Bell Ringer

• Brandon wrote a check for $28.29 a pair of shoes that caused him to overdraw at the bank. Assuming the bank charged him $25 for the 'bounced' check and the merchant charged him $30, how much did he pay in total for the shoes?

Bell Ringer Answer

• $28.29 + $25 + $30 = $83.29

Agenda

• Bell Ringer / Announcements• Introduce Chapter 6– Before You Begin is on page

• Dave Ramsey Parts 1 & 2– Notes are on pages

• Identity Theft Activity

Chapter 6: Credit Bureaus and Collection Practices Overview

In this chapter, Dave shows how a FICO score is computed and the myth about building your credit score. He outlines a systematic plan to deal with creditors and explains the Fair Debt Collections Practice Act in detail.

Learning Outcomes

• Evaluate the myth of building your credit score• Describe precautions that will protect you from

identity theft• Explain how to correct inaccuracies on a credit

report• Become familiar with the Federal Fair Debt

Collection Practices Act and parameters regulating collectors:

Key Terms for Chapter 6

• Bankruptcy• Credit Bureau• Credit Report• Chapter 7 Bankruptcy• Disposable Income• FFDCPA**

• FFCRA**• FICO Score• Fraud• Garnishment• Necessities• Pro Rata

** = Definitions are found in book as we watch Dave Ramsey

Chapter 6 Schedule• Monday

– Dave Ramsey Parts 1 & 2– Identity Theft

• Tuesday– Credit Score Scenarios– Identity Theft

• Wednesday– Finish Identity Theft– Online Fraud Activity

• Thursday– Online Fraud Activity

• Friday– Online Fraud Activity

• Monday– Dave Ramsey Parts 3 & 4

• Tuesday– Dave Ramsey Parts 5 & 6

• Wednesday– Pro Rata Debt Plan– Chapter 6 Vocabulary Quiz– Chapter 6 Money in Review

• Thursday– Chapter 6 Test

Review Questions

• What is your credit score/FICO score?• What are the 5 components of the FICO

Score?• What are the names of the three credit

bureaus?• Approximately how many hours does it take to

clean up identity theft?

Money in Review Assignment• Matching – (1 – 7) 2 pts = 14 points– Clicker

• True or False – (8 – 12) 2 pts = 10 points– Clicker

• Multiple Choice – (13 – 20) 2 pts = 16 points– Clicker

• Short Answer (21 – 24) 5 pts = 20 points– Paper

• Case Study (27) 10 pts = 10 points– Paper

TOTAL POINTS = 70 POINTS

Understanding CreditDirections:• On the Impact on Credit column, place either a +, --, or no impact, to represent

positive, negative, and no impact respectively. As the instructor goes over the answers, use the Narrative column to take notes on why each behavior impacted Amy’s credit.

Amy’s Story• Meet Amy. She just graduated from college with a degree in nursing and is about to

start her career. While Amy isn’t a real person, the way she uses her credit is a good example of how our actions affect our credit scores.

• During college, Amy had a student credit card with at $500 limit. She managed her

credit well, charging items like books and living expenses, but she always made her payments at the end of each month. But now, Amy is faced with many more challenges as she searches for a job, looks for an apartment, and furnishes her place. The choices and temptations are great as Amy begins this exciting phase of her life! Let’s see how she does over a two-year period.

Impact on Credit Cheat Sheet

• +’s 6• -’s 5• No Impact 2

Review Questions

• What is the best way to pay debt?• Collectors are trained _____________ or

__________________.• The Federal Fair Debt Collection Practices Act)

of 1977 prohibits collector’s calls between what hours?

FICO Score

• Fair Isaac Corporation, which developed a score-based rating system that many companies used to measure an individual’s credit risk.

• Five Components of the FICO Score:– 35% Debt History– 30% Debt Levels– 15% Time in Debt– 10% New Debt– 10% Type of Debt

FICO Broken Down

FICO Ranges

• 760-850 - Excellent - This represents the best score range and best financing terms.

• 700-759 - Very Good - Qualifies a person for favorable financing.

• 660-699 - Average - A score in this range will usually qualify for most loans.

• 620-659 - Fair - May still qualify, but will pay higher interest.

• 300-619 - Poor - Will have trouble obtaining a loan.

Scenario

Mark is a professional athlete, who makes $360,000 per year. He has 12 open accounts. Three of these are mortgages for his houses. A year and a half ago, he had a late payment on one of those mortgages. The others have all been paid on time. Four of his open accounts are car leases which have all been paid on time. The other 5 accounts are credit cards. He made two late payments on one of those cards within the past 6 months, but he has paid the others on time. All of the cards carry a balance of more than 50% of the limit.

Scenario Answer

• Mark: 660-699. He has never had any repossessions or collections. He has established credit history, but his high credit card balances and late payments have pulled down his score.

Identity FraudLindsay Mattison, a college student, was on “The Price is Right” game show and won a “Hattaras

Roman Arc Hammock,” which retails for about $800. Since Lindsay didn’t really need a hammock for her dorm room, she decided to sell it online for $300.

Lindsay posted an ad, and a con-artist sent her an e-mail response offering to buy the item at full price. Lindsay was leaving the country the following day and needed to speed up the process. The thief’s colleague agreed to send the check by overnight courier to a shipping service he was familiar with and would pick up the item at Lindsay’s home.

To save time, the buyer sent Lindsay one check to pay for the hammock and shipping, plus an extra $50 for her troubles. The next day, Lindsay received a package containing a $3,000 check. After sending the check, the thief asked Lindsay to wire $2,600 out of the country to the shipper in Apakpa Cotonou, Republic of Benin (an African nation bordering Nigeria).

Lindsay thought it was very weird that someone would pay $2,600 to ship a $350 item, so she called her mother for advice. Her mother immediately recognized the scam and contacted the police department. Turns out the check was fraudulent and did not belong to the company listed on the check. If Lindsay had cashed the check and shipped the item, she would have been out the item, cost of shipping, and $3,000 which the bank would have taken from Lindsay for bouncing a check.

TIP: If you advertise a product or service in a local newspaper or magazine, it is likely the ad is also available on the internet, which is worldwide. Local, national and international thieves commonly use “For Sale” ads to locate their victims.

From Identity Theft Newsletter (August, 2007)

Identity Theft ActivityDirections: Using the Internet and a popular search engine, research

the following questions and record your answers on a blank document (Microsoft Word or handwritten) in complete sentences.

1. What are 5 common sense practices or personal safety rules to protect your identity from fraud?

2. What do you need to do if you find yourself victim to fraud or identity theft?

3. Find an example of an online fraud and briefly explain the setup of the fraud and the risk involved with this scam.

Hint: Try searching “top online fraud” or “top online scams”.

Turn your answers into the tray upon completion.

FFCRA

• 1977 Federal Fair Credit Reporting Act requires a credit bureau to remove all inaccuracies within 30 days of notification of such inaccuracies.

FFDCPA

• Federal Fair Debt Collection Practices Actconsumer law passed in 1977 by Congress to protect you from unfair collectors. The act states that harassment is illegal and restricts a collector’s calls between the hours of 8 am and 9 pm. The act also allows you to demand that a creditor cease calling you at work.

Vocabulary Quiz

• Worth 75 Total Points– 60 comes from matching vocabulary words to the

correct definition– 15 comes from 3 questions over Chapter 6– 2 Bonus Question Opportunities worth 10 points

• Once you have completed your vocabulary quiz, turn the quiz into the tray and then SILENTLY begin working on your Online Scam Assignment that is due at the end of the period.

Investigating and Reporting Online Scams Activity

Find and research an online scam or get rich fast scheme using www.snopes.com or http://www.fbi.gov/scams-safety/fraud/internet_fraud (Google Search -

online scams) Choose one of the following.1. Write an editorial warning people about this scam. Cover the subject. Include

everything one would need to know and your opinion of those who perpetrate the scams and those who are victims. Your goal with the editorial is to chastise the criminals and inform and warn the victims.

2. Create an informational advertisement which warns victims of this scam. Include all the information, and make up a place for people to report the scam.

3. Create a brochure that warns people by explaining the scam or get-rich scheme.

4. Come up with your own idea for using this information.

Questions to Answer• How does the scam work?

– Give me SPECIFIC details• Who is the target?

– Age group? Race? Gender?• What is the economic impact?

– On average how much money does a person or company lose?• What makes it believable?

– What are some phrases/promises/guarantees that make the scam sound real.

• Do you think the average person would fall for this scam?• What emotion does this scam depend upon?

– Angry, sadness, false happiness