Post on 12-Jul-2020
Understanding Your Credit
Who cares about your credit?
Banks
Credit Card Companies
Landlords
Employers
Utility Companies
Insurance Companies
5 C’s of Credit
Character
Capacity
Capital
Collateral
Conditions
Character
Do you pay your bills?
What is your credit score?
Have you ever had a debt go to collections?
Have you ever had utilities shut off?
Have you ever been evicted?
Have you ever declared bankruptcy?
Character: Credit Report
Character: Credit Score
FICO score: 300-850
Average score: 700 Average score of 18-29: 652
Higher score = better terms, more likely to be approved
Lower score = denial, shorter loan, higher interest rates
Character: Credit Score
Character: Credit Score
Character: Credit Score
What helps your score?
On time payments
Low balance as a percentage of available credit
Long history
Some loans are better than others: mortgage, education, auto, etc.
No judgments (evictions, collections, bankruptcy)
Character: Credit Score
What hurts your score?
Late payments
Recent requests for credit
High balances
Judgments
Foreclosures
Bankruptcy
Character: Credit Score
What should YOU do?
Check credit report: 3 free annual reports
PAY YOUR BILLS!
Don’t close old accounts
Don’t open cards at every store you go to
Don’t open new credit if you will soon be applying for a loan
Capacity
Do you have the ability to pay?
Debt to income ratio
Total monthly debt payments
Stable income
Capital
Do you have any money or investments?
Savings
Retirement accounts
Investments
Collateral
Do you have something the lender can take if you don’t pay?
Mortgage
Car loans
Retirement Account Loans
Rent-to-own
Conditions
Terms of the agreement
Length
Penalties
Interest rate
Extra conditions