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					     American Debt Solutions, Inc
     A non-profit consumer credit
         counseling agency
           Credit, Risk Assessment Score and
                        Budgeting




Rev 12/23/05                                   1
          Credit Reports & CRA’s




Rev 12/23/05                       2
                 What is a
         Credit Reporting Agency?
    A credit reporting agency (CRA)
         gathers and maintains credit data
               aka credit report/credit history
               shows payment history
         available to subscribers who have a “permissible
         purposes”
               lenders
               employers
               landlords
               government agencies


Rev 12/23/05                                                3
Understanding Your Credit Report
  Credit Reports Contain:
       Identifying Information
               Name
               Current and former addresses
               SSN, Date of Birth, Employers
       Public Record/Collection Acct Information
               Tax or State Liens
               Bankruptcy
               Foreclosure
               Judgments



Rev 12/23/05                                       4
Understanding Your Credit Report
   Credit Information
         Opening Date
         High Credit or Credit Limit
         Loan Amount
         Monthly Payment
         Balance
         Past Due Amount
         Type of Account and Rating
               O, R, I
               1,2,3,4,5,7,8,9
         Responsible Party
               Joint, Individual, Maker/Co maker


Rev 12/23/05                                       5
Understanding Your Credit Report
        Inquiries (Hard)
               Credit Inquiries
                  Automobile
                  Mortgage
                  Credit Cards

               Employment Inquiries
                  Current or future employers (EMP)




Rev 12/23/05                                          6
Understanding Your Credit Report
        Inquiries (Soft)
               Promotional Inquiries
                  Pre-approved offers (PRM)
                  Account Monitoring (AM)
                  Account Review (AR)
                  Consumer Copy (ECIS)




Rev 12/23/05                                  7
 How Long Does Information Stay
           On File?
    Credit Accounts
         Accounts paid as agreed
               Up to 10 years from DLA
         Accounts not paid as agreed
               7 years from DLA
    Collection Accounts
               7 years from DLA (Date of Last Activity)




Rev 12/23/05                                              8
 How Long Does Information Stay
           On File?
   Bankruptcy and Judgments
        Chapter 7 – Liquidation of debts
               reported for 10 years
        Chapter 13 - Reorganization or Repayment
               reported 7 years
        Lawsuit or an unpaid judgment
               reported for 7 years
               or until the statute of limitations runs out,
               whichever is longer



Rev 12/23/05                                                   9
 How Long Does Information Stay
           On File?
   Tax Liens
        Paid IRS Tax Liens
               7 years from date paid
        Unpaid IRS Tax Liens
               indefinitely
   Student Loans
        Defaulted Student Loans
               indefinitely
               cannot be included in bankruptcy



Rev 12/23/05                                      10
        How Do I Contact the CRA’s
    Contact the three major credit reporting
    agencies:
         Equifax
         800-685-1111
         www.equifax.com
         Experian
         888-EXPERIAN (888-397-3742)
         www.experian.com
         Trans Union
         800-916-8800
         www.transunion.com

Rev 12/23/05                                   11
                          FACT ACT
   Fair and Accurate Credit Transactions Act

        Signed into law by President Bush
               Due to increase in Fraud/ID Theft
               December 4, 2003
        Free credit reports once a year
               Beginning December 1, 2004
               Broken down 4 areas




Rev 12/23/05                                       12
How to Get a Copy of Your Report
   www.annualcreditreport.com

        The website will direct you to select your state and
        will then transfer you to a screen to input your
        personal information.
        You can pull reports from all three major CRA’s
        The report is free, but there is a charge for your
        credit score




Rev 12/23/05                                                   13
    How Do I Correct Errors on My
          Credit Report?
   Get a copy of your credit report
        Highlight the errors
        Write a letter of dispute that includes an
        explanation of the error's
        Locate and photocopy
               documents to show items reported incorrectly
        Send everything to CRAs
               highlighted copy of your credit report,
               your letter of dispute,
               and a copy of any additional information



Rev 12/23/05                                                  14
What Is The FICO® Credit Score,
           Anyway?




                                  15
               FICO® Credit Score
    What is a FICO® Score?
         A generic risk score used by lenders,
         developed by Fair, Isaac Corporation in
         conjunction with Equifax, Experian and
         TransUnion.
         Predicts how likely you are to repay your
         debt; if you qualify for the loan; and what
         your interest rate will be.



Rev 12/23/05                                           16
               FICO® Credit Score
   CRA Product Names
        Equifax----------------BEACON®

        Experian--------------Experian/Fair Isaac
                              Risk Model


        TransUnion----------EMPIRICA®
                            EMPIRICA




Rev 12/23/05                                        17
               FICO® Credit Score
   Score Ranges
   300 to 850
        The higher the score the better the credit
        The lower the score the riskier the credit




Rev 12/23/05                                         18
           FICO® Credit Score
              Interest Rate
      What a Difference a Score Makes!
            Score    APR
           720-850      5.604%   A+
           700-719      5.729%   A
           675-699      6.267%   B
           620-674      7.417%   C
           600-619      8.531%   D
           500-599      9.289%   F


Rev 12/23/05                             19
 What a FICO® Score Considers
   Five types used to calculate a FICO®
   score. (Each type counts as a percentage of a total FICO® score)
        Payment history= 35%
        Amounts owed= 30%
        Length of credit history= 15%
        New credit= 10%
        Types of credit in use= 10%




Rev 12/23/05                                                          20
    What A FICO® Score Does Not
              Consider
    Race, color, religion, national origin,
    sex and marital status
    Age
    Employment
         salary
         occupation
         title
         employer
         date employed
         employment history
    Residence

Rev 12/23/05                                  21
    What A FICO® Score Does Not
              Consider
   Reported child/family support
   obligations
   Interest rate on existing accounts
   Consumer/CRA Inquiries
   Information not found in credit report
   Information not proven to be
   predictive of future credit
   performance
   Participant in credit counseling


Rev 12/23/05                                22
               Tips For Improving Your
                     FICO® Score
   Get a copy of your credit report
   Review for discrepancies/questions
   Pay bills on time
   Bring past due accounts current and
   keep them current
   Keep balances low
   Contact creditors immediately if
   problems arise


Rev 12/23/05                             23
               Tips For Improving Your
                     FICO® Score
   Pay debt off – don’t move it around
   Don’t open several new accounts
   Don’t have excessive inquiries
   Use caution when closing accounts

   Note: Paying off or closing an
   account or collection account does
   not make it go away!


Rev 12/23/05                             24
          Credit Repair Companies
   Everything a credit repair company can
   do legally, you can do yourself !
        Credit repair companies charge money—
        sometimes lots of money
        No one can legally remove accurate
        negative information from a credit report
        If you decide to work with a company,
        research its offer carefully



Rev 12/23/05                                        25
                 Easy Money Loans
   Payday Loans
        Personal check in exchange for cash
        Held 15 days
        Fees range from $30 and up
        Rollovers
               Additional Fees added




Rev 12/23/05                                  26
                     Be Patient
               the Payoff Is Worth It!




Rev 12/23/05                             27
The True Cost of Credit Card
           Debt




                               28
        The True Cost of Paying the
            Minimum Payment!
                      How does interest work?
  A. Average Daily Balance                     $2,000          Maxed-0ut Credit Card!
  B. Annual Percentage Rate                   18% APR          Or 1.5% per month
  C. Minimum Payment Percentage            2% of balance       2% x $2000 = $40
  E. Finance Charge                            $30.00          1.5% x $2000

                      (For all details, see credit card disclosures)

                                 EXAMPLE
               $2,000 X 2% (minimum monthly payment %) = $40.00

     $40.00                                                            $2,000.00
     - 30.00 Finance Charge                   Amt to Principal          -    10.00
     $10.00 Amt to Principal                   New Balance               $1,990.00

Rev 12/23/05                                                                            29
        The True Cost of Paying the
            Minimum Payment!
Paying the minimum payment every month, it will take you
370 months to be rid of your debt. In that time, you will pay
$4,931.15 in interest.
Payment Schedule
      Minimum         Interest   Principal    Remaining
Month
      Payment         Paid       Paid         Balance
1     $40.00          $30.00     $10.00       $1,990.00
2     $39.80          $29.85     $9.95        $1,980.05
3     $39.60          $29.70     $9.90        $1,970.15
4     $39.40          $29.55     $9.85        $1,960.30
5     $39.21          $29.40     $9.80        $1,950.50
6     $39.01          $29.26     $9.75        $1,940.75
7     $38.81          $29.11     $9.70        $1,931.04

Rev 12/23/05                                                    30
        The True Cost of Paying the
            Minimum Payment!
Paying $50 every month, it will take you 62 months to be rid
of your debt. In that time, you will pay $1,077.25 in interest.
Payment Schedule
              Interest                          Remaining
Month Payment                  Principal Paid
              Paid                              Balance
1     $50.00 $30.00            $20.00           $1,980.00
2     $50.00 $29.70            $20.30           $1,959.70
3     $50.00 $29.40            $20.60           $1,939.10
4     $50.00 $29.09            $20.91           $1,918.18
5     $50.00 $28.77            $21.23           $1,896.95
6     $50.00 $28.45            $21.55           $1,875.41
7     $50.00 $28.13            $21.87           $1,853.54

Rev 12/23/05                                                      31
        The True Cost of Paying the
            Minimum Payment!
Paying $75 every month, it will take you 35 months to be rid of
your debt. In that time, you will pay $573.36 in interest.

Payment Schedule
              Interest                            Remaining
Month Payment                   Principal Paid
              Paid                                Balance
1     $75.00  $30.00            $45.00            $1,955.00
2     $75.00  $29.33            $45.68            $1,909.33
3     $75.00  $28.64            $46.36            $1,862.96
4     $75.00  $27.94            $47.06            $1,815.91
5     $75.00  $27.24            $47.76            $1,768.15
6     $75.00  $26.52            $48.48            $1,719.67
7     $75.00  $25.80            $49.20            $1,670.47


Rev 12/23/05                                                      32
Stretching Your Dollars




                          33
               Budget/Spending Plan
   What is a budget/spending plan?
        Your budget/spending is the foundation for
        your financial success.
        It’s what you can do within your income.
        It’s not about denying yourself.




Rev 12/23/05                                         34
               Budget/Spending Plan
   What Do I Do First?:
        Get Organized
               File box
               Jar
               Shoe box
               Large manila envelope




                  GET AND SAVE RECEIPTS

Rev 12/23/05                              35
               Budget/Spending Plan
     Next, create the budget/spending plan by:
         using money management software
         using a paper a budget form
         using a budget workbook
     Then, complete the budget/spending plan
      in detail:
         be honest with yourself.
         it won’t work if your budget doesn’t truly reflect how
         you spend.




Rev 12/23/05                                                      36
               Budget/Spending Plan
    How much money do I have to spend?

         Money In vs. Money Out
         Gross vs. Net Income
         Track Spending




Rev 12/23/05                             37
               Budget/Spending Plan
   Types of Expenses
        General Monthly
        Annual
        Debt




Rev 12/23/05                          38
       Developing A Spending Plan
   Expense Categories
        Fixed
               Child care
               Rent/mortgage
               Installment payments
                 Car, home and personal-type loans
               Insurance premiums
               Tithes


Rev 12/23/05                                         39
     Developing A Spending Plan
        Flexible
               Food
               Utilities
               Gas
               Home phone/cell phone
               Car maintenance
               Credit card payments
               Personal/Medical Needs



Rev 12/23/05                            40
     Developing A Spending Plan
        Luxury
               New Clothes
               Going out to eat
               Entertainment/Recreation
               Gifts




Rev 12/23/05                              41
               Budget/Spending Plan
  Savings included in your budget:
       Three types of savings:
               Emergency Reserve
                  Three months of living expenses in the event
                     laid-off
                     medical reasons
                     divorce
               Short-term
                  Vacation, special occasion, special purchase
               Long-term
                  Down payment on a home
                  Buying a new card
                  Retirement

Rev 12/23/05                                                     42
                Budget/Spending Plan
       Review:
               Put in writing
               Keep it simple
               Stick to major categories
               Review plan and make changes
               Keep records and receipts
               Buy what you “need”
               Allow for relaxation/entertainment
               Save what is left

Rev 12/23/05                                        43
Credit Counseling




                    44
                   Credit Counseling
   Are you Knee-Deep In debt?
   Do you have more month than money?
        When debt becomes overwhelming:
               Talk with your creditors.
               Consult with a certified credit counselor.




Rev 12/23/05                                                45
               Credit Counseling
   What can a certified credit counselor do?
        Review your finances and help you set up a
        budget.
        Review your credit situation.
        Look at the possibility of a Debt Repayment
        Plan (or debt management plan, aka DMP).




Rev 12/23/05                                          46
                  Credit Counseling
    How does DMP work?
         May reduce interest rates and fees.
         Helps you begin making consistent, on-time
         payments
               payments made to the counseling agency.
         You will see results over time
               Credit Score/Credit History begins to improve.




Rev 12/23/05                                                    47
                  Credit Counseling
                       Review
    Is there a fee for their services?
               What are they?
    What services does the agency offer?
               Budget/Credit Counseling
               Debt Repayment
               Credit Report Review




Rev 12/23/05                               48
               Credit Counseling
                    Review
   Is the agency truly accredited and, if so,
   by whom?
   Are the counselors certified and, if so, by
   whom?
   Are there local offices where I can talk
   with a counselor directly?




Rev 12/23/05                                     49
               Credit Counseling
   American Debt Solutions is a member of:
        AICCCA (Association of Independent
        Consumer Credit Counseling Agencies)
        Better Business Bureau of Southeast Florida
   American Debt Solutions is certified by:
        BVQi – Quality certified according to ISO
        2000-9001 standards




Rev 12/23/05                                          50
               Have A Nice Day!




Rev 12/23/05                      51

				
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