Building Good Credit & Improving Your Credit Score

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  • Building Good Credit & Improving Your Credit Score

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareSome statistics to considerAverage credit card debt per household - $15,788 (May 2010) College loans alone now total almost $830 billion (said another way, $830,000,000,000!) Credit card penalties estimated at $20.5 billion in 2009National default rate on credit cards almost 28 percentHome foreclosure rate worse since Great Depression

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareObjectivesWhat is credit and why do we need it?Understand how to use debtDiscuss your credit reportUnderstand your credit scoreImproving your credit scoreManaging your cash flow better

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareWhat is credit and why do we need it? Allows us to make purchases that we cannot afford todayUsed by governments and businessesUsed by individualsour credit worthiness determines our cost and access to creditcould impact ability to rent housing, get insurance, or even being hired

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareUnderstanding how to use creditGood debtlow interest ratesmanageable paymentslong term benefits (examples: home, education, car)Bad debthigh interest rates (typically unsecured)doesnt fit into your budgetshort-term benefits/long pay off period! consider the repayment period posted on your credit card statement

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareSo should you use debt?Ask yourself how long it will take you to pay off the amount you borrow with the interest charges addedAsk yourself whether this spending provides a long-term benefit or a short-term benefitIf you expect a benefit, what is the return

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareYour credit reportLate payments Outstanding debtTotal amount of credit currently available to youPersonal judgments, bankruptcies, liens

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareThe Power of Your Credit Reports and ScoreWill determine if you will get a loanWill determine what interest rate you will payCan determine if you can rent an apartment or houseCan impact your job prospectsCan impact insurance rates

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareHow is a Credit Score Graded?

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    Chart1

    35

    30

    15

    10

    10

    FICO Score

    Sheet1

    FICO Score

    Payment History35

    Amount Owed30

    Length of Credit History15

    New Credit10

    Type of Credit Used10

    To resize chart data range, drag lower right corner of range.

  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareImproving Your Credit ScoreExperian, TransUnion, and Equifax will provide a copy of your credit report for free (1 per year)www.experian.comwww.transunion.comwww.equifax.comStagger your requests (1 company report every 4 months)Review all entries for errorsContact both credit bureau and company providing the incorrect information ASAP in writingExplain that you are disputing the information provided to the bureau.Provide supporting documentation (cancelled checks) Your dispute may not get immediate results Have a statement of your dispute included on your current credit reportRequest a new report showing your disputed statement for any inquiries into your credit report provided within the last 6 months

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareMake Smart Moves! Pay on Time! Get current and stay current Keep your balances below 30% of your credit limit Pay down debt Keep old credit relationshipsContact your creditor first Be prepared Suggest a payment plan you can handle Send letter to creditor detailing agreement Enclose copy of letter with each paymentImproving Your Credit Score (cont)

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareWorking with Collection AgenciesKnow your rights! (Fair Debt Collection Practices Act)Small possibility to negotiate with the collection agency to remove account from credit reportIf agreed upon, document this fact in Settlement Offer sent to collection agency Make payment after offer accepted

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareCredit Counseling Agencies and Debt Management Programs (DMPs)DMPs are available through credit counseling agencies. Can help with budgetingCan negotiate plans with creditorsYou pay CC with one check, they pay creditorsKeeps you organized, current, out of bankruptcy

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareCredit Counseling AgenciesBuyer Beware! US Federal Trade Commissionwww.ftc.gov/org US Federal Trade Commission www.ftc.gov/creditNational Federation for Credit Counselingwww.nfcc.org

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareRebuilding CreditUse secured credit cardsConsider store cardsUse cards, but keep spending lowPay on time!Be patient! This could take time- Chapter 7 (10 years) Chapter 13 (7 10 years)- Late payments 2 years- settlements/repos/foreclosures (7 years)

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareManaging Cash FlowWork on your budget!Identify problem spending areasPlug the spending holes!Re-direct money towards paying down your debtSet up equal payments plans Use on-line payment options

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareBuilding Good Credit and Improving Your Credit ScoreWrap up

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  • *06/29/2007 2:30pmeSlide - P4065 - LifeCareAdditional Resourceswww.ftc.gov/creditwww.nfcc.orgwww.annualcreditreport.comLifeCare800-873-4636www.lifecare.com

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  • Building Good Credit & Improving Your Credit Score

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