Turn in Understanding Credit Card Packet and Reflection Paper

1. Turn in Understanding Credit Card Packet and Reflection Paper

2. Should they apply for a credit card? In groups, take the 10 scenarios provided for you and read through the considerations. Make suggestions based on if these individuals/families should consider having a credit card. Making a “yes”, “no”, and “maybe” pile will be helpful. Be sure you have a reason why you placed the scenarios in the group you did. When everyone finishes, we will discuss as a class.

3. Intro to Credit Reports • Think with your table groups… • What are things that are included in a credit report?

4. Credit Report Detectives Meet Isabella, your new client: • About to graduate from college • In extreme debt • Concerned about finding a job • Doesn’t understand her credit report YOUR MISSION: Help Isabella understand her credit report, identify what she did to get into this situation, and decide what she can do to improve her credit report.

5. REVIEW….The Credit Process Credit – when goods, services, and/or money are received in exchange for a promise to pay back a definite sum of money at a future date.

6. Isabella’s Story • What is your analysis of her situation? • Does she need your help? • Why? • What kind of information stands out in the reading as “questionable?” IN SMALL GROUPS: READ ISABELLA’S SCENARIO

7. Credit History Reporting What they do Additional Information

8. Credit Reporting Agencies • Acquire information from:

9. Information in a Credit Report Lenders may or may not report information to all three credit reporting agencies. An individual’s information may be different in each report. Information can be divided into 4 categories: • Personal Information • Accounts Summary • Public record items related to credit • Credit Inquiries

10. Personal Information Personal Information Isabella’s Personal Information: Name – Isabella G. Langley or Isabella Langley Addresses – 101 Hopeful Ave. & 695 Parent Street Date of birth – 05/04/86 Telephone numbers – 555-354-2368 & 555-198-2358 Employers – Lucky’s Restaurant & Jane’s Daycare • Name and aliases • Current and past addresses • Social Security number • Date of birth • Employment history FIND ISABELLA’S PERSONAL INFORMATION

11. Accounts Summary Accounts Summary Isabella’s Accounts Sam’s Electronic World City of Anywhere U.S. Department of Education Financial Institution School Loan Shop ‘Til You Drop Store Credit Card Love to Read Store Credit Card The Free Money Credit Card • Types of accounts • Date the account was opened • Credit limit or loan amount • Account balance • Payment history, including missed or late payments WHAT LENDERS DOES ISABELLA HAVE ACCOUNTS WITH?

12. Accounts Summary Isabella’s Late or Missed Payments Sam’s Electronic World Past due Store Credit Card Occasional late payments DOES ISABELLA HAVE ANY LATE OR MISSED PAYMENTS ON ACCOUNTS ?

13. Public record itemsrelated to credit Public Record Items Isabella’s Public Record Items City of Anywhere In Collection • Accounts turned over to collection agencies • Public records • Bankruptcy • Tax liens • Legal suits • Foreclosures IDENTIFY PUBLIC RECORD ITEMS IN ISABELLA’S REPORT

14. Credit Inquiries WHAT INQUIRIES DOES ISABELLA HAVE ON HER REPORT? • Requests for an individual’s credit report • Completed by: • Insurance agencies • Potential credit companies • Financial institutions • Landlords • Potential employers, etc.

15. Equal Credit Opportunity Act Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant you credit • Prohibits credit discrimination on the basis of: • Race • Religion • Marital status • Nationality • Gender • Age

16. Credit Score Impact $256,680 saved over the lifetime of this loan because of a good credit score!

17. How Credit Scores are Determined

18. Payment History • The timely manner in which a consumer did or did not repay debt • Includes: • Several types of credit accounts • Late or missed payments • Public records and collection items

19. Payment History WHAT IS ISABELLA’S PAYMENT HISTORY? • Found in status column • Payment history • Sam’s Electronic World is past due • City of Anywhere is in collection • Shop ‘Til You Drop has occasional late payments • Love to Read was closed and never late • The Free Money Credit Card is paid on time • Credit score impact • Negative • Too many late accounts What Impact Does this have on Her Credit Score?

20. Outstanding Debt • The total dollar amount of debt currently held • Includes balances on all reported accounts • When a high percentage of debt is used, then it negatively impacts a score

21. Outstanding Debt How much Total Debt does Isabella Have? • Total debt • Found in recent balance column • $37,325 • Available credit • Found in credit limit column • $37,546 • Impact • Negative • $37,546-$37,325 = $221 she is using almost all her available credit How much Available Credit is Isabella using? What Impact Does This have on her Credit score?

22. Length of Credit History • Length of time a consumer has held credit accounts • Includes how long ago credit accounts were established • A longer credit history will generally increase a credit score

23. Length of Credit History When did Isabella First begin her Credit history? • Credit history • Found in date opened column • 08/05 U.S. Dept. of Education • Free Money Credit Card • Score will improve If Isabella keeps her Free Money Credit Card Open for Another 10 years and pays Off the balance, what will happen?

24. Pursuit of New Credit • Assesses how many accounts have been opened recently and the type of account • Includes the number of recently opened accounts as well as requests for new credit • Opening too many types of accounts in a short period of time has a negative affect

25. New Credit Has Isabella Pursued any Additional credit Since January 2008? • Additional credit • Shop ‘Til You Drop in August 2008 • Impact of seeking additional credit • Credit score will go down If Isabella acquired Another credit Card and shopped for An Automobile loan, what would happen to her score?

26. Types of Credit in Use • Analyzes the types of credit in use • Credit cards, retail cards, mortgages, automobile loans, etc. • Variety is generally good to have

27. Credit in Use What types of Credit does Isabella have? • Types • Credit card (revolving) • School loan (installment) • Private school loan (installment) • Store cards (revolving) • Additional forms • Mortgage • Automobile loan What are Additional forms Of credit she may seek?

28. Mistakes in Credit Reports • Important to check each credit report annually to correct mistakes • Two common errors • Fraud (identity theft) • Mistaken identity • When a lender reports a transaction on the wrong person’s credit report

29. Fair Credit Reporting Act • Gives consumers the right to review and correct their report • If a person is denied credit, they have the right to request their credit report from the credit reporting agency • If within 60 days it is free of charge

30. Credit Report Detectives Advice • Will Isabella receive her dream job? • What advice would you give Isabella to improve her credit report and score? • What should she do immediately? • What recommendations would you suggest she employ in the near future?

31. ASSIGNMENT REVIEW… • Complete questions 1-16 at the end of the packet to check your understanding of credit history and credit reports.