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