Good Credit is an Asset

Agenda

• Your Financial Foot Print• Good Credit• Poor Credit• Student Loans• Housing and Credit

Financial Footprint

• Credit: (Webster) Something entrusted to another; time given for payment of goods sold on time; financial trustworthiness

• Each of us needs to manage our credit portfolio

• It’s called a credit report

Your Credit Score

• The higher your score, the less credit will cost• Your score determines; Interest Rates, Auto, &

Homeowner Insurance rates; Utility deposits, and the ability to obtain new credit

Your Credit Score

• Know what's in your credit history• www.annualcreditreport.com• Pull your reports annually• Dispute inaccuracies

Your Credit Score

• What makes up your score• Revolving Credit• Secured DebtWhat do I need to establish credit (Credit)• Income, bank accounts (checking, and savings),• Joint Accounts• Authorized User Accounts• Pre-Paid Credit Cards• Credit Card Accountability Responsibility and

Disclosure (CARD) Act of 2009, Must be 21

Guide for Credit Use

• Using credit is a promise to pay in the future• Pay off balance each month to improve your

credit score• What Owing Money Cost You

Paying the minimum on a $5,000 balance at 18% interest, will take 23 years to repay, and cost $7,000 in interest

• Know your Cards

Guide for Credit Use

• If you can’t pay the full balance; always pay more than the minimum payment due

• Credit limits/maxing out cards, hurts score• Eternal Vigilance is the price of survival • Money & Love Don’t Mix (Co-Signing)• Never loan more than you can afford to lose

Ways to Improve Finances

• Be a year round discount shopper (Never pay retail)• Leave Credit Cards at home • (Caring a credit card balance is like walking with holes in your pockets)

• Ask for what you want (price matching)• Practice delayed gratification• (Never use shopping for entertainment)

• Pay off debt slowly (get control)• Prepare for tax changes

Ways to Improve Finances

• Open a savings account• Make it automatic• Make better 401K choices• Shop for monthly services (Insurance, Phone, Internet, etc.)• Leverage your credit card (Collect Rewards)• Make a grocery list, and stick to it• Live within your means

Credit!!!

Things Credit Wont’s Buy• Gambling Chips (Am Ex, Discover)• Lottery Tickets (Am Ex, Discover)

How long will it hurt

• Trade lines with favorable data are retained 10 Yrs.

• Trade lines that indicated a delinquency 7 Yrs.• Collection items paid/unpaid 7 Yrs.– Medical Collections (Hurting Less in the future)

• Bankruptcies Chapter 7 or 11 retained 10 Yrs. • Bankruptcies Chapter 13, retained 7 Yrs.

How long will it hurt

• Judgments 7 Yrs. from date filed• Unpaid Tax Liens report indefinitely from date

filed• Paid Tax Liens 7 Yrs. From date paid/released

Blunders & Rebuilding

What Credit Reporting Agencies Do• Your track record of payments (good/poor)• How much you owe (managing debt limits)• How long you have had established credit• Whether you are taking on new credit• Types of accounts you have opened

Rebuilding

• You Rebuild your history• Takes time to improve history (late pmt’s 7

yrs.)• Pay on time – score will begin to recover• One single payment 30 days late takes 6 to 12

months to recover• Removing delinquent accounts:

Never settle a debt without first obtaining a written guarantee from the company

Rebuilding

• Debt Management Plans:• accounts will be closed• can have a negative impact• Settling Credit Card Debt for less than you owe• requires missed payments• settle before 180 days best

Student Loans

• Acquiring the loan may be the easy part• Paying may be difficult• Consolidation• Pro – Consolidating helps you lock in a

low interest rate.• Con – Consolidating can increase the

overall cost of your loan.

Student Loans

• Pro – Consolidation makes it easier to manage your debts.

• Con – Consolidation requirements can be tough• Pro –Consolidating your student loans can help

increase your credit score by reducing the number of open accounts on your credit report

• Con – Consolidation may not be your best option. There are other programs available to help you repay your loans or have them forgiven

Student Loans

• Obama’s bill; undergraduates will pay 3.86% interest on their government sponsored student loan, and graduate students 5.4%

• Private lenders; Sally May & Wells Fargo will know what students are paying for Government loans (competition)

Homebuyers & Credit

• Before you buy:• Get your credit score and make sure its

accurate• The better your credit score, the lower in

general your payment will be• Figure out how much home you can afford• Your mortgage payment should be no more

than 29% of your gross monthly income

QUESTIONS?