Chapter 26 how to get and keep credit
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Chapter 26 – How to Get and Keep Credit. What I need to know…. Developing a Credit History. Without a History Banks will not loan you money and/or You will pay very high interest rates Ways to begin developing a Credit History Open a Checking and Savings Account Get a Debit Card

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Chapter 26 – How to Get and Keep Credit

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Chapter 26 how to get and keep credit

Chapter 26 –How to Get and Keep Credit

What I need to know…


Developing a credit history

Developing a Credit History

  • Without a History

    • Banks will not loan you money and/or

    • You will pay very high interest rates

  • Ways to begin developing a Credit History

    • Open a Checking and Savings Account

    • Get a Debit Card

    • Apply for a Secured Credit Card

      • Charge Small balances and pay bill in full each month

        NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…


Developing a credit history1

Developing a Credit History

  • You will have a good chance of getting a car loan, mortgage or a personal loan

  • BEFORE APPLYING FOR A LOAN

    • Check your Credit Report – fix discrepancies

    • Bring the following when applying for a loan:

      • PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of income

      • PROOF OF IDENTITY: Social Security Number and Driver’s License

    • If they feel you are not credit worthy you may need a Cosigner


Credit worthy 3 c s of credit

CREDIT WORTHY – 3 C’s of CREDIT

  • Character: does the lender think you are honest, reliable, and lead a stable life

    • Have you used credit before?

    • Do you pay bills on time?

    • How long have you lived at your present address?

    • How long have you been working at your present job?

    • What is your credit score?


Credit worthy 3 c s of credit1

CREDIT WORTHY – 3 C’s of CREDIT

  • Capital: do you have assets such as real estate, personal property, investments, or savings that the lender can take if you do not repay the loan

    • What property do you own that can secure the loan?

    • Do you have a savings account? How much?

    • Do you have any investments?


Credit worthy 3 c s of credit2

CREDIT WORTHY – 3 C’s of CREDIT

  • CAPACITY: do you have enough income to pay the loan

    • Do you have a steady job? What is your salary?

    • How many other loan payments do you have?

    • What are your current living expenses? (Budget)

    • What are your current debts?

    • How many dependents do you have?


What s your fico score

What’s Your FICO SCORE?

  • Credit Score –

  • CREDIT SCORES – Vary from different lenders

    • Range from 300 – 850

    • Good 600-750

    • Excellent – 700 +

  • What Impacts your Score?

    • Late Payments

    • Types of credit

      • Loans (cars/Home), Credit Cards, Store Loans (Best Buy/Ashley)

    • Number of loans/credit cards

    • TOTAL DEBT

    • Public Records – Bankruptcy, Judgments


Credit scores

Credit Scores

  • Things not considered in your Score

    • Race, religion, national origin, sex, or marital status

    • Age

    • Where you live

    • Occupation, title, employer, on Public Assistance

      • LENDERS LOOK AT THESE BUT IT DOES NOT AFFECT SCORE

  • Consequences of Scores

    • Low score will keep you from getting a loan and/or paying a higher interest rate


Comparing credit cards

Comparing Credit Cards

  • List the different features of credit cards that you may need to compare…

  • Why do some credit cards charge and Annual Fee?

  • Most important if:

    • Pay balance off each month?

    • Don’t pay balance off

    • Use you credit card to get cash

    • Don’t keep good track of your checking account balance


Facts about loans and mortgages

Facts about loans and mortgages

  • Most are secured

    • Backed by collateral

  • Interest Rates/Finance Charges

    • Variable

    • Fixed

  • Most need a down payment

  • A loan’s Principal

    • Amount Financed

  • Cosigner

    • Needed with poor credit history or no credit history

    • Someone with good credit also signs the loan

      • If you default…they have to pay


Keeping a healthy credit record

Keeping a Healthy Credit Record

CLICK HERE FOR VIDEO

  • Pay Bills on time

  • Don’t carry more credit cards than you need

  • Stay within your means – no more than 20% of your Income for consumer Credit

  • Check your Credit Report yearly

  • Correct Errors on your Report


Signs of credit trouble

Signs of Credit Trouble

  • Can only pay minimum payment

  • Can’t pay bills on time

  • Getting calls from Creditors

  • Garnishment of Wages

  • Repossess


How much debt can you afford

How Much Debt can you Afford?

  • Never borrow more than 20% of your Annual net income

    • If you make $400 a month

      • 400 X 12 +4800

      • 4800 *.2 =$960 .

      • Outstanding Debt not including housing

    • Monthly payments shouldn’t exceed

      • More tan 10% of your monthly take home

      • $400 a month - $40 monthly debt payment


Debt to income ratio

Debt-to-income ratio

  • Your debt-to-income ratio usually gives a clear picture of your financial well-being.

  • To calculate it

    • add up your fixed monthly expenses, such as rent, mortgage or credit card payments (do not include expenses like utilities or groceries).

  • Then divide the total by your monthly take-home pay (net pay)

  • It should not be more than 28%


Identity theft

IDENTITY THEFT

Deter...Detect…Defend


Credit reports

Credit Reports


Free credit report com

Free Credit Report . Com

  • http://www.youtube.com/watch?v=YzkBhfbwRkg

    Annual Credit Report.com

  • http://www.youtube.com/watch?v=4GC9dobzEKc

    Which one’s for you??????


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