Education Financial The National Economics Department Financial Freedom Campaign NAACP
Agenda • Banking Basics • Borrowing Basics • Budgeting Basics • Saving Basics • Credit Basics • Financial Recovery • Consumer Rights • Resources
Banking Basics Requirements for opening an account • Opening Deposit You'll usually need at least $1 to open an account, but some banks will require a higher amount, such as $100, $500, or more, depending on the type of checking account you want. • IdentificationAcceptable identification includes: • Your Social Security number • Tax identification number • Permanent resident card • Driver's license or state identification card If you are opening a U.S. bank account and are not a U.S. resident, you'll need at least one and probably two of the following: • Foreign passport with photo • Foreign driver's license, nonimmigrant Visa and border crossing card (DSP-150 with photo), • nonresident alien border crossing card (I-586 with photo) • Contact InformationThis will include your address, phone number and email address.
Borrowing Basics • Interest: The Cost of Borrowing Money • Avoid Alternative Finance Services (i.e. Payday loans, Car Title Loans, etc) • Usually charge higher fees for products/services • Not considered to be credit building institution(s)
Know the FACTS Pros Cons
The Golden Rule of Money When you use someone else’s money you have to pay for it! Most of the time that payment is in the form of INTEREST!!!!
Line of Credit V.S. Loan Line of Credit Loan A loan usually refers to borrowing a fixed amount at one time and paying a set amount each month for the term of the loan. • A line of credit works like a credit card in the sense that you have a credit limit and can borrow as needed and pay at least a minimum payment based on your balance.
Types of Credit Revolving Credit: Allows you to borrow money at any time up to a set limit. The most common types are credit cards. Installment Credit: A loan that must be repaid over a specific period of time. This type of credit is common for larger purchases such as a home, car, or education. Non-installment or Service Credit: Allows you to pay for a used service at a later date usually without an interest charge. (i.e. A utility bill)
Types of Credit Continued • Secured Credit: Requires you to provide something of value to guarantee that you will repay your debt. It is usually used for installment loans. If you fail to repay, the lender takes your item as repayment • Unsecured Credit: Does not require a guarantee (collateral)
Budgeting Basics • Track daily spending habits • Prepare a personal spending plan or budget to estimate monthly income and expenses • Identify ways to decrease spending • Identify possible ways to increase income • Identify budgeting tools that will help you manage your bills • List and prioritize financial goals • Recognize how to create a plan to achieve financial goals
Setting Financial Goals Financial Goal Setting: The 5 Steps 1. Set and write down your financial goals2. Breakdown the goals into bite-size chunks3. Create a detailed plan of action4. Grow your financial knowledge5. Evaluate progress
Saving Basics • Explain why it's important to save. • Determine goals toward which you want to save. • Identify savings options. • Determine which savings options will help you reach your savings goals. • Recognize investment options that will work for you. • List ways you could save for retirement. • List ways to save for large-expense goals, including child’s college tuition, car or home purchase, or a vacation.
Credit Basics • Credit: Money you borrow and plan to repay. It allows you to make a purchase without having to pay the entire price at once. • Interest: Is the cost of borrowing money.
U.S. Credit System Creditors Public Records Collection Agencies Credit Bureaus/Inquiries Data Furnishers TransUnion Equifax Experian
The FICO Score: Factors that influence credit • 35% Payment History • 30% Amounts Owed • 15% Length of Credit History • 10% New Credit • 10% Type of Credit in Use
Want GOOD Credit??? • Tip 1: Pay your bills on time • Tip 2: Contact your lenders immediately if you foresee a payment problem • Tip 3: Borrow at a minimum • Tip 4: Do not overdraft accounts • Tip 5: Understand loan terms/agreements before signing
The Credit Report: Explored Information typically included: Common errors on the report Duplicate Information Uninvited Inquiries Items that should no longer be listed on your credit report • Indentifying Information • Name, Address, Social • Credit Information • Dates opened, creditlimits • Public Record Information • Bankruptcy, Foreclosures • Inquiries • Others who looked at report
The Credit Report: Explored Credit Report: A record of how you have paid your credit card debt and other loans. It reflects the following: • How much debt you have • If you’ve made your payments on time • Whether or not you’ve paid back your loans
The Credit Report: Explored Credit reports are complied by national credit reporting agencies called credit bureaus • There are three Credit Bureaus: • TransUnion • Equifax • Experian
Financial Recovery Tips • Assess your current financial situation • Identify ways to increase income and decrease and prioritize expenses • Develop a financial recovery plan • Identify steps to successfully implement a financial recovery plan • Recognize how to guard against credit repair scams • Identify timeframes to review and adjust your financial recovery plan.
Financial Recovery Plan • Evaluate the Damage • Catalog all of your losses as well as your remaining capital • Set short-term financial goals • This can include saving a modest amount each month and paying off high interest loans • Re-do your budget • Be sure to track your spending habits and eliminate any superfluous expenses.
Financial Recovery Plan 4. Follow your revised budget 5. Update your budget regularly • This will allow you to track your progress while adapting to your ever shifting economic climate 6. Pad Your Income -Find creative and realistic ways to increase your income 7. Set new financial goals -once you’ve accomplished your short term goals it will be time to set some longer term goals
Recognizing Credit Repair Scams • The company wants you to pay for credit repair services before they provide any services. • The company recommends that you do not contact any of the three major national credit reporting companies directly. • The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current. • The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number. • The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.
Consumer Rights • Each of the nationwide consumer reporting companies Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it. • It doesn’t cost anything to dispute mistakes or outdated items on your credit report. • No one can legally remove accurate and timely negative information from a credit report
Resources Annual Credit Report: www.annualcreditreport.com Experian: www.experian.com Equifax: www.equifax.com TransUnion: www.transunion.com National Foundation For Credit Counseling: www.nfcc.org Federal Trade Commission: Choosing a Credit Counselor www.ftc.gov Department of Justice: List of Credit Counseling Agencies- http://1.usa.gov/2P1Bq4 Better Business Bureau: See if there are any alerts on the organization you are considering www.bbb.org Association of Independent Consumer Credit Counseling Agencies: www.aiccca.org