Free Legal Form Repayment of Personal Loan Collateral by reb13440

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and Using Credit
I. Credit Basics
               What is Credit?
• The benefit of being able to pay at a later date for
  the goods and/or services that one enjoys today
• It is both privilege and a responsibility
                Types of Credit
• Secured
  – Repayment is backed by some form of collateral
     • Car loan (secured by the car)
     • Mortgage (secured by the property)
     • Secured loan (secured by cash in a bank account)
• Unsecured
  – Simply the promise to repay
     • Alternative loan, revolving credit card, personal loan
         Benefits of Good Credit
• A person with “good credit” is someone most
  likely to repay a loan
• Makes it more likely that you will receive the credit
  you want when you want it
   – Car rentals
   – Apartment rentals
   – Utilities and phone service
• When financing education costs (particularly
  postgraduate education), good credit is needed to
  obtain an alternative student loan.
      Create a Good Credit History
•   Pay your bills on time
•   Keep your debt load reasonable
•   Understand the basics
•   Know the terms and conditions of all credit
•   Review your credit history every year
             Applying for Credit
•   Print clearly
•   Use your complete name
•   Only apply for the credit you want
•   Review your credit report before making a major
II. Recent Developments
Credit Report
             Your Credit Report
• Visit
• One free credit report per year from each
  reporting agency
• Additional reasons for free reports
   – Unemployed and plan to apply for employment in the
     next 60 days
   – Denied credit within 60 days on public assistance
   – Denied employment or insurance in the past 60 days
   – A victim of identity theft
      Credit Reporting Agencies
• Equifax, 1-800-685-1111
• Trans Union, 1-800-888-4213
• Experian, 1-888-397-3742
Information on Your Credit Report
• Personal Information
   – Name, address (current and prior), SSN, DOB,
• Credit Information
   – current open accounts, closed accounts, rating and
     number of day(s) delinquent, timeliness of repayment,
     installment or open ended
• Public Record Information
   – bankruptcy, legal judgment, property lien, warrants
 Information on Your Credit Report
• Inquiries
   – Creditors and agencies who have requested your credit
• Statements of dispute
                     Fixing Errors
• Document discrepancies in your credit report in a
  letter to the credit reporting agency, detailing:
   –   Name, address, SSN
   –   Account and account numbers in dispute
   –   The information you are disputing and why
   –   Any documentation to support your claim
   –   A request for an updated credit report reflecting the
       correct information
Credit Score
 FICO (Fair, Isaac and Company)
  Scoring, a.k.a. Credit Scoring
• Credit scoring is a system creditors use to help
   – Whether or not to give you credit
   – The interest rate to charge for the credit they do give
• A credit scoring system awards points for each
  factor that helps predict who is most likely to
  repay a debt
• Your credit score is based on information on your
  credit report, therefore, make sure your report is
      What is Your Credit Score?
• Forecast of how likely you are to repay a debt as
  agreed during the next 24 months
   – The higher the score, the better the score, the better the
     forecast that you will repay
• Snapshot of your credit history at a particular
  point in time
• Only includes factors related to your credit
• Always changing
Information Considered in Scoring
Credit Scoring Does Not Consider
• Race, color, religion, national origin, sex or marital
• Age
• Employment history, occupation, salary
• Where you live
• Non-credit inquiries
• Any information not found in your credit
             Why Credit Scoring?
• More than 70% of the top 100 financial institutions
  use FICO scoring to make billions of credit
  decisions annually because it is …
   –   Fast
   –   Consistent
   –   Objective
   –   Cost Effective
   –   Reliable and updated regularly
   –   Strong analytical support
   –   Support increase lending
    FICO Scores - Ranges and Grades
•   760 and above   Excellent A++
•   700 to 759      Very Good A+
•   680 to 699      Good A
•   660 to 679      Above Satisfactory B
•   640 to 659      Satisfactory B-
•   620 to 639      Below Satisfactory C
         Improving Your FICO
• Make loan/credit payments on time
• Pay down your debt and consider charging less
• Keep balances low
• Don’t close old, paid-off accounts
• Don’t be afraid of credit counseling
• Stay out of bankruptcy
Identity Theft
                 Identity Theft
• Identity theft is the deliberate assumption of
  another person’s identity by using their personal
  information, such as date of birth, mother’s
  maiden name and social security number
• The theft of identity is usually to gain access to
  their credit and commit fraud
• Most identity theft is committed by people we
  know like friends, family, or co-workers
                 Protect Yourself
•   Check financial statements promptly
•   Review your credit report annually
•   Be careful with personal information
•   Say NO
    – opt out of credit offers
    – minimize the number of credit cards you carry by calling
               Protect Yourself
•   Shred and destroy
•   Protect your mail
•   Beware of strange ATM’s
•   Watch “Shoulder Surfing”
•   Keep your eye on your card at restaurants and
    gas stations.
    Steps to Take if You Are a Victim
•   Place a fraud alert
•   Start your search
•   File a police report
•   File and complete the Federal Trade Commission
•   Identity Theft Affidavit (1-877-ID-THEFT)
•   Document everything
Credit Trouble
         Signs of Credit Trouble
• Your credit card balances are rising and your
  income is decreasing
• Only paying the minimum monthly payment
• Too many credit cards
• Near, over, or at your limit
          Signs of Credit Trouble
•   Charge more than you pay monthly
•   Using credit for food or gas
•   Lost job
•   Receiving letters and calls on delinquent debts
•   Use credit cards because you have no money
    Steps Toward Resolving Trouble
•    Contact your lenders immediately
•    Stop using credit
•    Pay your bills when they are due
•    Consolidate
•    Get help from the professionals
    Credit Counseling Resources
• National Foundation for Credit Counseling
  (NFCC) and its member agencies
   – Member agencies known as Consumer Credit
     Counseling Services (CCCS)
   – To locate, visit: or call (800) 388-2227
II. Alternative Loans
                  Alternative Loans
•   Private loans to fund graduate studies
•   Interest Rate is based on LIBOR
•   A variety of graduate loan eligibility criteria
•   Many lending institutions
•   Factors to compare include:
    –   Interest rate
    –   Fees
    –   Interest capitalization
    –   Repayment terms
    Alternative Loan Advantages
• Process is fast
   – As little as 5 business days to receive funds
• Student is not required to file the FASFA
• Loans can cover costs for fees, books, and
• Competitive rates
• Many times funds are sent directly to the student
  Alternative Loan Disadvantages
• Variable interest rate
• No cap on the interest rate
• Cannot be consolidated through the federal
• No disability or death forgiveness
• Borrower must be creditworthy

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