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DEBTSetting Limits on Credit

Just 50% of Americans believe in the American dream, - you’ll get ahead by working hard. 43% say that the dream was once true,

but no longer is. Source: The Week

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Ha.

“ATM does not mean all the money, Loretta.”

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Who cares about your debt?

You Employers Credit reporting agencies

Get one report from each company FREE every year: www.AnnualCreditReport.

com

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Credit score A FICO (Fair Isaac Company) score is an

evaluation of a person’s ability to repay debt It is a number between 300 and 850

A higher number is a better credit score Indicator of a person’s ability to pay back a loan

A lower score may increase the interest rates a consumer pays or they may not receive credit

The creditor has a greater risk that the individual may not pay back the money they loaned

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Why does is matter? Low credit scores will cost individuals

more money long-term. This table is based upon a thirty-year fixed

mortgage rate on a $300,000 loan.

FICO Score Interest Rate

Monthly Payment

30 Year Amount

760 5.9% $1,787 $643,320

650 7.2% $2,047 $736,920

590 9.3% $2,500 $900,000

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Credit score calculation

10%10%

15%

30%

35%Credit MixPursuit of New CreditCredit History & LengthOutstanding DebtPayment History

Credit cards may influence each component of how an individual’s credit score is calculated.

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What else do they track? Identifying information

SS#, address, birthday Credit history

Account record with creditors Inquiries

Who has requested a report? Public record information

Collections, bankruptcies, late child support

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What is NOT included? Checking and savings account balances Income Medical history Purchases made with cash or check Race, gender, religion or national origin Driving record

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Ways to improve credit score Pay bills on time Keep balances low Apply for new accounts only when

necessary Check credit reports for accuracy

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Credit card tips

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Before you sign the dotted line

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How much can you afford? 20-10 Rule

20% Never borrow more than 20% of your yearly

income (after taxes)

10% Monthly payments shouldn’t exceed 10% of

monthly income

Ex: If you make $50 per month $50 x 12 months = $600 per

year $600 x 20% = $120 -- max

debt

Ex: If you make $50,000 per year $50,000 x 20% = $10,000 -- max debt

Ex: If you make $2,000 per year $2,000 / 12 = $167 per month $167 x 10% = $17 – max debt payments

Ex: If you make $50,000 per year $50,000 / 12 = $4,167 per month $4167 x 10% = $417 – max debt payments

***HOME LOANS NOT INCLUDED***

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Getting out of debt

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A plan to get out of debt

Reminder:

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Bankruptcy

Chapter 11: Business bankruptcy

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Negative InfoNegative Information

Max Time on Credit Report

Civil Judgement 7 yearsTax Lien 7 yearsChapter 13 Bankruptcy

7 years

Chapter 7 Bankruptcy

10 years

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Bankruptcy in our worldFormer Celtics star Antoine Walker is broke and in debt.

7 Famous Millionaires who files Bankruptcy.

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Millionaires file BK? There are many ways that the millionaire mind

is different from the average persons. It is through this thought process that true greatness is achieved. For starters, quitting or complete failures are simply not options they entertain.

Ask any millionaire what they would do should they go bankrupt, most will tell you it does not matter because they will be right back on top in no time at all. In fact, most if not, all millionaires have filed bankruptcy at least once in their adult lives.

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Is BK a good choice? What hope do we have for our future? Demand better for yourself.

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Moral obligation If a business or individual goes through bankruptcy

successfully, many of their debts are legally discharged. Creditors no longer have any legal right to collect on those debts. However, the moral obligation to pay those debts remains. This might seem inconsequential -- if the law says the debt is forgiven, why would anyone pay it?

There are certainly situations in individual bankruptcies where the moral obligation is important. If your parents loaned you money, you would probably feel a responsibility to pay them back, even if your parents "discharged" the debt. It can be even more important for business owners. If a business goes through Chapter 11, it would probably want to make some good faith payments toward debts if they ever wanted to use the same suppliers once the reorganization is complete.

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MTV True Life: I'm in Debt MTV True Life: I'm a Compulsive Shopper MTV True Life: I Have Broke Parents