A financial education workshop hosted by

FEPFinancial Education Partnership

A 5 0 1 ( C ) ( 3 ) N o n p r o fi t O r g a n i z a ti o n

www.FEPonl ine.org | (926) 825-1045 | info@FEPonl ine.org

Pros

• Purchases• Builds credit• emergencies

Cons

• Interest• Temptations• Over-

extending

WHAT IS CREDIT?

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THE 4 C’S OF CREDIT

creditworthiness

capacitycollateral

character

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HISTORY OF CREDIT & CREDIT SCORING

1750 BC The code of Hammurabi

Companies use proprietary cards

Bill Fair & Earl Isaac establish FAIR, ISAAC & COMPANY

1956

1989

Early 1900’s

Beacon score debuts (Equifax); it’s the first general purpose FICO score

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CREDIT SCORES & CREDIT REPORTS

• Credit report: a report that is compiled by credit reporting bureaus on an individual’s history of debt, credit, and borrowing behavior

• Credit score: a number based on the analysis of an individual’s credit reports that represents the creditworthiness of that person

Credit Reporta report that is compiled by

credit reporting bureaus on an

individual’s history of debt,

credit, and borrowing behavior

Credit ScoreA number based

on the analysis of an individual’s

credit reports that represent

the creditworthiness

of that person

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WHAT’S IN A CREDIT REPORT?

Personal information

Account information (aka Tradelines)

Inquiries

Collections

Public record information

Creditor’s contact information

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HOW IS CREDIT MEASURED?

35%

30%

15%

10%

10% Payment history

Amounts owed

Length of credit history

New credit

Types of credit used

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WHY IS CREDIT IMPORTANT?

Buying a home or car

Loans (college)

Life insurance

Interest rates

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CREDIT REPORTS AND SCORES

TransUnion

Experian

Equifax

3 major credit reporting bureaus:

Retrieving your credit report:• www.annualcreditreport.com

• Call 1-877-322-8228

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DISPUTING INCORRECT

INFORMATION

Inform the credit reporting company, in writing, what information you think is inaccurate. Include copies of supporting legal documents

Clearly identify the information in question. Explain the facts and why you’re disputing the information, and request that it be removed or corrected

Enclose a copy of your report with the items in question circled. Send your letter by certified mail, “return receipt requested”

Keep copies of your dispute letter, enclosures, and receipt.

1

2

3

4

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CREDIT MONITORING SERVICES

• Businesses who claim to check your credit for you, allow you access to your credit report and score at all times, and alert you if there are any changes in your credit.

• Some companies offer help if ID Theft occurs.

• Costs-$10-15 a month

• "Credit monitoring is grossly overpriced," says Gail Hillebrand,  senior attorney for Consumers Union (which publishes Consumer Reports)   

“I can think of a lot of other ways to spend $150 a year.

-- John UlzheimerPresident of consumer information for financial

education website Credit.com

”

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1-877-254-1097

Carefully check any Credit Counseling Service

Self-Help: dispute errors, contact creditors, create a budget, payment plans

REBUILDING YOUR CREDIT

Avoid credit repair scams!

“Bad Credit, No Problems!”

CCCS Money Help Line

“We can

erase your bad

credit--

-100% Guarantee

d!”

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MANAGING DEBT

• Rip off the band aid: assessment of debt

• Create Budget

• Emergency Fund

• Call Creditors

• Payment Plan

• How to choose what to pay first?

• Is putting Credit Card debt on HELOC a good choice?

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CREDIT AFTER BANKRUPTCY

• How long on credit report- 5 years; 7 years; 10 years?

• Assess behavior – and changes

• Budget– emergency funds, insurance

• Secured credit card

• Student loan repayment

• Installment loan

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CREDIT SUMMARY

1. Check your credit report

2. Know your credit score

3. Shop around for credit

4. Pay bills on time

5. Be in charge of debt

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