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Make Your Credit Work for You

TRiO Student Support Services- Financial Literacy Part 2
by

Herlinda Ruvalcaba

on 31 October 2013

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Transcript of Make Your Credit Work for You

Credit Score
FICO Score
What makes up my Score
Credit Report & FICO Score
Improving Score
Your Future
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Brought to you by:
Presenter
Myths about Credit
Making Your Credit Work for You
Future Advantages
- Save money by qualifying for low interest rates on credit cards and loans

- Higher chance of credit card/loan approval

- Negotiating power for lower interest rates

- Approval for higher limits

- Approval for rental homes/apartments

- Better care insurance rates

- Avoid security deposits on utilities
What to keep in mind
Let's Test Your Credit IQ

Build Credit History

Online Purchases

Don't have to carry large amounts of cash

Buy now, pay later
TRiO Student Support Services
Lets talk Interest
I'll Pay it off when I get a job
Minimum Payments will soon pay off my debt.
I will only use my credit Card for emergencies
I have a really low interest rate, so its not costing me much.
I will always be able to pay off entire credit card balance.
APR
(Annual Percentage Rate)
TRiO Student Support Services
Herlinda Ruvalcaba
Fact: Americans are loaded with credit debt. The average household has $15,956. The average undergrad carries $3,173 of credit debt (Now include student loans)
Heritage University
Program Assistant
Fact: Paying only the minimum payment will barely cover the interest you owe. Which means very little is going towards the principal.
Fact: Making the minimum payment will barely cover the interest you owe. Which means more of your payment is going towards interest instead of principal.
Fact: Credit cards are rarely used for actual emergencies. More often than not, credit cards are used for non-emergency purchases. Since credit cards are easy to use its easy to run up debt and get more cards.
Fact: Credit card companies lure in customers through introductory rates. After about 3 months then the interest rate increases
Fact: Credit Card companies prefer that you do not pay off your balance. Why??? They earn more from the interest you pay to borrow money from them. Credit card companies try to "reward" cardholders to keep you from paying off your balance or by increasing your credit limit.
Advantages of Credit
What is the average credit card debt per household?
Which of the following cards is most circulated in the US
Master Card, Visa, American Express, or Discover?
What is the average credit card debt of undergraduates?
What percentage of the student population as credit cards?
What percentage of undergraduates have no credit history?
What percentage of the population has at least two credit cards?
How many credit card solicitations are mailed each year nationwide?
What is the average amount of credit cards one cardholder has?
What is the average interest rate for credit cards in the US?
What type of expenses are most paid by credit cards?
Congrats to the winning team!!! Now lets learn a little more
Terms you should know
Annual Fee:
An annual fee charged by a credit card company for the use of a card.
Annual

Percentage Rate (APR):
The annual percentage rate (APR) is the interest rate charged on credit card balances expressed in a standardized, annualized way. This rate is applied each month that an outstanding balance is present.
Grace Period:
The grace period is the time during which you are allowed to pay your credit card bill without having to pay interest. The Credit CARD Act of 2009 requires that if issuers have grace periods, they must last at least 21 days. The grace period usually applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers; instead, interest charges start right away.
Credit line
A credit line is the amount of money that can be charged to a credit card account. The size of a credit line, and how much of it has been borrowed, have a large influence on consumer credit scores. Low credit utilization -- that is, a credit line on which little has been borrowed -- leads to a higher credit score. Credit line is also known as a credit limit.
Credit line
A credit line is the amount of money that can be charged to a credit card account. The size of a credit line, and how much of it has been borrowed, have a large influence on consumer credit scores. Low credit utilization -- that is, a credit line on which little has been borrowed -- leads to a higher credit score. Credit line is also known as a credit limit.
Variable interest rate
With variable-rate cards, your APR (annual percentage rate) can change.
Fixed rate (or fixed APR)
An annual percentage rate that does not change throughout the year, unlike an introductory APR that changes after a specific period of time. The credit card reform law President Obama signed in May 2009 changed the rules for cards advertised as having fixed rates. Previously, fixed rates could be changed with as little as 15 days' notice. Under the reform law, fixed rates must remain fixed for at least a year, and then can be raised with 45 days' notice to consumer
Balance
On a credit card account or credit line, the balance is the amount owed. When a consumer does not pay the monthly amount owed in full, and carries a balance over a monthly billing period, the card issuer charges the consumer for the privilege of borrowing, in an amount set by the card's interest rate.
Minimum Payment:
The minimum payment is the lowest amount of money that you are required to pay on your credit card statement each month. See your credit card "terms and conditions" document to see how your credit card's minimum payment is calculated.
Terms and Conditions:
Terms and conditions is the common name for the document in which credit card issuers describe in detail their practices. After a consumer applies for a credit card and receives it in the mail, the first use of the card turns the terms and conditions into a legal contract.
http://www.bankrate.com/credit-cards.aspx
- Have only one or two major credit cards

- Try to stay away from store cards.

-Send payments on time!!!! To avoid late fees and also create a good credit payment history

-Pay off balances each month

-Use card ONLY for emergencies

-Keep receipts to check against monthly statement

-Avoid using your cards for tuition, books an other large expenses for school
Do your research
Rules to Live by:
Why making the minimum payment doesn't work
http://www.bankrate.com/calculators/credit-cards/minimum-payment-calculator.aspx
How long will it take me to pay it off?
http://www.federalreserve.gov/creditcardcalculator/
http://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx
Pay it off
https://www.annualcreditreport.com/cra/index.jsp
Equifax, Experian and TransUnion
- Named for Fair, Isaac and Company, business that develops the credit scoring formulas

-FICO scores are used by lenders to asses the risk they're taking by lending you money

-Scores range from 300-850 (bad to great), Median Score is 725

-Your score can affect how much money a lender will lend you and at what terms (interest rate)

-FICO Scores are calculated using information in your credit report
Get Your Credit Report:
Information on Your Credit Report:
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Your Identity
Name, Address, Date of Birth, SSN
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Your Existing Credit
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Credit Card Accounts
Car Loans
Student Loans
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Your Public Record
Any Court Judgements Against You
Tax Liens on your property
Filed Bankruptcy
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Inquires About You
List of companies or persons that have requested your report
- Pay ALL bills on time

- Pay delinquent Bills

- Lower your total credit card debt

- Keep ratio of outstanding balance to total available credit low

- Pay off cards that you are closest to your credit limit

- Pay off highest interest-rate cards first

- Don't close unused credit cards (short-term strategy)

- Don't open new credit cards to increase available credit

- Apply for credit only when you need it (to many inquiries in report show that you are looking for more)
Full transcript