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									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
feedback@servicecu.org
Thank you!

								
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