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Week 7 – Credit History

Week 7 – Credit History. Welcome!. Today you will need a pen or pencil REMINDER!!! Test tomorrow on Chapter 7! I do have tutoring today!. What areas of your life will your credit history impact?. Job Insurance rates Buying a car Buying / renting a home Getting a loan Utilities

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Week 7 – Credit History

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  1. Week 7 – Credit History

  2. Welcome! • Today you will need a pen or pencil • REMINDER!!! Test tomorrow on Chapter 7! • I do have tutoring today!

  3. What areas of your life will your credit history impact? • Job • Insurance rates • Buying a car • Buying / renting a home • Getting a loan • Utilities • Getting a credit card • Getting a cell phone

  4. Research Activity - What are the 3 main types of credit available to most consumers? • Single-Payment CreditPay in a single payment within a given time periodExamples: Doctors, utilities, paycheck lenders • Installment CreditPay in two or more regular payments of a set amountExamples: Cars, mortgages, furniture, vacations • Revolving CreditBuy within a credit limit – minimum due regularly Examples: Retail charge accounts, credit cards

  5. Most people get themselves into trouble with having too much debt! • RESEARCH: How much debt is recommended that the average consumer borrow? 20 / 10 rule

  6. What is the 20 / 10 rule? • Never borrow more than 20% of annual net income* • Monthly payments should be less than 10% of monthly net income* • *the 20/10 rule does not apply to home mortgages

  7. For example • If I am a single parent with a monthly net income (after taxes) of $1,000… • I should not spend more than $100 month on credit card debt! • I should not spend more than $1,200 per year! • Use the 20 / 10 rule to figure out • How much should they pay per month on credit card debt? • How much should they spend per year?

  8. Can you figure out the average credit card debt of most Americans in 2013? $15,956 2 4 8 4 7 Higher or lower? Game! SOURCE: www.creditcards.com

  9. Why does this matter? • The average American is spending around $500 a month on credit card payments!

  10. Use Credit Card Calculator to figure out how long it will take you to pay off with just minimum payments: • http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

  11. NUMBERS ACTIVITY 10 % 10 % WHAT MAKES UP A TYPICAL CREDIT SCORE? 15 % 30 % 35 %

  12. What does a Credit Report keep track of? • Credit Report - Record of personal transactions over the past 7 to 10 years. • What does this tell creditors? • How promptly you pay bills • Credit you have • Bank accounts • Legal record • Bankruptcy • Lawsuits

  13. Unfavorable credit information stays on your credit report for ______ years. • Bankruptcy stays on your credit report for ______ years. 7 10

  14. What is the Average Credit Score for someone living in the US? 693 www.experian.com (2005)

  15. You are given a 3 digit number called a Credit Score • Most common scoring method = FICO Score (300 – 850) 850 (Good) 300 (Bad)

  16. WHAT CAN HURT YOUR CREDIT SCORE? • Late Payments • Bouncing checks • Too many loans or cards • High balances on loans or cards • Charging credit cards frequently

  17. WHAT CAN IMPROVE YOUR CREDIT SCORE? • Cosigner • Pay bills on time. • Regular deposits to savings • Don’t open too many accounts • Low balances on credit cards • Pay off debt quickly • Check credit report frequently

  18. Who keeps track of your credit history? • Credit Bureaus – keeps records of people who have attained credit • There are 3 main bureaus in the United States: • Equifax • Experian • TransUnion EVERYONE IS ENTITLED 1 FREE CREDIT REPORT FROM EACH OF THESE BUREAUS PER YEAR

  19. Who can legally view your credit report? • Credit Bureaus • Employers • Landlords • Anyone with a legitimate business concern

  20. How can you begin building your credit history? • Department Store Credit Card • Gas Card • Secured Credit Card • Utilities • Ask someone with an established credit history to be your cosigner

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