By: Lane Cleeton

Talk about what credit it is

Advantages and Disadvantages to having credit and credit cards

Terminology

Tips

Credit in simple terms is having use of something before you pay for it.

Gives you flexibility, pay for expensive items over time, and helps you plan

Several different types of credit◦ Loans

◦ Mortgages

◦ Credit cards

You need credit for many reasons 1. To obtain best interest rates

2. Employers review prior to hiring

3. Insurance premiums

4. Rentals

5. Reflects on how responsible you are

Ability to obtain payment history which is part of your credit score

Flexibility to rent a hotel room or an auto

Access to funds in an emergency

Convenience◦ Carry less cash

◦ Interest free if paid in full when bill is due

◦ Accepted at most retailers

◦ Some credit cards have reward programs to redeem for gifts or cash

Can be costly if you carry a balance and have finance charges

Future income is for paying on balances

Make impulse purchases easier

May not sure item purchased, but still paying for it

Rewards can make you over spend

There are cost associated with credit and credit cards. Knowing what the terms mean will save you money in the long run.

Annual Percentage Rate (APR) – annual rate of interest charged on an outstanding balance

Annual Fee – fee charged yearly to have card Over limit Fee – charged when exceeding

credit limit Balance transfer fee – assessed for

transferring balance from one card to another

Cash Advance Fee – fee for accessing cash from a credit card

Late Fee – not pay the bill on time

Miscellaneous fee – fees can include a replacement card, inactive account, and not carrying a balance

Ask for a due date you can remember

Make on time payments (compensate for mail time)

Read the disclosures

Don’t go over your credit limit

Avoid minimum payment

Universal default clause ◦ If you default on a bill, some credit card companies

will raise your interest rate

◦ Avoid minimum payment

Owe Pay-off time total payments

$1,800 22years $5,600

$2,700 12 years $4,635

As you can see if you only make the minimum payment each period, you will pay more interest and it will take a longer time to pay it off.

New regulations must show this information on your bill.

Convience, track spending, and earn rewards

Charge what you can afford

Pay on time

Have a variety of tools like loans and credit cards

Apply for credit when need it

Do not obtain high interest loans more expense (payday loans)

Repay debts timely

Avoid the following types of loans:◦ Payday loans – high interest of about 300-900%

◦ Title loans – car title loans interest high, hard to repay due to expensive, and can lose your auto

◦ High-cost credit cards – cards that have high fees

Trouble can happen with credit cards if misused.

Do not use cards as extra cash

Signs to watch for◦ Only able to make min. payments

◦ Near or at your credit limit

◦ Using cash advances

◦ Creditors are calling

◦ Lying to family about spending habits

◦ Credit card balances exceed 20% of your income

When establishing credit it can take up to 6-12 months for the payment history to reflect a pattern.◦ Pay bills on time

◦ Open a checking account – keep in good standings

◦ Obtain credit in your own name (small loan or credit card) and use it by charging on the card.

◦ Live with in your means

◦ Track your spending

◦ Save money for an emergency fund then you do not fall back on credit cards or loans

When shopping for a credit card read and understand the fine print.

Watch for low introductory rates

Do not wait for offers – shop on your own

Watch for the universal default rate (explained earlier)

Obtain card with no annual fee

To Prevent Fraud:◦ Do not use easily known PIN & Passwords

◦ Shred Receipts

◦ Use “trusted websites” online

◦ Keep your card numbers & phone numbers in a fileto be able to access them if cards are stolen

◦ Do not respond to unknown emails

◦ Look over your statements

◦ Review your credit report 3 times a year

You should call your card holder immediately to alert them of your loss.

Your liability would be zero (not responsible for fraudulent charges)

Some card companies will have protection on the cards that notify if a transaction is not a common one of yours.

It is coded information which can be confusing.

Credit Report includes:◦ Identifying information about you

◦ Employer information

◦ Payment history & creditors

◦ Bankruptcies, liens, judgments

◦ Inquiries on your credit

FICO means Fair Isaac Corporation which is a firm that developed a credit score system.

Range is 300-850

Higher the better

Changes with activity on your report

Ignores personal information and reflects credit practices (race, occupation, religion, and salary)

To maintain a good score:◦ Keep balances low on credit cards

◦ Don’t open a lot of new cards

◦ Longevity works in your favor

◦ Rate shop

The following can hurt your score:◦ Late bill payments – 30 days past due

◦ Using all credit available to you (using $400 of a $500 limit credit card)

◦ Opening to many new accounts in a short time

◦ Not working with a trusted financial

Many people look at credit such as lenders, landlords, employers, insurance companies.

What affects your credit score

Payment History

Amounts Owed

Length of Credit

History

New Credit

Types of Credit Used

Negative 7 years

Bankruptcies 10 years

Positive info for ever

By law you get 3 free credit reports a year meaning 1 from each bureau.

Visit www.annualcreditreport.com

The 3 bureaus are Transunion, Experian, Equifax

Your report is free and you would have to pay for your credit score

Mistakes can happen by:◦ Clerical error

◦ Applied for credit under a different name (Robert/Bob)

◦ Gave wrong social security number

◦ Payments inadvertently applied to the wrong account

To dispute something on your credit:◦ Tell the credit bureau in writing identifying each

item, explain the dispute, and request your action

◦ Write to the creditor explaining the situation Include copies of statements not originals

Dispute within 30 days

Take copies of sent items

If you have bad credit you can rebuild it by:◦ Paying the creditors and not ignoring them

◦ Don’t use credit cards or get new debt

◦ Ask for advise from your financial

◦ Review your report

◦ Set up automatic payments

◦ Consolidate debt

◦ Reduce credit card solicitations (www.optoutprescreen.com)

http://www.myfico.com/