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Achieving Your Financial Goals

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 Credit Reports: Our
 Students and What They
 Need to Know.
Presented by
Renee Gullotto, EdFund and
Sun Ow, Great Lakes Higher Education
                                                     2




What we’ll learn today
•   What’s on a credit report
•   What is a credit score based on
•   How to “clean up” credit
•   Identity Theft
•   Credit Card Law Changes and Public Law 111-24
•   How to entice your students to attend a credit
    workshop
                                3




Understanding Credit
• What is a credit report?
• Checking your credit report
• What’s in a credit score?
• Credit risk
• Benefits of good credit
                                             4




What is a Credit Report?
• History of your ability to manage credit
  Similar to a transcript
• Lenders report your:
  Payment history
  Amount borrowed
  Credit limits
  Delinquencies
                                5




What’s in Your Credit Report?
• Summary of key information
  Personal information
  Credit history
  Public records
  Inquiries
                                                                                6




Checking Your Credit Report
                                                             1
 • 79% of credit reports have errors
 • Check report annually
    – Name
    – Address
    – Birth date
    – Social Security number
    – Accuracy of accounts



1National   Association of State Public Interest Research Groups, 2004 Survey
Credit Report Purpose

• Provides a history of your credit use to
  current and prospective lenders

• Allows lenders to assess risk of extending
  credit or lending money to you

• Used for all forms of credit, including private
  student loans, apartment rental, etc.
                                       13




The purpose of a Credit Score
• Probability of paying new loan
• Grades of loans
  A: the most creditworthy borrower
  B: the average borrower
  Subprime: highest risk borrower
• More information
  www.myfico.com
                                               14


What Determines Your Score?




                      Source: www.Myfico.com
                                                15



Credit Score Distribution




                       Source: www.Myfico.com
                       Credit Score



Score = Indicator of Risk




                        Source: www.Myfico.com   16
                                        17


Buying a Car




               Source: www.Myfico.com
                                          18


Buying a House




                 Source: www.Myfico.com
                                     19




Securing Good Credit
• Pay bills on time
• Pay before due date
 ▫ Automatic payments
• Pay down outstanding balances
• Check credit report periodically
• Protect your identity
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Low Credit Risk
•   Stable class schedules
•   Steady employment
•   Consistent payments
•   On-time loan payments
•   Responsible student loan management
                                        21




High Credit Risk
•   Late payments
•   High balances
•   Unpaid accounts
•   Excessive number of open accounts
•   Many recently opened accounts
Charging $100 a Week

                                                       Minimum
   End of Period                 Balance
                                                       Payment
1st month                          $400                  $12
1 year                            $4,713                 $146
5 years                           $2,232                 $69
10 years                           $877                  $21
19 years                            $7                    $7
Payments based on 3 percent minimum payment. Interest rate is 18 percent.
No additional charges made in years 2-19
                                              23



The Benefits of Good Credit
•   Establish and build good credit history
•   More apartment/house choices
•   Open a checking account
•   Better job opportunities
•   Fast loan decisions
•   Increased purchasing power
    ▫ Little or no money down on cars
    ▫ Lower interest rate
    ▫ Save money
 Credit Repair

• You cannot “repair” poor credit
   - derogatory credit remains on your report for up to 10 years
   - avoid paying for “credit repair” services that guarantee to fix
   poor credit
• You can correct inaccurate information
   - dispute incorrect credit information
   - update personal information
• You can improve credit behavior
   - pay off credit cards in full monthly
   - make payments on time
   - don’t have too many open lines of credit
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Feeling the Crunch?

•   Contact creditors
•   Create a spending plan
•   Limit credit card use
•   Opt out of pre-approved offers
    • 888.5OPTOUT (888.567.8688)
• Ask for a free credit report
    • 877.322.8228
    • www.annualcreditreport.com
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Getting your Free Credit Report
• www.annualcreditreport.com
• 877.322.8228
• One free report from
   Equifax
   TransUnion
   Experian
• All three at once or one every four months
How to Report Fraud
• File a police report.

• Contact your creditors or bank immediately to
  close accounts. Keep a record of all calls.

• Each Credit Bureau offers a service that will
  notify you whenever a new credit card is opened
  in your name.

• Contact Federal Trade Commission
  (877)438-4338
        Preventing Credit Fraud
• Sign new credit cards immediately
• Store credit cards in secure place
• Limit # of cards you carry
• Do not write PIN on your cards
• Do not print SSN on checks
• Shred any mail with your account # before throwing away
• Notify card issuers immediately if billing statement is
incorrect or if you don’t receive your statement
• Monitor your credit report regularly
Other tips

• Use USPS mailbox & not home mailbox to
 send letters
• Stop mail when on vacation
• Request special delivery for check orders
• Keep your purse or wallet in a secure place
• Carry limited # cards and checkbook with you
• Place a fraud alert if you suspect something
Keys to Using Credit Successfully

 • Identify your spending habits
 • Understand the fine print
 • Manage credit wisely
 • Have only one card
 • Pay balance in full each month
 • Ask for help at the first sign of trouble
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The Credit Card Accountability
Responsibility and Disclosure Act of
2009
• Signed into law on May 22, 2009
• Amends the Truth in Lending Act and Covers:
  ▫   Protection of Credit Card Holders
  ▫   Limits on Fees and Interest Charges
  ▫   Application of Credit Card payments
  ▫   Rules Regarding Monthly Statements
  ▫   Consideration of Ability to Repay
  ▫   Late Payment Deadlines and Penalties
  ▫   Protection of Young Consumers
  ▫   Credit Cards and College Students
  ▫   Prepaid Cards, Gift Certificates and Gift Cards
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Protection of Credit Card Holders
• Written notice of increase in APR, fees and
  finance charges 45 days prior to change.
• Notice of Right to Cancel in clear & concise
  manner.
• Closure/cancellation of account by consumer
  shall not constitute a default and will not trigger
  an obligation to pay in account in full.
• Limits on Interest Rate, Fee and Finance charge
  increases on outstanding balances.
• Interest Rate Reduction- specific rules that must
  be considered before creditor reduces rates.

TILA Sections 127, 171
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Protection of Credit Card Holders
• Annual rate, fee or finance charge may not be
  increased for the first year
• Promotional annual rate may not be increased for at
  least 6 mos. from the beginning date the promo rate
  takes effect.




• TILA Sec.172
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Limits on Fees and Interest Charges
• Opt-in is required for Over-The-Limit
  Tranactions if fees are imposed.
 ▫ Consumer must be informed of the fee amount.
 ▫ Customer has to elect that their credit line be
   extended to cover in excess of credit limit.
 ▫ Customer must be notified of the right to revoke
   their election.
 ▫ Amount of fees must be reasonable- late fees, over
   the limit fees and penalty fees/charges

 ▫ TILA Sec. 127
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Application of Credit Card Payments
• Payments in excess of the minimum payment are to
  be applied to the card balance with the highest
  interest.

• If card issuer makes a change that causes a delay in
  crediting a payment over a 60 day period, no late fee
  or finance charge may be applied.




TILA Sec. 164
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Rules Regarding Statements
• Payment date must be the same each month
• If the payment due date is a day the creditor
  does not receive or accept payments, the creditor
  may not treat a payment received on the next
  business day late for any purposes.




• TILA 127
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Consideration of Ability to Repay

• A card issuer must consider the consumers
  ability to make required payments under the
  terms of the account prior to:

 ▫ Opening an account
 ▫ Increasing the credit limit on an account.




 ▫ TILA Sec 150
                                                      38


Payoff Timing Disclosures
• The billing statement must have the following
  information in a prominent location:
  ▫ A statement that making only the minimum will
    increase the interest you pay.
  ▫ The number of months to pay the entire balance
  ▫ Total cost to consumer, including interest and
    principal payments.
  ▫ Monthly payment amount required to eliminate
    the balance within 36 mos.
  ▫ A toll free number to obtain credit counseling.

  ▫ TILA Sec 127 (b)(11)
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Requirements on Late Payment
Deadlines and Penalties

• Late payment deadline is required to be
  disclosed in conspicuous location and must
  include:
 ▫ The date payment is due
 ▫ The date the late fee is charged
 ▫ Amount of late fee.
 The statement “If one or more late payments on a
   credit card account may result in an increase in
   interest rate.”

 TILA 127 (b)(12)
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Requirements on Late Payment
Deadlines and Penalties
Brick and Mortar: If the creditor maintains
 branches or offices that accepts payments, the
 date the payment is made must be used for
 determining whether a late fee or penalty may be
 imposed.



TILA 127(b)(12)
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   Extensions of Credit to Underage
              Consumers
• Credit cards may not be issued to, accounts
  opened by or on behalf of a consumer under the
  age of 21 unless a written application that meets
  application requirements is obtained.
• Application Requirements for consumers under
  21 shall require:
 ▫ A co-signer indicating joint liability until the
   consumer turns 21.
 ▫ The consumer to submit financial information
   showing a means to repay obligation.
 TILA 127(C)
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  Issuance of Credit Cards to Certain
           College Students

• No credit increase may be made to accounts that
  have a co-signer due to the consumer being
  under the age of 21 unless:

 ▫ The co-signer approves the increase in writing
 ▫ Assumes joint liability for the increase




 ▫ TILA Sec 127(p)
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Privacy Protection for College Students
• An institution of higher education must publicly
  disclose any contract for the purpose of
  marketing a credit card.
• Card issuer or creditors may not offer tangible
  items as an inducement to students to apply for
  credit card offers if the offer
  ▫ Is on campus
  ▫ Near the campus or
  ▫ At an event sponsored or related to campus

  ▫ TILA 140
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Privacy Protection for College Students
• Congress believes colleges should consider
  adopting the following policies:
 ▫ Card issuers that market credit cards on campus
   should notify the institution of the location the
   marketing will take place.
 ▫ The number of locations that marketing of credit
   cards takes place should be limited.
 ▫ Credit card and debt education/counseling
   sessions should be offered as a regular part of any
   orientation program for new students.

 TILA 140
                                                                       45

   General Use Prepaid Cards, Gift
   Certificates and Store Gift Cards
• It is unlawful to sell or issue a gift certificate,
  store gift card, or general use prepaid card that
  has an expiration date unless:
  ▫ Expiration date is at least 5 years from the date
    the certificate was issued.
  ▫ Card funds were last loaded to a store gift card or
    general-use prepaid card and
  ▫ Terms of expiration are clearly stated.

    *Credit Card Act Overview and information obtained on EDFUND.org
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How to Get the Students To Attend
   Credit Workshops- Ideas…
                     47




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