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					                            BUILDING GOOD CREDIT
                                [Lecture Notes]

How many of you have a credit card
How many have credit card debt
How many have other debt like student loans
How many know your credit score.
How many know you can get a credit report and your score annually, FREE!


BUILDING GOOD CREDIT IS A KEY TO YOUR FUTURE


WHY SO IMPORTANT – see article
      Everyone is using it, not just credit,
           o Most jobs today require a credit check,
           o Getting housing requires a credit check jobs,
      Major impact on credit – e.g. Auto loan
           o 720 + 7%
           o 650 - 12%
           o <600 18%
      Identity theft is growing and is a major concern, learn about it
           o http://www.consumer.gov/idtheft/
           o http://www.privacyrights.org/identity.htm

WHAT IS A CREDIT SCORE
      Each credit agency computes one
      Range from 300 to 850
      Average about 720 [median]
      20% over 790


HOW IS THE CREDIT SCORE COMPUTED
      35% Payment History – recent, frequency, problems
      30% Balances – to total limit, 50% or less
      15% Credit History - length of credit and new accounts
      10% Type of credit – open, closed, beneficial
      10% Inquiries – how many creditors asking [mortgage different, not if
       you do and not if job, or rental, etc.]

BA 101 – Thomas R. Webb              5/15/2012                      Page 1   of 3
EXAMPLES OF THE IMPACT OF A LOW CREDIT SCORE
On a $10,000 car loan
        Interest $1400 or over $4,000.
        Over $60/month [25% increase in monthly payments
On a house Mortgage. Take a 30 year. $200,000.
        Good credit 6% Pay $230,000 in interest, Payments $1200
        Medium credit 9% Pay $380,000 in interest. Payments $1600
Credit card
        9% $3,000 balance - $22.50/month interest
        25% on $3,000 balance - $62.50/month       $40/month, $480/year
        And if paying minimum, payoff a lot longer away

SO WHAT SHOULD YOU DO TO MAXIMIZE SCORE
       Start building a credit history NOW! Need 3
       Pay ALL bills on time, especially ones on credit report.
       Have 2-4 cards, use at least 2, get now and don’t ask for more
       Annually ask company for increase limit.
       Keep total debt to limit at 50%
       Create a history – e.g. 0% card for a year. Put in bank and pay
        back in 11 months.
       Say NO to new cards unless major deal, needs a year to get off.
       If have a problem, negotiate with card to pay, and get in writing it
        will be off credit report, not just show paid.
       Get credit report annually and check it and fight to correct it.


SOME THINGS YOU MUST DO!
   Get your credit report every year – free.
        o www.annualcreditreport.com
        o Study it
        o Challenge it
        o Correct it
   Learn the keys to a good credit score
        o The definition and how used
        o The basis of determination
        o The secrets to a good score
BA 101 – Thomas R. Webb             5/15/2012                        Page 2   of 3
                      www.myfico.com
                      www.howstuffworks.com
                      www.creditscoring.com
                      www.smartfinancetips.com
   Build a strong positive credit history, start now.

CREDIT CARD DEALS – BE CAREFUL!
       MUST LOOK AT CAREFUL!!!!!
       Annual card fee - $0 can be $60 or more
       Balance Transfer Fee – can be up to $50/account , $0 at time of
        new card
       Cash advance fees 1.5% or up to $50,
       Minimum purchases/month
       Minimum monthly payment, often 3%, many cards only1%
       When the pr letters arrive the final rate and amount depends on –
        guess what – right – YOUR CREDIT SCORE


Discover deal. 15months 0%
       Annual fee $100
       Initial balance transfer fee $50/transfer
       2 purchases/month every month or rate jumps to 19%
        automatically.
       At end of period, moves to cash advance at 16%
       3% of balance monthly payment
Capital One 0% for 9 months and fixed 8% after that on outstanding
balance,
       No annual fee, no balance transfer fee on initial transfer, no cash
        advance if done at initial time
       No minimum purchase requirements,
       8% on outstanding balance
       2% monthly minimum payment


www.annualcreditreport.com
www.myfico.com
www.howstuffworks.com
www.creditscoring.com
www.smartfinancetips.com
http://www.consumer.gov/idtheft/
http://www.privacyrights.org/identity.htm
BA 101 – Thomas R. Webb              5/15/2012                      Page 3   of 3

				
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