BUILDING GOOD CREDIT
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
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
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 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
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
Cash advance fees 1.5% or up to $50,
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%
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
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
BA 101 – Thomas R. Webb 5/15/2012 Page 3 of 3