Understanding Credit Topics covered: •Establishing Credit •Credit Scores •Repairing Credit Why is credit necessary? • Applying for a loan • Applying for a credit card • Applying for a mortgage • Renting an apartment/house • Applying for a job Catch 22 To get credit, you need to have credit. If you don’t have it – what do you do? How do you build credit? • Open a checking and savings account – Checking – you have an account to pay bills – Savings – you are putting aside something for the future How do you build credit? • Apply for a credit card • Take out a small personal loan from your credit union • Use a co-signer • Use share secured products Secured Products • Share Secured Loan – Use your own savings/share account as collateral for the loan – Continue to earn interest on the savings – APR is 5.99% Secured Products • Share Secured VISA® – Use your own savings/share account as collateral for the loan – You secure 75% of the credit line: • $1,000 credit limit = $750 on deposit – Interest rate is 9.9%, but • Discounts are available When building credit . . . • Charge small amounts • Don’t be tempted to apply for more cards! • Pay your bills on time • Authorized users should be people you trust • Avoid temptation to increase your credit limit • Check your credit bureaus for accuracy Topics covered: •Establishing Credit •Credit Scores •Repairing Credit Credit reports • Shows history of borrowing • Used to assign a credit score • Used by lenders to determine your credit worthiness What is on a credit report? • Where you live – If you own – How often you’ve moved • How much credit you have • Types of credit • How you pay your bills What is on a credit report? • Whether you’ve been: – Sued – Arrested – Filed for bankruptcy Importance of a credit score • This three-digit number, helps lenders determine the likelihood the borrower will pay off the debt • The higher the score, the better your rate What is a FICO score? This is one of the most popular scores in the industry. FICO stands for: Fair Isaac & COmpany FICO Ratings Risky: Less than 620 Uncertain: 620-660 Acceptable: 660-720 Very Good: 750 or more Excellent: Over 750 What determines your FICO score? 35% - payment history 30% - amount you currently owe lenders 15% - length of your credit history 10% number of new credit accounts you’ve opened 10% on mix of credit accounts you have (mortgages, credit cards, installment loans, etc.) Topics covered: •Establishing Credit •Credit Scores •Repairing Credit How can I improve my credit score? • Pay your bills on time • Manage credit wisely • Pay your mortgage on time • Keep borrowing below your credit limits A few suggestions: • Stop using your credit cards • Pay more than the minimum • Opt out of credit card offers – 1-800-5-OPTOUT – Instructions for opting out are included on the back of credit card offers A few suggestions: • Call the credit card companies and try to negotiate a lower rate • Consolidate your debts – Debt consolidation loan – Home equity loan – Car loan (use your car as collateral) A few suggestions: If you are able to take control of your finances yourself – be sure to make and keep a budget. We offer budgeting online seminars which will give you some tips on developing a budget. Credit Counseling Services Obviously, if you can take control of your financial situation yourself, that is the ideal situation, but if you are: • Unable to make minimum payments • Consistently late on payments • Hounded by creditors and collection agencies • Failing at working out reasonable plans with creditors Credit Counseling Services You may find credit counseling services helpful. Check your credit report! Checking your credit report is a good idea for many reasons. • Check for errors • Know where you stand • Safeguard against identity theft Credit Reporting Agencies Thanks to a 2004 amendment to the Fair Reporting Act, you can receive a free copy of your credit report from each of the three reporting agencies: • Equifax 800-685-1111 • Experian 888-397-3742 • TransUnion 800-916-8800 Your FREE report - • Access online • www.annualcreditreport.com • Call • 877-322-8228 • Complete request form www.annualcreditreport.com Brochure Found online http://www.ftc.gov/bcp/conline/edcams/credit/ycr_free_reports.htm Re-establishing Credit • You need two types of credit to quickly rebuild your credit score: – Installment: auto loans, student loans or mortgages; – Revolving: credit cards or home equity line of credit Secured Products • Share Secured Loan – Use your own savings/share account as collateral for the loan – Continue to earn interest on the savings – APR is 5.99% Secured Products • Share Secured VISA® – Use your own savings/share account as collateral for the loan – You secure 75% of the credit line: • $1,000 credit limit = $750 on deposit – Interest rate is 9.9%, but • Discounts are available In summary The key to good credit is: • Pay your bills on time! • Do not max out your credit cards • Pay off your cards every month if you can, if not, pay more than the minimum • Don’t apply for several credit cards at the same time • Check your credit report In summary The key to re-establishing credit is: • Learn from your mistakes! • If overspending is a problem – create a budget and stick to it! • If you didn’t have enough savings to survive an emergency – get serious about establishing an emergency fund Questions? For more information on products or services, please contact your local branch, or contact center. US 800-936-7730 International 00800-4728-2000 firstname.lastname@example.org Thank you!
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