Protecting and Building your Credit

Lower auto and homeowner insurance rates

Lower rates on car loans Your credit may even affect your

ability to get a job!

How does good credit help you?

Insurance companies have found a correlation between risk of accidents/claims and credit scores

Credit card companies and banks look at your credit history to determine the likelihood you will repay the loan

More risk = Higher rates

Why do companies charge more for people with bad credit?

Better chance with a credit union Open a savings account first – can still get

ATM card, receive direct deposits, etc. May be able to open checking account at

bank used by employer Open an investment account; most

investment banks will open a bank account for you without a credit check (but may cost $500 or more to open)

Can I get a checking accountif I have bad credit?

Apply for a credit card and make sure you pay it off each month

Discover.com has good cards for students with cash back incentives

Set up your credit card for automatic payments so you are never late

Establishing and Building Credit

Secured Credit Cards Some people don’t quality for regular

credit cards Secured cards require a cash collateral

deposit that determines your credit line Banks may reward you for good

payment history and add to your credit line without additional deposits

Rebuilding Credit

People usually qualify for a regular unsecured credit card after a year with the secured card

Switch as soon as you can to an unsecured card as fees and rates are lower

Better than a prepaid card for rebuilding credit because a prepaid card = debit card (they are not reported to the major credit bureaus)

Secured Credit Cards

Watch out for fees: Don’t pay an application fee Don’t pay insurance policies!! Annual fees lower at credit unions Read the fine print! Ask how long the issuer will keep your deposit

after card is closed Make sure card issuer DOES report to three

major credit bureaus Ask the card issuer if they flag report to

credit bureaus as a secured credit card

Secured Credit Cards

Get the lowest annual fee you can Just charge a few things each month

and pay off entire balance each month Don’t go into credit card debt! It can

takes YEARS and YEARS to repay: Calculator

Compare credit cards at BankRate.com or look into cards through a credit union (i.e. Global)

Recommendations

annualcreditreport.com is free Can check for free once a year from

each credit bureau TransUnion Experian Equifax

Check your Credit Reports

Credit reporting agency used by 80% of banks

You can get one free report per year from their Web site

Some credit unions don’t use ChexSystems If you owe one bank money, you may not

be able to open account at another bank if they run report in ChexSystems

You can apply for account online to avoid embarrassment

ChexSystems

Location across from STA Plaza They offer secured loans for $250 or

$500 with no credit check and no fee at 5% interest. They are reported to Equifax as installment loan.

They offer two secured credit cards; to qualify, you can’t owe more than $500 to another bank. Annual fee is low ($12 or $18) and interest rate about12% or 18%.

Global Credit Union

$20 to join (one-time fee) After 6 months to a year, most

qualify for a regular credit card (it depends on your credit history)

Global Credit Union

Free Financial Help

How do I pick a stock? What are good investments? What’s a Roth IRA?

Your Questions

What things should I look for?

Choosing a Bank

What is equity? How do I choose a bank for a home

loan? Compare, compare, compare! Points vs. interest rate

Debt-to-income ratio? Does it make sense to refinance? Selling a home to limit taxes Tax Info Best place to invest that money?

Owning a Home

You have to pay extra for it Precise formula for calculating it is a

mystery, but experts estimate it is calculated this way: 35% based on your payment history 30% based on credit utilization 15% based on length of time you’ve had credit 10% based on new credit 10% based on the types of credit you currently

have

Your FICO Score

How do I estimate my power bill? Track your expenses for a few

months to develop a budget/see where your money goes

Consider using “money buckets” or envelope system

STCU Web Site

Budgeting

Limit the number of credit cards you have Clean up your score

If a company no longer exists or a bank has merged with another, bureaus are required to remove information because it is no longer verifiable

Try to keep debt utilization rate low (people with best credit scores borrow 7% or less of limit)

All 3 credit bureaus allow you to add a brief statement to report, which may help with employers

Strategies for Improving your Score

Credit repair offers Some dispute all of your accounts, but

after credit bureaus validate the accounts, they appear on your report again

Secured credit cards with monthly fees or application fees

Stay Away from These Things!!

How do you have paid items removed from your credit? Info

How do you build your credit? How can I get the best car loan deal? How is interest calculated? Stay

tuned! Teaching kids they can’t buy

everything Choosing lowest car insurance Considering bankruptcy

Miscellaneous

Moneysavingmom.com Clarkhoward.com http://balancetrack.org/

How to Teach Teenagers (& yourself) Good Web Sites

AM Radio Shows Clark Howard Dave Ramsey

Groceries Buy generic brands Consider low-cost protein sources like

beans Get the Wednesday ads and stock up on

good deals Use leftovers

Ways to Save Money

Clothes and furniture Buy second hand

Craigslist Consignment shops

Insurance Get several quotes Increase deductible

Check out books from the library Download music for free with Freegal

Ways to Save Money

If you spend 30 minutes clipping coupons and you save $10.00 on groceries, that’s like earning $20 an

hour tax-free!

Moneysavingmom.com Clarkhoward.com

Good Web Sites

AM Radio Shows Clark Howard Dave Ramsey

Why do some rich people pay lower tax rates than middle-class taxpayers? Capital gain taxes vs. ordinary income

Different tax structures in different states Income taxes versus sales taxes

Other questions

Use W-4 form worksheet to determine number of allowances

Income Taxes

Cost of using money You pay interest when you borrow

money You earn interest when you invest

money

High interest rates are good for savers, bad for borrowers.

Interest

First and second mortgages Refinances

Mortgages

Ties up your money for a period of time

Early withdrawal penalties, but higher rates than regular savings

No fee to purchase Doesn’t help build your credit Invest in bonus rate savings accounts

first

Certificates of Deposit (CDs)