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• The ABCs of Credit

• Credit Scores• Establishing Credit

• Maintaining Good Credit

• Credit Cards

• Managing Credit Challenges

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CREDIT DEFINITIONS

Credit 

 Trust given to another person for futurepayment of a loan, credit card balance,etc

Creditor 

A person or company to !hom a debtis o!ed

"

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THE FIVE Cs OF CREDIT

C = CapacityC = Capital

C = Collateral

C = Conditions

C = Character

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WHEN TO USE CREDIT

Can you describe a situation !henit is a good time to use credit and

!hen it is $%T a good time to use

credit&

'

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QUESTIONS TO S!"EFORE USIN# CREDIT

$%&%

'%

(%

)%

*%

+%

(

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WHT IS CREDIT SCORE,

• A credit score is a number that helps a lenderpredict ho! li)ely an individual is to repay a loan,

or ma)e credit payments on time

• A credit score is a number that changes as theelements in a credit report change

• A credit score has broad use and impact *ourcredit past is your credit future

• +C%- scores, one of the most common creditscoring systems, vary bet!een #(. and /(.

• 0antageScoreSM, a ne! credit scoring systemdeveloped by the three credit bureaus, rangesfrom (.1233.

4

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WHT-!ES U.

T/.IC0

CREDITSCORE,

5

Source: Fair Isaac and Consumer

Federation of America, 2005

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I-.ROVIN# /OUR CREDITSCORE

• 6ay bills on time• Get current and stay current

• 7on8t open a lot of ne! accounts toorapidly

• Correct mista)es• Shop for loan rates !ithin a focused

period of time

• 9eep balances lo! on revolving credit

• 6ay o: debt•

/

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T/.ES OF CREDIT 

Cash CreditSales Credit

Secured Credit

;evolving Credit

3

%<Single 6aymentCredit

nstallment Credit

%ther Types ofCredit

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SOURCES OF CREDIT

=hat are other sources of credit&

=hat sources of credit should be avoided& =hy&

"an1s

CreditUnion

s

RetailStores

FinanceCo2pani

es

Sa3in4s 50oan

ssociations

InternetStores

1.

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STE.S TO T!E TO VOID"USIVE 0ENDIN#

1 >ave you shopped around for thebest deal&

" 7o you feel the lender pressured you

to ta)e the loan&# 7o you understand the terms of the

loan&

11

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CO--ON .RTS OF CREDIT ..0ICTION 

• ;eason for ?oan• 6ersonal denti@cation nformation• Employment nformation• Mortgage;ental nformation• 7ocumentation ;euired for some

applicationsD• Current 7ebts• Credit ;eferences• Collateral for some applicationsD• Ban) ;eferences• Signature and 7ate

1"

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S-.0E CREDIT ..0ICTION

1#

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QUESTIONS TO S! WHEN..0/IN# FOR CREDIT

1 =hat is the ann6al 7ee&

" =hat is the ann6al percenta4e rate 8.R9&

# =hen are pay2ents due&

' =hat is the 2ini262 pay2ent reuired eachmonth&

( s there a 4race period&

4 Are there other 7ees associated !ith the credit,such as minimum @nance charges&

5 =hat is the credit li2it&

/ =hat are the penalties for late or 2issedpay2ents&

3 =hat are the ter2s and conditions of thecredit& =hat else is included in the @ne print&1'

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-aintainin4#ood Credit

%vervie!•  7ebt to income thermometer•  Credit process•  Credit reporting agencies•  Credit safeguards for consumers

•  Credit reports, ratings and scores•  Establishing a credit history

1(

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DE"T:TO:INCO-ETHER-O-ETER

14

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THE CREDIT .ROCESS

CREDIT HISTOR/ 

;CREDIT "UREU

;CREDIT RE.ORT

;CREDIT SCORE

;CREDIT RTIN#

15

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S-.0E CREDIT RE.ORT

1/

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CREDIT SFE#URDS FOR CONSU-ERS

Tr6th In 0endin4 ct

Fair Credit Reportin4 ct

E<6al Credit Opport6nity ct

Fair Credit "illin4 ct

Fair Det Collection .ractices ct

13

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THE FIR ND CCURTE CREDITTRNSCTION CT 

%ne of the primary obectives behind the +air and AccurateCredit Transaction Act the +ACT ActD is to help consumers@ght the gro!ing crime of identity theft The follo!ing aresome highlights of the Act

• +ree credit reports

• +raud alerts and Active 7uty alerts• TruncationF credit cards, debit cards, Social Security$umber

• ;ed ags

• 7isposal of consumer reports

• Credit scores".

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THIN#S TO DO TO EST"0ISHND -INTIN #OOD CREDIT

What can e3eryone do to estalish and2aintain 4ood credit,

1 6ay all bills on time

" Avoid late fees

#

'

(

4

"1

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Credit Cards

%vervie!

•  Types of credit cards•  Shopping for a credit card•  Costs of credit

""

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T/.ES OF CREDIT CRDS

.ri3ate 0ael

• ssued by a single source• Can only be used at a single source• EHamplesF 7epartment Stores,

Gasoline Companies

#eneral 0ael• ssued by a single source• Can be used in many places• EHamplesF Ban) Card, Maor Credit

Card"#

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SHO..IN# FOR CREDIT CRD

DECISIONS> DECISIONS%%%

A$$<A? +EE&A6;&

C%M6<TAT%$ MET>%7&

G;ACE 6E;%7&

+$A$CE C>A;GE&

C;E7T ?MT&

CA;7 $CE$T0ES&

"'

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  QUESTIONS TO S! WHENSHO..IN# FOR CREDIT CRD

• Annual fee• Annual percentage rate A6;D

• Minimum payment

• Computation method

• Grace period

• +inance charges

• Card incentives

"(

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"4

COSTS OF CREDIT

>o! much can credit cost& f you ma)e only the

minimum payment for an item, here are some

eHamples of !hat you might actually pay and ho! longit !ill ta)e you to pay it

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-ana4in4 Credit

Challen4es%vervie!

•  =arning signs of credit abuse•  Credit card reductions

•  Correcting credit errors•  ;esources and assistance

"5

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-ESURIN# THE SERIOUSNESSOF CREDIT TROU"0E SI#NS

;ate ho! serious you thin) each of the

follo!ing trouble signs is

1 I $ot Serious ' I 0erySerious

Tro6le Si4ns

"/

• 7elinuent 6ayments• 7efault $otices

• ;epossessions

• Collection Agencies

• ?ien• Garnishment

• %thers&

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WRNIN# SI#NS OF DE"T.RO"0E-S

"3

1 7elinuent 6ayments

" 7efault $otices

# ;epossessions

' Collection Agencies

( Judgment ?ien4 Garnishment

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CREDIT CRD REDUCTIONS 

6aying only the minimum payments on your credit cardmay seem appealing, but if only minimum payments are

made, it can ta)e years, and sometimes decades, toachieve full repayment

6aying the minimum amount due )eeps your credithistory clean, but it also costs you more

#.

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CORRECTIN# CREDIT ERRORS

1 Circle the incorrect items on your creditreport

" =rite a letter to the reporting agency, tellingthem !hich information you thin) isinaccurate 6rovide supportingdocumentation

# Send all materials by certi@ed mail

' Send a similar letter to the creditor !hosereports you disagree !ith

( The reporting agency !ill conduct aninvestigation

4 f negative information is accurate, it cansta on our re ort for 521. ears

#1

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  CORRECTIN# CREDIT.RO"0E-S

•  Ta)e responsibility for actions

• Communicate !ith creditors

• 7ebt Consolidation

• Credit Counseling• Ban)ruptcy

#"