Credit Use & Debt Reduction with Power Pay

1. Credit Use &Debt Reduction with Power Pay Florida Saves 2020 “See Your Future Clearly”

2. What is Credit? Commits future assets or income to pay for something today You get cash, goods, or services now, and then pay for it later. Installment vs. Open-ended/Revolving

3. Pros and Cons to Using Credit Advantages Disadvantages

4. Credit Cards • The National Average on accounts assessed interest was 13.67% (Federal Reserve, 2011) • Credit card statement • Previous balance • Purchases • Cash advances • Payments • Finance charge • New balance • Minimum payment due and Deadline • Time to payoff the balance if only paying the minimum

5. The Credit Score Summarizes your creditworthiness based on your credit report Married couples have separate scores Impossible to have a perfect score unless you’ve had an account open for at least 15 years.

6. FICO SCORES • FICO scores provide a guide to future risk based on credit report data • The assumption = the higher the credit score, the lower the risk

7. Credit Score Fair Isaac Corp. – www.myfico.com

8. Where do Floridians Fall? Florida’s Average Credit Score 673 677 The National Average Credit Score As of 02/10/2010

9. Cost of Borrowing 673 Florida’s Average Credit Score

10. The Importance of a Positive Credit History • Ability to gain employment • Cost of Borrowing • Lower Interest Rates • Ability to get different types of loans • Renting • Utility and cable companies may check to start an account

11. The Cost of Credit ScoreTaking out a Home Mortgage of $200,000 for 30 years

12. Reports are based on information obtained by: TransUnion, Experian, and Equifax from your lenders The data is used for the scores Scores created by FICO from reporting agency information It is lowered with: Late payments Reaching/Exceeding Limit High Debt to Income Ratio New Credit Requests Report vs. Score

13. New Legislation—More accessible Credit Scores • Jan. 1, 2011—Risk Based Pricing Legislation • New disclosure rules regarding credit reports & scores. • Requires lender to provide applicant with credit score used to determine rate

14. How To Obtain Credit Report To request your free credit report go to annualcreditreport.com or call 1-877-322-8228 • Complete the request form and mail to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

15. How to Systematically Reduce Debt Six Step Process

16. Step 1: Stop Using Credit • Stop • Charging new items • Increases what you owe! • Taking on additional credit

17. Step 2: Assess the Problem • Understand what happened • Job loss? • Didn’t get pay raise? • House/apartment you can’t afford? • Health crisis? • No savings? • Divorce? • Spending problem? • Expect security from wrong sources • Failed communication • Take care of others

18. Step 3: Break Your Challenge Into Manageable Steps Pay off $8000 credit card in 3 years by paying $300 per month ($10 per day saved from eating out) • Define your goal: • Specific - $10 a day • Time frame - 3 to 5 years • Measurable - Your debt balance

19. Step 3: Break Your Challenge Into Manageable Steps Debt Free in Three Years

20. Step 4: Track Your Spending Receipt Envelope Calendar Notebook Checkbook Computer

21. Step 5: Find the Money Change your withholding Reduce your interest rates Advance Earned Income Credit Overtime Second job Break costly habits Look for ways to reduce flexible expenses. Examine ways to restructure or cut fixed expenses. Overtime or extra job Managing in Tough Times

22. Step 6: Fix Debt Problems Importance High interest rate Low balance Debt consolidation Negotiate and pay-off Debt Repayment Plan Methods

23. Step 6: Fix Debt Problems PowerPay with Free service online Compares all previous methods Time-line printed

24. www.powerpay.org Click Florida

25. Enter an Account Click Here When Finished

26. Click Here to See Savings Without Power Payments

27. Payment Calendar Click Here for Repayment Method

28. To Pay Extra or Schedule Extra Payments

29. What will Improve the Score? • No quick fixes – time is the factor • Use your credit but perhaps only use on specific purchases • Pay your bill on time, every time, for the full amount. • Keep balances low on credit cards (i.e. zero) • Pay off high interest first and fast

30. How Do I Stop Getting Offers! Tired of unsolicited credit and insurance mail? • You may request that consumer credit reporting companies exclude your name from lists for pre-approved, unsolicited credit and insurance offers. • To find out more, please call 1–888–5OPTOUT(1–888–567–8688).

31. Correcting Credit Report Errors • Get a copy of your credit report, verify information. • Highlight the error's • Write a letter of dispute that includes an explanation of the error's • Locate and copy • any additional information that can help establish that the item is an error • Send to the credit reporting agency • highlighted copy of your credit report, • your letter of dispute, • and a copy of any additional information

32. After You Dispute the Information • Ensure that the error is fixed • Your score will be affected if it stays on the report • If you cannot resolve a disputed item: • You have the right to attach a 100-word statement, • Explaining the nature of your disagreement free of charge • Statement will become part of your credit file • It will be included each time your credit file is accessed.

33. Take Home Message • Be responsible with credit • Self control • Protect yourself • Check credit report frequently • Pay more than the minimum • Be careful of debt consolidation & credit repair companies