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Establishing Credit & Using Credit Cards

University of Maine at Farmington Peer Financial Assistants; http://www.farmington.edu/admissions/ ; contact us at PFA@umf.maine.edu

Michael Angelides

on 11 February 2014

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Transcript of Establishing Credit & Using Credit Cards

The Path to Establishing Good Credit
& The Use of Credit Cards

Finances and the College Student
What We are Here to Learn about
The Road to Good Credit

On-Time Student Loan/Credit Card/Car Loan payments

On-time payments with all bills, including:
- Housing, Utilities, Medical bills
and Financed purchases

*Remember that to build credit you must USE credit.
Ways to Establish GOOD Credit
According to research conducted by Nellie Mae..

84% of undergraduates began the school year with a credit card in 2008
39% of freshmen arrived on campus with a credit card in hand
Only 15 percent of those freshmen had a zero balance; average debt freshmen were carrying was $939
Credit Cards and College Students
*Use it wisely to establish a good credit history

*Set up a system to keep track of spending (mint.com)

*Shop around at different banks; find a program that works well for you (rewards programs)

*Learn about introductory vs. fixed interest rates

*Only use a card for purchases you know you have (or will have) the money to pay back
What to do if you are thinking about getting a credit card:
Jeremiah Roper Kyle Manning
Leona Kluge-Edwards Silas Lunetta
Matt Towle
This presentation was brought
to you by the UMF Financial Literacy Outreach Program
What Credit is
The Importance of
building Credit
How is this relevant
to me as a college
Communication is the key to maintaining a positive credit file and may help to avoid student loan default. Paying bills in a timely manner is important to your future credit needs.

Be wary of "Pay Day Check Cashing", "Buy Here and Now Car Dealerships", etc. These lenders may solve your temporary problem, but do not always report your good payments to the credit bureau.
More on Establishing Credit
A survey conducted by Nellie Mae showed the average student credit card debt rose from $2,169 in 2004 to $3,173 in 2008

Final year students had an average balance of $4,100 up from $2,864 in 2004
Freshmen had an average balance of $939
Credit Card Debt
How to establish Credit
Credit, Credit Scores,
and Credit Reports

Close to 70 million Americans today are living with low credit or NO credit.

Future employers may pull up your credit score as a measure of reliability

Having a low credit score can impact getting an apartment, house, car, and even A JOB.

HIGHER IS BETTER: The higher the credit score, the more financial success.

The average credit score is somewhere between *600 and 750*
A bit about Credit
What can happen
An example of Credit Card abuse
Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use." PROMO ONLY, Nonprofit, No Copyright Infringement Intended, All Copyrights Belongs to the Owner
We know this seems overwhelming, but we're here to help you. We are all available for one on one appointments to discuss any questions you have about credit, credit cards, or any general questions about finance that you may Have!

Ways to contact us:
-Find us on Facebook (PAID/UMF Financial Outreach Group)
-Email pfa@umf.maine.edu
(personal @maine.edu accounts are good too)
-It's a small school, pull us aside during the day if you see us.
More Information
credit card photo
"If you don't have the credit, you can't live the American Dream"
-Pursuit of the Dream (Film)
So, what IS credit?
Before starting down the path of building credit,
it is important to first know what it is!
A Creditor is a bank, credit card company, or other entity that lends money with the expectation of getting back the original amount of money, plus interest.
Creditors charge interest on money loaned to
debtors as an incentive for lending.
The borrower (Credit Card holder, loan holder, etc.) who seeks increased buying power today to be paid back at a later date.
Interest is charged on the amount owed to the Creditor in order to pay for the service of being credited money.
Credit begins with an exchange
$Money loaned to debtor$
$Money returned to creditor
with added interest +$
That's interest-ing...
Interest is a fee a debtor must pay in exchange for use of borrowed funds

Interest is represented by a percentage of the total borrowed funds.

If you borrow $100 at 10% interest you must pay back
$100 (principle) + $10 (interest)= $110 new principle

Interest is charged by a regular period of time (often by month), so every period it takes to pay back the principle is a period that interest is charged
Credit is an assessment of an individual's
financial strength and repayment history.

A Credit Score is a number created to compare
you to other borrowers. It shows how much credit you are
receiving and how likely you are to repay on time.

A Credit report does just what it says: It brings up
your credit scores so you, and potential lenders, have accurate information about your credit.
who wants credit, anyway?
Remember, communication is key! If you are going to be late on a payment or have any questions, be sure to contact your creditor!
How is my credit determined?
Payment History
Amount of Use
Age of Credit
Variety of Accounts
New Credit/Inquiries
Get A Secured Credit Card!
Secured Credit Cards
-Give your bank $250 as collateral
(hence, secured)
-Your bank gives you a Credit Card with a limit of $250
-Use it to make small purchases you KNOW you can pay off each month
-With each on-time payment, you build credit (or, conversely diminish it with missed or late payments)
-After a year of building credit, give the bank back their credit card. You get your $250 back AND you've got a credit history.
Program Coordinator- Michael J. Angelides
When a Debtor spends money 'on credit'
they are spending money that isn't theirs.
Thus the Debtor now owes the Creditor.
Full transcript