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Chapter 26 – How to Get and Keep Credit

Chapter 26 – How to Get and Keep Credit. What I need to know…. Developing a Credit History. Without a History Banks will not loan you money and/or You will pay very high interest rates Ways to begin developing a Credit History Open a Checking and Savings Account Get a Debit Card

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Chapter 26 – How to Get and Keep Credit

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  1. Chapter 26 –How to Get and Keep Credit What I need to know…

  2. Developing a Credit History • Without a History • Banks will not loan you money and/or • You will pay very high interest rates • Ways to begin developing a Credit History • Open a Checking and Savings Account • Get a Debit Card • Apply for a Secured Credit Card • Charge Small balances and pay bill in full each month NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…

  3. Developing a Credit History • You will have a good chance of getting a car loan, mortgage or a personal loan • BEFORE APPLYING FOR A LOAN • Check your Credit Report – fix discrepancies • Bring the following when applying for a loan: • PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of income • PROOF OF IDENTITY: Social Security Number and Driver’s License • If they feel you are not credit worthy you may need a Cosigner

  4. CREDIT WORTHY – 3 C’s of CREDIT • Character: does the lender think you are honest, reliable, and lead a stable life • Have you used credit before? • Do you pay bills on time? • How long have you lived at your present address? • How long have you been working at your present job? • What is your credit score?

  5. CREDIT WORTHY – 3 C’s of CREDIT • Capital: do you have assets such as real estate, personal property, investments, or savings that the lender can take if you do not repay the loan • What property do you own that can secure the loan? • Do you have a savings account? How much? • Do you have any investments?

  6. CREDIT WORTHY – 3 C’s of CREDIT • CAPACITY: do you have enough income to pay the loan • Do you have a steady job? What is your salary? • How many other loan payments do you have? • What are your current living expenses? (Budget) • What are your current debts? • How many dependents do you have?

  7. What’s Your FICO SCORE? • Credit Score – • CREDIT SCORES – Vary from different lenders • Range from 300 – 850 • Good 600-750 • Excellent – 700 + • What Impacts your Score? • Late Payments • Types of credit • Loans (cars/Home), Credit Cards, Store Loans (Best Buy/Ashley) • Number of loans/credit cards • TOTAL DEBT • Public Records – Bankruptcy, Judgments

  8. Credit Scores • Things not considered in your Score • Race, religion, national origin, sex, or marital status • Age • Where you live • Occupation, title, employer, on Public Assistance • LENDERS LOOK AT THESE BUT IT DOES NOT AFFECT SCORE • Consequences of Scores • Low score will keep you from getting a loan and/or paying a higher interest rate

  9. Comparing Credit Cards • List the different features of credit cards that you may need to compare… • Why do some credit cards charge and Annual Fee? • Most important if: • Pay balance off each month? • Don’t pay balance off • Use you credit card to get cash • Don’t keep good track of your checking account balance

  10. Facts about loans and mortgages • Most are secured • Backed by collateral • Interest Rates/Finance Charges • Variable • Fixed • Most need a down payment • A loan’s Principal • Amount Financed • Cosigner • Needed with poor credit history or no credit history • Someone with good credit also signs the loan • If you default…they have to pay

  11. Keeping a Healthy Credit Record CLICK HERE FOR VIDEO • Pay Bills on time • Don’t carry more credit cards than you need • Stay within your means – no more than 20% of your Income for consumer Credit • Check your Credit Report yearly • Correct Errors on your Report

  12. Signs of Credit Trouble • Can only pay minimum payment • Can’t pay bills on time • Getting calls from Creditors • Garnishment of Wages • Repossess

  13. How Much Debt can you Afford? • Never borrow more than 20% of your Annual net income • If you make $400 a month • 400 X 12 +4800 • 4800 *.2 =$960 . • Outstanding Debt not including housing • Monthly payments shouldn’t exceed • More tan 10% of your monthly take home • $400 a month - $40 monthly debt payment

  14. Debt-to-income ratio • Your debt-to-income ratio usually gives a clear picture of your financial well-being. • To calculate it • add up your fixed monthly expenses, such as rent, mortgage or credit card payments (do not include expenses like utilities or groceries). • Then divide the total by your monthly take-home pay (net pay) • It should not be more than 28%

  15. IDENTITY THEFT Deter...Detect…Defend

  16. Credit Reports

  17. Free Credit Report . Com • http://www.youtube.com/watch?v=YzkBhfbwRkg Annual Credit Report.com • http://www.youtube.com/watch?v=4GC9dobzEKc Which one’s for you??????

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