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Credit for the Rest of Us
© The Money Professors (TM) www.TheMoneyProfessors.com
2013 Career and Technical Education Summer Conference
Len Rhodes M.B.A. C.P.F.M.
Mark C. Weitzel M.B.A. C.P.F.M.
July 25, 2013
© The Money Professors (TM) www.TheMoneyProfessors.com
Playing the Game
© The Money Professors (TM) www.TheMoneyProfessors.com
Playing the Game
What Lenders Want
Lenders Measure
Your ability to pay
Your likelihood that you will pay
5 C’s of Credit
Character - willingness to pay your bills on time.
Capacity - your ability to pay the loan.
Capital - your net worth.
Collateral - something you own that the lender can take if you don’t pay.
Conditions - what are current economic conditions.
What Lenders Want
Credit Report Reporting Agencies
Equifax, Experian, Trans Union Free Credit Report
www.annualcreditreport.com Data Collected
Name, address, SSN, loan amounts Payment history from lenders, phone and
utility, hospital, etc.
© The Money Professors (TM) www.TheMoneyProfessors.com
What is a Credit Score?
© The Money Professors (TM) www.TheMoneyProfessors.com
What is a Credit Score?
A “report card” on how you handle your money
More specifically, on how you handle your debt
© The Money Professors (TM) www.TheMoneyProfessors.com
Why Use a Credit Score?
People with messy finances also lead messy lives
© The Money Professors (TM) www.TheMoneyProfessors.com
What Makes a Credit Score?
© The Money Professors (TM) www.TheMoneyProfessors.com
Credit Score
Score Range Rating % of US
Population
Extra Cost Per month for a 200K
Loan
780+ Perfect 20 $0
720-780 Excellent 20 $0
675-720 Average 20 $86
620-690 Fair 20 $242
Below 620 Low 20 $353
© The Money Professors (TM) www.TheMoneyProfessors.com
FICO: The Only Score that Matters
Get a copy of your credit report: www.annualcreditreport.com
NOT freecreditreport.com
Your FICO Score is the only number that matters.
Credit Costs Dollars
Lowering your risk to the lender lowers the cost of your credit
Increasing your risk to the lender increases the cost of your credit
Your Risk to Lender
Your Interest RateLow High
Your Risk to LenderLow
High
Credit
Credit Cards
Advantages No need to carry a lot of cash Buy now, pay later Easier bookkeeping Much more convenient
Credit Cards
But Much more convenient Buy now, pay later Cost $$$$$$ #1 cause of over spending Many hidden costs Obligates future income
They really are out to get you!
Buyer Beware!
Credit Card Rules
Credit Card Rules Credit cards are not to be used to
supplement your income
Credit Card Rules Credit cards are not to be used to
supplement your income Life is full of emergencies
Credit Card Rules Credit cards are not to be used to
supplement your income Life is full of emergencies You need to understand how to use a
credit card before you should get one
Credit Card Rules Credit cards are not to be used to
supplement your income Life is full of emergencies You need to understand how to use a
credit card before you should get one Know the credit card “tricks” so you can
avoid them
Credit Card Tricks
Use your card for everything! You get points when you make purchases
Rates that aren’t real Balance transfer fee of 4% 0% or low rates you lose with one mistake
Lowest interest rate gets paid first No grace period on purchases Ever-increasing credit limit Decreasing minimum payment
Credit Card Rules Credit cards are not to be used to
supplement your income Life is full of emergencies You need to understand how to use a
credit card before you should get one Know the credit card “tricks” so you can
avoid them Seek assistance if you get into trouble with your credit cards
Credit Cards
What can you do? Choose well – shop around
(www.cardweb.com) Read offer (contract) – Schumer box Negotiate better terms
Ask for a lower rate Ask to waive a fee
Pay on time – online or direct draft Complain
Attorney General (www.naag.org)
Credit Cards
Ruth Owens Discover Card Social Security Disability $1900 limit 6 years ago Minimum payment for 6 years totaling
$3492 $5564 balance Discover sued her!
Credit for the Rest of Us
© The Money Professors (TM) www.TheMoneyProfessors.com
2013 Career and Technical Education Summer Conference
Len Rhodes M.B.A. C.P.F.M.
Mark C. Weitzel M.B.A. C.P.F.M.
July 25, 2013
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