week 3 understanding credit

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Welcome to the Faith and Finances Series

UNDERSTANDING CREDITGod has called us to be good stewards

“Moreover it is required in stewards that one be found faithful”

1Corinthians 4:2

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Purpose

Understanding Credit will: Show you how to read a credit report Help you understand how your behavior

affects your credit health Help you build and repair your credit

history Provide you with good credit practices

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Objectives

By the end of this course, you will be able to: Describe the purpose of a credit report and

how it is used Read your credit report Order a copy of your credit report Identify ways to build and repair your credit

history

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Understanding Credit: Week 3 of 4

Help you build and repair your credit history

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Week 1 in Review

We learned about…– Credit Reports– Three Credit Bureaus– FICO Scores and what affects them– Why your credit score matters

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Week 2 in Review

We learned how your behavior affects your credit health…– Making Payments on Time– Using Debt Reasonably– Establishing a credit history– Inquiries– Types of Debt

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Remember…

The credit score is: A number that summarizes how much of a credit risk you could be Calculated based on a snapshot of the information in your credit report at a point in time **Most commonly referred to as a FICO Score

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…..Remember How Your Credit Report Is Used

Information in your credit report may determine whether you will: Get a loan, credit card, car loan, or mortgage Get a job Rent an apartment Get insuranceDetermine how much you pay for credit

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…… And There 5 Factors That Affect Your Score

Past payment history – 35%Amount owed – 30%How long you've had credit -15%New credit – 10%Types of credit – 10%

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….And The Most Important Factor: Payment History

How late your payments have been matters…..

30 days 60 days 90 days Collection

Your score goes….

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This Week….

We will focus on building and repairing your credit history

– How to Get a Copy of your Credit Report– Correcting Errors – Identity Theft– Credit Counseling– Credit Repair

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Credit Health Check Up

Managing your credit health is important.Managing your credit health is important.

Improving your score can help you get better credit terms, lower interest rates, and speed up credit approvals.

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Credit Health Check Up

It is important for you to know how lenders view your credit risk.

An critical time to check your FICO score is 6 months or so before you plan to make a major purchase….

A Car, A Home…..

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Credit Health Check Up

Why check your credit??

So you can… Verify the information on your credit report Correct any errors Take action to improve your score, if

necessary

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Credit Health Check Up

What’s a good FICO score??*What’s a good FICO score??*

Generally speaking… Below 630 – Bad 631-699 – Not Good700 -720 – Good Score721- 760 - Very GoodOver 761 - Great* Based on 9/19/07 FICO data

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Credit Health Check Up

Just like your physical health, you should check on your credit health regularly

Review your credit report least once a year……

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You Can Get a Free Credit Report

Each year you can get a FREE credit report from each credit bureau:

Equifax Experian TransUnion

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You Can Get a Free Credit Report

WRITE:Annual Credit Report Request Service

P.O. Box 105281

Atlanta, Georgia 30348-5281

CALL: 1-877-FACT-ACT (1-877-322-8228)

GO TO THE WEBSITE: www.annualcreditreport.com

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You Can Get a Free Credit Report

If: A company takes adverse action against you AND

you ask for your report within 60 days of receiving notice of the action.

You are unemployed and plan to look for a job within 60 days.

You are receiving public assistance. Your report is inaccurate because of fraud, including

identity theft.

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What’s an Adverse Action

You are denied credit Your credit line or credit card limit is reduced Your interest rate is increased because the

lender says you are a greater credit risk Your credit line or credit card is cut-off

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You Can Also Get A Credit Report…

By purchasing it from one of the credit bureaus:

Equifax: 1-800-685-1111 www.equifax.com Experian: 1-888-397-3742 www.experian.com TransUnion: 1-800-888-4213 www.transunion.com

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Credit Health Check Up

Mistakes get on your credit report most often because of….

Incomplete information or the report contains information about someone else

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Credit Health Check Up

Mistakes typically happen because….

You applied for credit under a different name There was a clerical error in reading information on a

hand-written application You gave an inaccurate Social Security number

(SSN) or the number was misread by the lender Loan or credit card information was inadvertently

applied to the wrong account

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Credit Health Check Up

If there is a mistake on your credit report….

You can dispute any errors by contacting the credit bureaus directly:

Equifax: 1-800-685-1111 www.equifax.com Experian: 1-888-397-3742 www.experian.com TransUnion: 1-800-888-4213 www.transunion.com

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Credit Health Check Up

If there is a mistake on your credit report….

It is best to follow up any verbal error inquiry with a written letter. The credit bureau has 30 days to investigate and respond to you.

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Credit Health Check Up

In reviewing your credit report, you may detect identity theft earlier.

Identity theft is when someone steals your personal information – name, SSN, or credit card number

And uses it to:– Open a new credit card account – Write checks in your name

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Identity Theft Can Hurt Your FICO Score

The unpaid credit card bills or bad checks can damage your credit history.

If you suspect identity theft, you should take immediate action and keep a record of your conversations and correspondence.

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Identity Theft Can Hurt Your FICO Score

You should…. Call the toll-free number at any one of the 3 credit

bureaus and place a fraud alert – you only have to call one to have an alert on all 3.

Contact the lender and close any accounts that have been tampered with or opened fraudulently.

File a report with your local police. File a complaint with the Federal Trade Commission.

Find more information at www.ftc.gov/bcp/microsites/idtheft.

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Identity Theft Can Hurt Your FICO Score

Tips….– Don’t send your SSN information in emails.– Don’t carry your SSN in your purse or wallet.– Keep all your credit tools in a safe place – credit

cards, debit cards, checks, account statements.– Shred any documents that contain financial

information if you no longer need them.– To correct an error on your credit report, work

directly with the credit bureau and your lenders.

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Credit Health Check Up

We know our credit health is not good, so how do we make ourselves healthy

again???

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Credit Health Check Up

Let’s understand the Truth about Credit Repair…..

No company, no individual can remove accurate information from your credit report.

No company, no one can create a new identity for you.

It can take years to repair your credit.

Legitimate companies provide a service BEFORE requesting payment.

You can order your credit report yourself.

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Credit Health Check Up

If you are going to use a Credit Counseling Agency…..

Interview several agencies Before signing any agreements

Ask questions regarding services, fees, and repayment plans.

Check with the State Attorney General , Better Business Bureau, and local consumer protection agency to find out if complaints have been filed.

Make sure your information will be keep confidential.

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Credit Health Check Up

Or you can enroll in a Debt Management Plan…..

It is NOT credit counseling. It is customized advice on managing your money

You deposit money each month with the credit counseling organization.

Your creditors may agree to lower your interest rates or waive certain fees.

You must make regular, timely payments. You may have to agree not to apply for or use any additional

credit will in the plan.

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Credit Health Check Up

Beware of Companies that: Promise to erase bad credit or bankruptcies Promise fast and easy credit repair. Offer to create a new identity for you. Want you to pay for repair services before providing

the services. Do not inform you of your rights and what you can do

yourself.

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Credit Health Check Up

Remember…Only consistent efforts and making your payments on time will

improve your credit.

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Remember…Your FICO Score Matters

Higher FICO Scores Result in Lower Interest Rates and $$$ Paid for

Credit

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Remember the Example from Week 1 $25,000 – 4 Year Auto Loan

FICO® score Interest Rate Paid (APR) Monthly payment *

720-850 6.19% $589

690-719 7.03% $599

660-689 8.57% $617

620-659 10.22% $637

590-619 13.33% $675

500-589 15.26% $699

* Estimated average over the life of the loan. Payments may vary.

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Auto Loan Example

If Your Score is > 760, You Paid $5,280 Less Than the Someone with a Score < 579 Over the Life of the Loan…..

……. Your Monthly Payment is $110 Lower

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Answers to Week 2 Quiz

The most important factor that affects your FICO score isa) New Credit b) Amounts Owed c) Payment History d) Length of

Credit History T/F Once you’ve had late payments, your score will always be

low. T/F Only two factors affect your score at a time. Maxing out on your credit cards could show a) you are overextended b) you are not using credit responsibly c)

you are a greater risk to the lender d) All of the above T/F Poor payment history 3 years ago will have less of an

impact on your credit score than recent payment history. T/F God calls us to be good stewards over what he gives us.

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Short Quiz

You should check your credit report at leasta) Every month b) every year c) every 2 years d) only when you are applying for

credit T/F Checking your credit score will help you get lower interest rates and speed

up credit approvals. T/F A credit counseling agency can remove negative information from your

credit report. T/F Placing a fraud alert at one credit bureau will be sent to all three bureaus. Which way does not protect your identity a) Shedding financial documents b) Not sending your SSN in emails c) keeping

your SSN in your wallet or purse d) Working directly with credit bureau to correct an error

T/F You can only get one free credit report a year from each credit bureau. T/F You should be willing to pay for credit counseling services before you start

the counseling. T/F God calls us to be good stewards over what he gives us.

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Home Activities

Before Week 4: Go to one of the credit bureau websites and get a free credit

report. Review your report for accuracy. Identify any corrections you need to make and contact the

credit bureau. Does there appear to be any loans on your report that you

were unaware of? If yes, Take action, Contact the bureau now. Look around your home and office and assess the protection

of your financial data. Are there any positive changes you can make?

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References

www.myfico.com “Understanding Your FICO Score”

(www.myfico.com/crediteducation) “To Your Credit”

(www.fdic.gov/moneysmart) Federal Trade Commission

(www.ftc.gov/bcp/microsites/idtheft)

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Next Session: Week 4 of 4

Providing tips on good credit practices

Putting it all together: 1-2-3