Chap 11.2 Qualifying for Credit: p.266 OBJECTIVES:What affects your ability to gain credit? (The credit roller coaster. Fcr.com)What is the significance of credit reports and scores?How can you establish and maintain good credit?

Who are the 4 people that will check your credit? Lenders- banks, cell phone company, car dealershipsLandlordsEmployersInsurance agents

How can bad credit impact your life? Considered HIGH RISK

Can’t get credit cards, loans, high interest rates if approved, not qualify for jobs, high insurance rates.

http://www.youtube.com/watch?v=tloVHJtrJ_k

4 :38

FREE CREDIT REPORT.COM is Not FREE! $19.99/monthWhen you order your $1 Credit Report and Score here, you will begin your 7-day trial membership in freecreditreport.com. If you don't cancel your membership within the 7-day trial period*, you will be billed $19.99 for each month that you continue your

membership. You may cancel your trial membership anytime within the trial period without charge.Click here to access your free annual credit report available under federal law.\\

www.Creditkarma.com See your credit score for free.

TERMS: Credit History: pattern of past behavior regarding repaying debt.Credit Bureau:

3 main reporting agencies: Equifax Transunion Experian *all will

have slightly difference score.Some credit card companies are now showing your credit score on monthly statements.Credit report: see sample on page 268

*** Annual credit report.com : You are entitled to a free credit report, once every 12 months from each of the national credit reporting agencies. Credit Score is not on credit report.

***Should request before applying for car loan, home loan, other major purchases.Avoid any unexpected issues on your report and have time to resolve before applying for credit

Credit Score: More important than your ACT or GPA!

Credit SCORE: (**more important than your GPA)

Excellent credit score: On time payment history. Credit cards are not charged to limit. Have same cards for years. Few/ no inquiries for new credit cardsBalance of credit types: mortgage, student loan, credit card, installment loans (i.e financing sofa)

Credit score estimatorhttp://www.myfico.com/FICOCreditScoreEstimator/Estimator.aspx

Imagine you are just out of college---complete the estimator. ***DID IT ASK FOR YOUR INCOME????

What Lenders consider:The 3 C’s of credit: p.266

Character: personal references- reputation

Capacity: how much income do you have compared to debts.

Ex: Banks will want loan payments, rent/mortgage and credit card payments to be within 40% of your gross monthly income. A good credit score is not enough.

Capital: What do you have of value? CD, Savings, contents of home, value of home - amount owed= equity. (net worth)

Why is student loan debt the most dangerous type of debt?

http://www.nytimes.com/2012/12/26/business/even-cupid-wants-to-know-your-credit-score.html?pagewanted=all&_r=0

Perfect 10? Never Mind That. Ask Her for Her Credit Score. "Scoring on the first date" takes on a whole new meaning.

People Out There May Want 'Your Number,' But Not Necessarily To Call You

December 26, 2012  |  https://www.youtube.com/watch?v=9mk-L9kdHzA credit score

dating on the Today show.

 

What are

some red flags for poor money management?

http://www.credit-report-101.com/marriage-and-credit-scores.html

How credit scores can be changed-

http://www.creditcards.com/credit-ca rd-news/fico-credit-score-points-mistakes-1270.php

https://www.creditkarma.com/

Establishing and Maintaining good credit-What steps can you take to establish credit?

Cosigner? Must have good credit. Risk? Both names are on loan. If loan is not paid, both credit scores will be damaged.

***Should you cosign for a boyfriend or girlfriend?*** Never. If you break up you are still responsible for repaying the loan if they don’t.

What should you do if you have a cosigner for a loan and can not make the payment by the due date? Give them plenty of advanced notice so they can make payment on time.

http://www.credit.com/products/credit_cards/

Having good credit is not the only thing banks consider….

Getting approved for installment loan:

Total debts (Car payment +mortgage or rent, student loans, credit card payments, installment loans, etc.) must be less than or equal to 40% of their gross monthly income.

3 c’s:

Banks also typically want to see 2 years of steady employment in same line of work. References, may need a co-signer if no credit history.

Banks will want you to have some “Skin in the Game” =down payment

Ex: Gross annual income $ 30,000 divide by 12 = $ 2500 Gross monthly income x 40%

$2500 x .40 = amount of monthly debt payments $1000.00

Rent - $450.00

Student loan - 250.00

Credit cards - 125.00

Name________________________________11.2 review questions: 1) When would you want to know about a potential mate’s credit score/history? Why?

2) If you were romantically involved with someone with bad/poor credit, explain 4 ways it could create more stress/challenges.

3) Why do you think older Americans tend to have higher credit scores?

Ex: Gross annual income $ 30,000 divide by 12 = $ 2500 Gross monthly income x 40%

$2500 x .40 = amount of monthly debt payments $1000.00

Rent - $450.00

Student loan - 250.00

Credit cards - 125.00

Total available for car payment $ 175.00

4) Sam makes $44,000 a year as a sales rep and wants to buy a new truck. He has an 800 credit score. His estimated payments will be $681 for 60 months..

He currently has no credit card debt but his rent is $600 a month. He has $225 student loan payment. Can he qualify for the loan?_____. What amount can he afford as a monthly payment? $________

Show math:

If he were approved, should he buy the truck? Give your sound financial advice-

Complete the application for an approved loan.

Read more: http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php#ixzz1plw2BNsF

Equal Credit Opportunity Act : What can they NOT ask on a credit application?

Fair Credit Reporting Act: The average age at which a U.S. consumer under the age of 35 first adopted a credit card is 20.8 years. The average age of credit card adoption for a consumer over the age of 65 is 40.6 years. (Source: "The 2008 Survey of Consumer Payment Choice," Federal Reserve Bank of Boston)