, not against you

8. Secured vs. unsecured credit • Secured credit • Leverages collateral for the purpose of: • Obtaining higher loan/line amounts • Establishing credit history • Unsecured credit • No collateral

9. Loans (Closed end) Entire amount provided up front Fixed monthly payments Set time to repay Fixed and variable interest Examples: Car loans, mortgages Lines (Revolving) Use credit as needed Payments based on use Time to repay flexible Usually variable interest Example: Credit cards Loans and lines of credit

10. The cost of a loan Annual interest + Fees and charges = Annual Percentage Rate (APR)

11. The cost of a line of credit • Total cost depends on • Type of line • Amount used • When you pay • Cost includes • APR: interest on what you owe • Annual fees • Finance charges • Late charges • Cash advance fees

12. Credit reports paint your financial picture • Credit reporting agencies track credit use and payment history • Compile reports and scores • Sell to lenders, landlords, and others • Lenders use credit reports and credit scores to help determine: • Whether to extend credit • Amount or credit limit • Rates

13. Have a good credit strategy • Decide when to borrow • Review your budget • Determine the right type of credit • Continually monitor your overall credit position

14. Strengthen your credit situation • Apply only for what you can manage • Build credit with appropriate products • Always pay on time • Limit the use of credit if your debt increases • Seek help if you’re struggling with debt

15. When does borrowing make sense? • When you: • Know you can pay it back • Need to buy before money is available • Can get a better price buying now • Want to stretch payments over time

16. Monitor your credit • Review credit at least once per year • www.annualcreditreport.com • 1-877-322-8228 • Keep track of all outstanding credit balances • Look for opportunities to reduce the amount of interest you’re paying

17. Ways to manage your debt • Lower the cost of credit by making accelerated payments • Simplify debt repayment by consolidating debt and paying one bill • Reduce monthly payments with a consolidated loan that fits your budget

18. Now is the time to act • Get on track to obtain credit • Meet with someone to discuss how credit can work for you • Schedule an appointment today

19. Thank you!