understanding credit & credit scores · 2019. 10. 9. · fair credit report act •be told if...
TRANSCRIPT
![Page 1: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/1.jpg)
Understanding Credit & Credit Scores
Jesse M. Ketterman, Jr., PhD AFCExtension Educator
Maria Pippidis, AFCExtension Educator
![Page 2: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/2.jpg)
Objective
• Develop an understanding of credit and credit reports• Learn how to obtain a copy of your credit report• Learn how to correct mistakes on your credit report• Steps that you can take to improve your credit score
![Page 3: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/3.jpg)
Will you help us?https://ume.qualtrics.com/jfe/form/SV_3fN2QmP6dlmkPyZ
Minimize Link – Please do not close the link!
![Page 4: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/4.jpg)
What is Credit?
• The ability of an individual to obtain goods or services before payment, based on the trust that the payment will be made in the future. (Google)
Chat: What are the advantages of credit?
![Page 5: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/5.jpg)
What is Credit?
• The ability of an individual to obtain goods or services before payment, based on the trust that the payment will be made in the future. (Google)
• A record (Snapshot) of how you borrowed and repaid debt. (Guide to Surviving Debt)
What is Credit Report?
![Page 6: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/6.jpg)
What is Credit?
• The ability of an individual to obtain goods or services before payment, based on the trust that the payment will be made in the future. (Google)
• A record (Snapshot) of how you borrowed and repaid debt. (Guide to Surviving Debt)
• A numerical representation of your credit worthiness.
What is Credit Report?What is Credit Score?
![Page 7: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/7.jpg)
Types of Credit
Revolving – Variable PaymentsInstallment – Fixed PaymentsOpen – Balance Paid in Full
Secured vs Un-secured
Closed vs Open
![Page 8: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/8.jpg)
Impact of Credit Reputation
Positive Credit Reputation
• Low interest rates• More options• Saves you Money
Negative Credit Reputation
• High interest rates• Lack of options• Spend more money• Turned away from loans
![Page 9: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/9.jpg)
How much can credit cost?
Used Car – $8,000 / 48 months• Excellent Credit• Interest Rate 6%• Monthly Payment $188• Interest Paid $1,018• Total Paid $9,018
Used Car ‐ $8,000 / 48 months• Okay Credit• Interest Rate 15%• Monthly Payment $223• Interest Paid $2687• Total Paid $10,687
![Page 10: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/10.jpg)
Consumer Debt Ratio
Consumer Debt RepaymentsTake Home Pay• Take Home Pay: $1,800• Debt
• $200 – Credit Cards• $190 – Car Payment• $720 – Mortgage
• $390 / $1800 = 21.6%
Percent For Current Debt
Take on Additional Debt?
10 or less Safe limit; borrower feels little debt pressure
Could be undertaken cautiously
11 – 15% Possibly safe limit; borrower feels some pressure
Should not be undertaken
16 – 20% Fully extended; borrower hopes that no emergency arises
Only the fearless or foolhardy ask for more
21 – 25% Overextended; borrower worries about debts
No, borrower should see a financial counselor
26 or more
Disastrous; borrower may fee desperate
Impossible; borrower will probably declare bankruptcy
![Page 11: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/11.jpg)
Ways to damage your credit
• Bankruptcy• Missing payments• Late payments• Owe lots of money• Irresponsible credit card use
![Page 12: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/12.jpg)
Start Here
12
![Page 13: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/13.jpg)
Credit Bureaus
•Credit bureaus collect information from public records and companies you do business.
•They use that information to create your personal credit report.
•A credit report is comprised of four sections.
![Page 14: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/14.jpg)
Title of Slide Here
• Bodyhttps://youtu.be/MPh7xpLdyEk
![Page 15: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/15.jpg)
Personal Information
• Name• Address• Social Security Number• Date of Birth
![Page 16: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/16.jpg)
Credit History
• Includes all of your open and closed credit accounts and how you’ve done repaying them.
![Page 17: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/17.jpg)
Public Records – Related to Finances
• Property Liens• Bankruptcies
![Page 18: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/18.jpg)
Inquires (last two years)
Hard Inquires• Ones that you initiated
by filling out a credit application
Soft Inquires• Companies that want to send out promotional information to a pre‐qualified group
![Page 19: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/19.jpg)
Credit Report Review Checklist
https://files.consumerfinance.gov/f/documents/201701_cfpb_credit‐report‐review‐checklist.pdf
![Page 20: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/20.jpg)
Errors!
•Contact the creditor.•Contact the credit bureau.•Unresponsive: Contact CFPB (Consumer Financial Protection Bureau)
![Page 21: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/21.jpg)
Fraud!• Contact the credit bureaus and request that they place a fraud
alert on your account. They will need to take steps to verify the information surrounding the suspicious activity.
• File a report with the police and the Federal Trade Commission (FTC).
![Page 22: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/22.jpg)
Types of Freezes
•Fraud Alert – Free of Charge•Credit Freeze – Free of Charge•Credit Lock – Not so Free
https://www.consumer.ftc.gov/sites/www.consumer.ftc.gov/files/intial_alert_freeze_or_lock_after_equifax.pdf
![Page 23: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/23.jpg)
Credit Scores• FICO (Fair Issac Corporation)• Vantage
![Page 24: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/24.jpg)
Title of Slide Here
• Body
![Page 25: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/25.jpg)
FICO Pie Chart
• Payment History• Amount Owed• Length of History• New Credit• Types of Credit Used
![Page 26: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/26.jpg)
Length on Report
Type of Account Time Frame
Credit Inquires 2 YearsLate/Missed payments 7 YearsCollection Accounts 7 YearsChapter 13 Bankruptcy 7 YearsChapter 7 Bankruptcy 10 YearsClosed Accounts in good standing
10 Years
Open Accounts in good standing IndefinitelyCivil Judgement 7 YearsPaid Tax Liens 7 YearsUnpaid Tax Liens 10 Years
![Page 27: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/27.jpg)
Who Can See Your Credit Report?
• Banks• Collection Agencies• Creditors• Employers• Government Agencies• Insurance Companies• Landlords• Utility Companies (including cell phone)
* In some cases you sign a release for access!
![Page 28: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/28.jpg)
Coping with Bad Credit•Correct Errors•Work with the Creditor• Student Loan Defaults•Public Records•Delete Old Information• Explain Damaging Items• Threats•Avoid Credit Repair Agencies
7 yrs – Collections, Judgements, Tax Liens, Criminal Records10 yrs – BankruptciesLife – Convictions
![Page 29: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/29.jpg)
Rebuilding Credit• Stabilize • Establish New Accounts• Build Credit in Your Name• Explain Damaging Items
Source: Surviving Debt – National Consumer Law Center
https://files.consumerfinance.gov/f/documents/cfpb_how‐to‐rebuild‐your‐credit.pdf
![Page 30: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/30.jpg)
Improving Your Score
• Pay bills on time.• Reduce debt.• Keep balances low / credit limits.• Apply for & open new lines only when you need them.• Check your credit report for accuracy and clear errors as soon as
possible.
https://powerpay.org/
![Page 31: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/31.jpg)
Identity Protection – How often to check
•All three credit bureaus, at least annuallyhttp://annualcreditreport.com/
•Before you shop for a mortgage or other large investment
•Review at once or stagger?
![Page 32: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/32.jpg)
Fair Credit Report Act
•Be told if information has been used against you•Know what is in your file• To ask for a credit score• To dispute incomplete or inaccurate information•Agencies to correct inaccurate, incomplete, or unverified information
![Page 33: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/33.jpg)
Fair Credit Report Act•Agencies may not report outdated negative information
•Access to file is limited•Consent for reports to employers•May limit “prescreened offers of credit and insurance”• Seek damage from violators•Victims of Identity Theft and Military have additional rights.
![Page 34: Understanding Credit & Credit Scores · 2019. 10. 9. · Fair Credit Report Act •Be told if information has been used against you •Know what is in your file •To ask for a credit](https://reader035.vdocuments.mx/reader035/viewer/2022071106/5fdff7c9d3b01b612572bbac/html5/thumbnails/34.jpg)
Will you help us?