CHAPTER 26 –HOW TO GET AND KEEP CREDIT

What I need to know…

Developing a Credit History

Without a History Banks will not loan you money and/or You will pay very high interest rates

Ways to begin developing a Credit History Open a Checking and Savings Account Get a Debit Card Apply for a Secured Credit Card

Charge Small balances and pay bill in full each month

NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…

Developing a Credit History

You will have a good chance of getting a car loan, mortgage or a personal loan

BEFORE APPLYING FOR A LOAN Check your Credit Report – fix discrepancies Bring the following when applying for a loan:

PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of income

PROOF OF IDENTITY: Social Security Number and Driver’s License

If they feel you are not credit worthy you may need a Cosigner

CREDIT WORTHY – 3 C’s of CREDITCharacter: does the lender think you

are honest, reliable, and lead a stable life Have you used credit before? Do you pay bills on time? How long have you lived at your present

address? How long have you been working at your

present job? What is your credit score?

CREDIT WORTHY – 3 C’s of CREDITCapital: do you have assets such as

real estate, personal property, investments, or savings that the lender can take if you do not repay the loan What property do you own that can

secure the loan? Do you have a savings account? How

much? Do you have any investments?

CREDIT WORTHY – 3 C’s of CREDITCAPACITY: do you have enough

income to pay the loan Do you have a steady job? What is your

salary? How many other loan payments do you

have? What are your current living expenses?

(Budget) What are your current debts? How many dependents do you have?

What’s Your FICO SCORE?

Credit Score – CREDIT SCORES – Vary from different lenders

Range from 300 – 850 Good 600-750 Excellent – 700 +

What Impacts your Score? Late Payments Types of credit

Loans (cars/Home), Credit Cards, Store Loans (Best Buy/Ashley)

Number of loans/credit cards TOTAL DEBT Public Records – Bankruptcy, Judgments

Credit Scores

Things not considered in your Score Race, religion, national origin, sex, or marital

status Age Where you live Occupation, title, employer, on Public Assistance

LENDERS LOOK AT THESE BUT IT DOES NOT AFFECT SCORE

Consequences of Scores Low score will keep you from getting a loan

and/or paying a higher interest rate

Comparing Credit Cards

List the different features of credit cards that you may need to compare…

Why do some credit cards charge and Annual Fee?

Most important if: Pay balance off

each month? Don’t pay balance

off Use you credit

card to get cash Don’t keep good

track of your checking account balance

Facts about loans and mortgages Most are secured

Backed by collateral

Interest Rates/Finance Charges Variable Fixed

Most need a down payment

A loan’s Principal Amount Financed

Cosigner Needed with poor

credit history or no credit history

Someone with good credit also signs the loan If you default…they

have to pay

Keeping a Healthy Credit RecordCLICK HERE FOR VIDEO

Pay Bills on time Don’t carry more credit cards than

you need Stay within your means – no more

than 20% of your Income for consumer Credit

Check your Credit Report yearly Correct Errors on your Report

Signs of Credit Trouble

1. Can only pay minimum payment2. Can’t pay bills on time3. Getting calls from Creditors4. Garnishment of Wages5. Repossess

How Much Debt can you Afford? Never borrow more than 20% of your

Annual net income If you make $400 a month

400 X 12 +4800 4800 *.2 =$960 . Outstanding Debt not including housing

Monthly payments shouldn’t exceed More tan 10% of your monthly take home $400 a month - $40 monthly debt payment

Debt-to-income ratio

Your debt-to-income ratio usually gives a clear picture of your financial well-being.

To calculate it add up your fixed monthly expenses, such

as rent, mortgage or credit card payments (do not include expenses like utilities or groceries).

Then divide the total by your monthly take-home pay (net pay)

It should not be more than 28%

Deter...Detect…Defend

IDENTITY THEFT

CREDIT REPORTS

Free Credit Report . Com

http://www.youtube.com/watch?v=YzkBhfbwRkg

Annual Credit Report.com http://www.youtube.com/watch?v=4GC9

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Which one’s for you??????