Ford Credit—Credit Drives America

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

What is credit?

• Credit is a promise to repay an obligation.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

Who are the parties involved?

• A credit transaction involves at least two parties:

The lender provides value in the form of cash, merchandise, or some other item of value.

The borrower makes a commitment to repay what he or she has borrowed according to a pre-agreed schedule.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

How does a lender decide whether or not to give you credit?

• Lenders need to feel confident you will repay.

• Decisions to extend credit are usually based on the "Three Cs of Credit.”

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

What are the “Three Cs of Credit”?

• Credit—the borrower's willingness to pay

• Capacity—the borrower's ability to repay the obligation

• Character—the borrower's stability

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

What is “credit history”?

• Your credit history records your experience with credit including loans and credit cards. Late payments, delinquent payments, bankruptcies and court judgments are also recorded.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

Who keeps track of your credit?

•  Credit reporting agencies

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

How does a credit reporting agency or credit bureau work?

• A credit reporting agency (or credit bureau) collects and maintains information about people's experience with credit.

• Lenders provide the agencies with payment history on the customer's accounts. In exchange, lenders receive credit data on applicants from the agencies so that they can decide whether they should grant credit to the applicant.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

Who are the creditreporting agencies?

•  Three major credit reporting agencies are:

EQUIFAX1-800-685-1111 or www.equifax.com

EXPERIAN 1-888-397-3742 or www.experian.com

TRANS UNION 1-800-888-4213 or www.tuc.com

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

Why is a good credithistory important?

• A good credit history is important because it shows your financial reputation. This can affect your chances to buy or rent a house or apartment, get a loan, or even get a job.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

How might you establish a credit history?

• Apply for a secured credit card.

• Secure a loan with a CD (Certificate of Deposit).

• Obtain a retail store credit card.

• Become an authorized user on your parents' account or another person's account. Remember to be responsible because the reputation and credit history of the other person is also at stake.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

How can you maintain a good credit history?

• Apply for one credit card at a time.

• Pay your bills when they are due.

• Pay more than the minimum balance on your credit cards each month.

• Avoid impulse purchases.

• Contact your creditors if you can't pay your bills — don't ignore your obligations.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

Should you check yourcredit history?

• People should check their credit history once a year to make sure that it is accurate.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

How do you check?

• Contact one of the three credit reporting agencies for a copy. They usually charge a fee.

 ©2001 Lifetime Learning Systems*, Inc. Created for Ford Motor Credit Company.

What if there is a mistake?

• If you find a mistake, report it to the agency. They are required by law to investigate the claim, usually within 30 days.

Sample Credit Sample Credit ReportReport