Keys to Credit

Keys to Credit

What is Credit?What is Credit?

• Buy now – pay later

• Financial tool

• Binding contract

• Buy now – pay later

• Financial tool

• Binding contract

Advantages of Using Credit Advantages of Using Credit • Establish credit history

• Use of item now• Safety• Take advantage of bargains

• Convenience• Emergency funds• Consolidate bills• Spending record

• Establish credit history

• Use of item now• Safety• Take advantage of bargains

• Convenience• Emergency funds• Consolidate bills• Spending record

Disadvantages of Using Credit Disadvantages of Using Credit

• Tend to overspend

• Credit history damaged if misused

• Fees

• Interest (APR)

• Commits future income

• Tend to overspend

• Credit history damaged if misused

• Fees

• Interest (APR)

• Commits future income

Ways to Minimize Credit CostsWays to Minimize Credit Costs

• Shop for the lowest APR

• Borrow only amount really needed

• Pay more than minimum monthly

• Shop for the lowest APR

• Borrow only amount really needed

• Pay more than minimum monthly

Ways to Minimize Credit CostsWays to Minimize Credit Costs

• Pay cash whenever possible

• Take out a loan for the shortest time possible

• Pay bills on time

• Pay cash whenever possible

• Take out a loan for the shortest time possible

• Pay bills on time

The 3 C’s of CreditThe 3 C’s of Credit

• Character

• Capital

• Capacity

• Character

• Capital

• Capacity

Types of CreditTypes of Credit

• Installment credit

• Non-Installment credit

• Installment credit

• Non-Installment credit

Paycheck LoansPaycheck Loans

• Borrow money against your future paycheck

• Always a loan fee

• Interest is very high

• Borrow money against your future paycheck

• Always a loan fee

• Interest is very high

Information on Credit ReportsInformation on Credit Reports

• Identification & employment data

• Payment history• Inquiries• Public record information

• Identification & employment data

• Payment history• Inquiries• Public record information

Sample Credit Report

Sample Credit Report

Credit reports used by:Credit reports used by:

• Banks• Landlords• Car dealers• Insurance companies

• Retail stores

• Employers

• Banks• Landlords• Car dealers• Insurance companies

• Retail stores

• Employers

Major Credit Reporting AgenciesMajor Credit Reporting Agencies

• Equifax

• Experian

• Trans Union

Offer free report every 12 monthswww.annualcreditreport.com

• Equifax

• Experian

• Trans Union

Offer free report every 12 monthswww.annualcreditreport.com

FICO ScoresFICO Scores

Sample Credit Report

Sample Credit Report

Sample Credit Report

Sample Credit Report

Sample Credit Report

Sample Credit Report

If there are mistakes…If there are mistakes…

• Write CRA

• Explain error

• Include copies of documents

• CRA must check into

• Write CRA

• Explain error

• Include copies of documents

• CRA must check into

Building a Credit RatingBuilding a Credit Rating• Open checking & savings account

• Apply for credit with your bank

• Buy something on time from a store

• Apply for a gas card

• Get a co-signer

• Open checking & savings account

• Apply for credit with your bank

• Buy something on time from a store

• Apply for a gas card

• Get a co-signer

Most Important!!!Most Important!!!

Pay your bills on time

Pay your bills on time

Misuse of credit can:Misuse of credit can:

• Ruin credit history & chances of qualifying for future credit

• Make it hard to find a place to live or get a job

• Result in bankruptcy

• Ruin credit history & chances of qualifying for future credit

• Make it hard to find a place to live or get a job

• Result in bankruptcy