Knowing and Understanding Your Credit
Presented by: Presented by: Jay Gilmore Jay Gilmore
Based on information provided by: Fannie Mae Based on information provided by: Fannie Mae Foundation. Foundation.
Introduction
For most Americans, owning a home is a major part of the American dream. We want to help you understand the steps you have to follow to reach that dream. Knowing your credit is the first step in preparing for homeownership. We know the process of buying a home can be a daunting one, that’s why we provide this information to help.
Overview
What is credit? Why is it important? Improving your credit Using a budget, checking account, and savings account to take control of your credit.
Steps To Homeownership
Establish good credit by:
– Taking care of debts – Getting into the habit of paying your bills on time
Keep your good credit once you have it.
What Is Credit
Credit means you are using someone else’s money to pay for things you buy. You promise to repay the money (the loan) to the person or company that loaned you the money (the creditor or lender).
Good credit
you make your loan payments on time and as promised you are more likely to get a new loan in the future lenders are more willing to lend you money in the future and at a lower interest rate than if you have bad credit
How To Order A Credit Report
It’s a good idea to order your credit report once a year to check for errors Reports are free or for a small fee
– Equifax 1-800-685-1111 www.equifax.com – Experian - 1-888-EXPERIAN www-experian.com – Trans Union Corporation - 1-800-916-8800 www.transition.com
If there are errors, follow instructions on the report to tell them about the mistake
What Builds Good Credit?
Pay loans first, before other expenses Remember that credit cards are loans Charge less than the maximum on cards Choose a credit card with low interest rate and low (or no) annual fee
Building Good Credit…
Pay more than the minimum each month. Use your credit card to establish good credit. Pay them off each month or keep the balance low. Keep track of bills and past-due notices. Don’t assume the bill is forgotten if you have stopped receiving notices.
How Can A Budget Help?
A budget is a plan to spend and save your money. Gets you ready to apply for a mortgage loan by showing income and expenses. Four steps to making a budget: – list your income and your expenses, – compare income and expenses, – set priorities and make changes so that income will be greater than your expenses.
Cutting Expenses
Buy what you need, not what you want Use a shopping list and stick to it, use coupons, pay cash Eat at home, take lunch to work Be price conscious: look for sales and bargains Share driving or use public transportation
Increasing Your Income
Get a part-time job Work overtime hours at your current job Sell items that you make or no longer need at flea markets and garage sales Study ways to reduce your tax liability
Savings Accounts
The best way to improve your financial picture is to save money every month Have your bank automatically transfer an amount from your paycheck to your savings When you pay off a bill, continue putting the same amount into your savings account
Investing Your Money
Banks and credit unions
– grows by earning interest – federally insured
Mutual Funds
– buy shares in different companies – traditionally has made more money over time than savings at a bank – more risky, can go up, can go down
What’s Next?
Achieving the dream of homeownership can be very rewarding Some steps you take will be easy and quick, some will take months, or even years Every step you take will bring you closer to your dream of owning a home We hope this presentation will be useful as you take control of your credit and pursue your goals
Quick Review
Order your credit report Correct any errors Make loan payments on time every month Reduce debt, use credit cards wisely Use a budget, checking and savings accounts to manage your money