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MoneyWi$e: Rebuilding Good Credit
Rebuilding Good Credit
Money Wi$e– A joint financial education project of Consumer Action and Capital One Services, Inc.
© 2009
MoneyWi$e: Rebuilding Good Credit
By the end of the training you will understand:– How poor credit can prevent
you from doing certain things.
– That it is never too late to start to rebuild good credit.
– What information on a credit report is seen as negative.
– Some ways to improve one’s credit.
MoneyWi$e: Rebuilding Good Credit
About the Rebuilding Good Credit training
There will be two sessions of two hours each.
Each two-hour session will include a 15-minute break.
MoneyWi$e: Rebuilding Good Credit
In participants’ folders
‘Improve Your Credit’ (brochure) Evaluating Financial Services Ads (classroom activity)
Debt Payments Worksheet (take-home)
Are You Damaging Your Credit questionnaire (take-home)
Compare Three Secured Credit Card Offers (classroom activity)
Evaluation of the MoneyWi$e Rebuilding Good Credit Seminar
MoneyWi$e: Rebuilding Good Credit
Rebuilding Good Credit
Session one (two hours)
MoneyWi$e: Rebuilding Good Credit
Welcome
Let’s introduce ourselves. What do you hope to get out of this training?
MoneyWi$e: Rebuilding Good Credit
‘Improve Your Credit’ A MoneyWi$e brochure
Look in your folder for the brochure titled ‘Improve Your Credit.’
Take a couple minutes to review the brochure.
MoneyWi$e: Rebuilding Good Credit
Damaged credit
What does bad credit mean to you?
MoneyWi$e: Rebuilding Good Credit
How can bad credit limit your life?
Access to credit is essential for buying a home or financing a car.
MoneyWi$e: Rebuilding Good Credit
Poor credit may hinder your ability to:
get a credit card. rent an apartment. start phone service. buy life insurance. get a job.
MoneyWi$e: Rebuilding Good Credit
How do you know if you have bad credit?
– Many people first realize they have credit problems when they are turned down for a loan, a job or a rental dwelling.
MoneyWi$e: Rebuilding Good Credit
Credit reports & credit bureaus
MoneyWi$e: Rebuilding Good Credit
How do companies know if you have bad credit?
Information about your credit is kept by credit reporting bureaus.
This information on file about you is called a credit report.
MoneyWi$e: Rebuilding Good Credit
It’s your right to see a copy of your credit report You can get a free copy of
your credit reports from the 3 major reporting bureaus each year at:www.annualcreditreport.com
It is also free if you’ve been turned down for credit.
If not, there is a charge of about $10 per copy.
MoneyWi$e: Rebuilding Good Credit
What is a credit report?
A record of your past and present loans and credit accounts.
MoneyWi$e: Rebuilding Good Credit
What’s in your credit report?
Information about your past and current...– credit cards– mortgages– car loans.
Your credit report has information about credit accounts you’ve had in the past seven years (or the past 10 years if you filed for bankruptcy).
MoneyWi$e: Rebuilding Good Credit
Remember
If you have been denied credit in the past 60 days, you can get a free copy of your credit report.
You have the right to correct errors in your credit report.
You can’t remove accurate information in your credit report.
MoneyWi$e: Rebuilding Good Credit
Credit reporting bureaus
There are three major credit reporting bureaus: – Equifax– Experian– TransUnion
The contact information for the credit bureaus is in your ‘Improve Your Credit’ brochure.
MoneyWi$e: Rebuilding Good Credit
Take a break
Please come back in 15 minutes
MoneyWi$e: Rebuilding Good Credit
Credit repair offers &debt consolidation
MoneyWi$e: Rebuilding Good Credit
Do credit repair companies help fix bad credit? Everything a credit repair
company can do legally, you can do yourself
Credit repair companies charge money—sometimes lots of money
No one can legally remove accurate negative information from a credit report.
If you decide to work with a company, research its offer carefully.
MoneyWi$e: Rebuilding Good Credit
Can you get a new, clean personal identity number? No. Companies that promise
you a new Social Security or tax ID number are breaking the law.
They tell you that you can apply for a special business tax identification number called an Employer Identification Number.
Employer Identification Numbers are similar to Social Security Numbers, except they’re for businesses.
MoneyWi$e: Rebuilding Good Credit
Remember
It’s a federal crime to make any false statements on a loan or credit application.
MoneyWi$e: Rebuilding Good Credit
Loan consolidation
Can you consolidate all your loans together under a new loan?– Debt consolidation loans could put you deeper into debt.
Borrowing money from relatives or friends can be a great way to consolidate your debts.
MoneyWi$e: Rebuilding Good Credit
A home equity loan might be a solution.
If you are a homeowner and have equity in your home, you can take out a home equity loan.– The interest may be tax deductible.
Approach any loan secured by your home with caution. – If you fail to repay the loan, you could lose your home.
MoneyWi$e: Rebuilding Good Credit
Let’s evaluate some ads
Class activity– Take out the activity sheet from your folders.
– Read the ads carefully. Do you believe they offer a legitimate service?
– Jot down your reasons to share with the class.
MoneyWi$e: Rebuilding Good Credit
Evaluating ads for financial services
Legitimate lenders never ‘guarantee’ that you can get a loan or a credit card.
It’s against the law to ask you to pay for a loan before you are approved.
Any promise to create a new identity is a scam.
MoneyWi$e: Rebuilding Good Credit
Remember
Legitimate ads do not make outrageous, unbelievable claims.– Web sites that end in “.org” (DOT ORG) are owned by not-for-profit organizations.
MoneyWi$e: Rebuilding Good Credit
Remember
‘900’ numbers are a red flag for fraud– When you call a ‘900’ number you will be charged a lot of money on your phone bill.
MoneyWi$e: Rebuilding Good Credit
Collection agencies
If you don’t pay a debt, the company you owe money to might hire a collection agency.– Collection agencies get a cut of the debts they collect.
MoneyWi$e: Rebuilding Good Credit
What should you do if a collection agency calls?
Respond immediately if you don’t agree that you owe money.
Ask the collection agency to prove that you owe the money.– A collection agency can’t try to collect the debt while its validity is being checked out.
MoneyWi$e: Rebuilding Good Credit
Collection agencies must provide you with:
The amount of the debt. The name of the original creditor.
Notification that you have 30 days to dispute the debt.
MoneyWi$e: Rebuilding Good Credit
Stop hassling me!
Legally, you can ask a collection agency to back off.
Put it in writing.– You are still responsible for paying legitimate debts.
– You may be losing an opportunity to explain your situation and resolve the debt.
MoneyWi$e: Rebuilding Good Credit
Can collection agencies call your neighbors?
– Collectors may contact any third party (such as your neighbor, relative or co-worker) only one time.
– They can only call to confirm or correct information about where you are.
– They can’t tell the third party that you owe a debt.
MoneyWi$e: Rebuilding Good Credit
Let’s wrap-up the first session
Please read the ‘Improve Your Credit’ brochure before the next session. – Next time we will go over secured credit cards, credit counseling, bankruptcy and how you can keep your credit in good shape.
MoneyWi$e: Rebuilding Good Credit
Here’s a helpful worksheet
You’ll find a worksheet titled ‘Debt Payments Classroom Activity’ in your folders.
It’s for you to take home and fill out in private. – Attached to it you’ll find a questionnaire to help you assess your risk of damaged credit.
MoneyWi$e: Rebuilding Good Credit
Thank you ...
for taking part in the MoneyWi$e Rebuilding Good Credit training
– MoneyWi$e A joint financial education project of Consumer Action and Capital One.
MoneyWi$e: Rebuilding Good Credit
Rebuilding Good Credit
Session Two (two hours)
MoneyWi$e: Rebuilding Good Credit
Welcome
It’s great to see you again. – Have you had any thoughts about the first session that you’d like to share?
MoneyWi$e: Rebuilding Good Credit
Rebuilding Good Credit
It’s never too late to start getting your credit back on track.
MoneyWi$e: Rebuilding Good Credit
How long will it take to rebuild good credit?
It takes time and patience to establish good credit.
Each person’s situation is different and lenders have wide-ranging requirements.
MoneyWi$e: Rebuilding Good Credit
How much damage has been done to your credit?
A few late payments might be downplayed if you pay on time for several months.
A default or bankruptcy may be more difficult to put behind you.
MoneyWi$e: Rebuilding Good Credit
Why should I even try?
Access to credit is essential for:
Buying a home. Financing a car.
Poor credit may hinder your ability to:
Get a credit card. Rent an apartment. Start phone service. Buy life insurance. Get a new job.
MoneyWi$e: Rebuilding Good Credit
What are some ways to rebuild good credit?
Pay your existing credit accounts on time.
Apply for a credit card or small loan from:– Your bank.– Your credit union.– A local department store.
MoneyWi$e: Rebuilding Good Credit
Find a co-signer
Ask a relative or friend with good credit to co-sign your credit application. – After a year of good payments, you should receive credit card offers on your own.
– Make sure to close the co-signed account to absolve the co-signer of responsibility.
MoneyWi$e: Rebuilding Good Credit
Get a secured credit card
– Secured credit cards are backed by money you deposit and keep in a bank account.
– If you don’t pay off your credit card bill, the money in your account will be used to cover that debt.
– Even people with poor credit may be able to get a secured Visa or MasterCard.
MoneyWi$e: Rebuilding Good Credit
Secured credit cards can help you repair your credit. Make sure the credit card
company will report your payments to credit bureaus.
MoneyWi$e: Rebuilding Good Credit
How you use your secured credit card is important. Show that you can handle
credit responsibly by using your card to make a few purchases.
Make all payments before the due date and pay your balance in full each month.
After one year, apply for a regular, unsecured card.
MoneyWi$e: Rebuilding Good Credit
Credit limits on secured cards
The maximum amount you can charge is usually equal to the amount of your deposit. – Look for a card that will pay interest on your deposit.
MoneyWi$e: Rebuilding Good Credit
Secured card fees
What’s reasonable? Secured cards always have annual fees.
Avoid high up-front fees.
MoneyWi$e: Rebuilding Good Credit
Comparing secured credit card offers
Class activity
Here are three secured credit card offers.– Decide which one seems like the best deal.
MoneyWi$e: Rebuilding Good Credit
Let’s talk about your conclusions
Did your responses jibe with the conclusions on the back?
MoneyWi$e: Rebuilding Good Credit
Let’s take a break
Please come back in 15 minutes.
MoneyWi$e: Rebuilding Good Credit
Credit counseling, bankruptcy
MoneyWi$e: Rebuilding Good Credit
Credit counseling
Credit counseling is a service that helps people get out of debt.
Services offered– Budgeting & money management– Debt management programs
MoneyWi$e: Rebuilding Good Credit
Most credit counseling organizations …
negotiate directly with creditors on your behalf in order to lower interest rates and waive accumulated late fees.
Find a credit counseling agency near you by calling 800-388-2227.
MoneyWi$e: Rebuilding Good Credit
Bankruptcy
Before you consider filing bankruptcy:– Try to work out payment programs with your creditors or;
– Enter a debt management counseling program.
MoneyWi$e: Rebuilding Good Credit
Two types of bankruptcy
Chapter 7 (straight or liquidation bankruptcy)
Chapter 13 (wage earner or repayment plan)
MoneyWi$e: Rebuilding Good Credit
Bankruptcy
Remains on your credit report for 10 years.
MoneyWi$e: Rebuilding Good Credit
Sometimes bankruptcy cannot be avoided
Common reasons that people declare bankruptcy– Large medical bills.– Seriously over-extended credit.
– Lack of adequate insurance after a catastrophe.
– Divorce and marital problems.
MoneyWi$e: Rebuilding Good Credit
You need an attorney to file bankruptcy
Hiring an attorney protects your rights in bankruptcy court
Make sure the attorney you retain is an expert in bankruptcy
Don’t just look in the Yellow Pages to find an attorney
MoneyWi$e: Rebuilding Good Credit
Keeping your good credit
Review your credit report at least once a year.
Potentially negative information on your credit report includes:– Late payments on credit cards and loans.
– Unpaid debts.– Bankruptcy.
MoneyWi$e: Rebuilding Good Credit
Credit fraud is on the rise
Check your credit report carefully to ensure that:– All the debts listed belong to you.
– A criminal hasn’t set up credit accounts under your name.
If you find unauthorized or fraudulent activity, notify the credit bureaus right away.
MoneyWi$e: Rebuilding Good Credit
Good credit is about:
Meeting your responsibilities.
Not taking on more than you can handle.
MoneyWi$e: Rebuilding Good Credit
How you can protect your credit
Order copies of your credit report once a year to check for errors.
Pay your bills on time. Apply only for credit that you really need.
MoneyWi$e: Rebuilding Good Credit
Joint account liability
If you divorce or separate, make sure that joint accounts are closed.
You are liable for paying joint account transactions, no matter who makes the charges.
MoneyWi$e: Rebuilding Good Credit
Questions and Answers
Let’s open the floor to questions.
MoneyWi$e: Rebuilding Good Credit
Wrap-up and evaluation
Let’s talk about how this course compared with your expectations.
MoneyWi$e: Rebuilding Good Credit
Congratulations!
You’ve completed the MoneyWi$e Rebuilding Good Credit training.
Good luck!