Credit klein version

“Better than a Bank”

Bell Ringer Get out a full sheet of paper

On the back of that white paper:1.Who in this room would you be willing to

loan $50 to?2.What are some questions you would ask

them before loaning the money?


BR Get out a full

sheet of paper

Why is this lady sad?

“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union

Jackie ValdezFinancial Education Specialist

Marketing Department

Credit: Buy Now Pay Later


Overview of CreditTo use credit wisely you need to

understandthese key credit terms.

_____________is the original amount of money borrowed.

_____________ is what you get when someone is willing to loan you money.

_____________ is the amount you pay to use a financial institution’s money.

CREDIT

INTEREST

PRINCIPLE


Types of Credit

Credit cards Installment loans Student loans Mortgages


The Benefits of Using Credit

Access to cash in an emergency Ability to use it now and pay

later Safety and convenience Builds a good credit report score


Sample Loan Application PINK – Primary Applicant

Number of years at address

Length of Employment WHITE – Assets

Type of Bank or CreditUnion Accounts

Vehicles or Real Estateowned

BLUE – Liabilities Mortgage or Rent Loans, credit cards


The Five C’s of Credit

Capacity – your ability to pay Character – your good name Collateral – using an item to secure

the loan, such as your car. Capital- amount of assets you own Conditions- what are the economic

conditions

www.tucsonfcu.com Tucson Federal Credit Union


Credit Reports

Your credit report = Your credit history

Lenders review credit reports Delinquent payments Your credit scorecard History for 7-10 years Fair Isaac Company (FICO scoring)


What is Credit Scoring?

A credit score reflects your personal financial history and

ability to pay debts. It is represented as a number

between 300-850.


How Often to Check Your Credit Report and Score

At least once a year Actually free: annualcreditreport.com Three major credit reporting

agencies:Equifax, www.equifax.com,

800-685-1111Experian, www.experian.com,

888-397-3742TransUnion, www.transunion.com,

800-916-8800


John Q. Public

Age 27 Member with TFCU since 1998 Opened savings & checking

account at age 18 Goes to work everyday Currently pays his bills on time Interested in a home loan



How to Build a Good Credit Score

On time payments. Keep balances low.

Use less than 30% of your credit limit

Apply for new credit only as needed

Maintain a long history with 1-2 lenders

Close unneeded accounts Start with a secured loan


www.myfico.com


$300,000 mortgage

30 years

FICO Score Interest Rate Monthly Payment

760-850 6.168% $1,831

700-759 6.391% $1,875

660-699 6.677% $1,931

620-659 7.492% $2,096

580-619 8.383% $2,282

500-579 9.269% $2,472


Secured Loan Example

Apply for $500 loan Use savings as

collateral Make on-time payments Builds credit history

$0

$100

$200

$300

$400

$500

$600

Savings 11%

Savings Principle Interest


Getting Your “First” Credit Card


A Credit Card is Serious Business

Legally obligated To repay the loan & interest on

time Your personal financial

responsibilities Failure uphold the agreement =

legal actionagainst you for recovery

Bankruptcy should be your lastoption – Seek legal advice first


You Buy Some “Stuff”


$1,000 $1,000

$345

$865

$0

$500

$1,000

$1,500

$2,000

11% 18%

Interest

Principal

The Cost of Credit


Monthly Paymentsat 11% APR

$1,000 $1,000

$345$142

$0$200$400$600$800

$1,000$1,200$1,400$1,600

$20 Pmts $40 Pmts

Interest

Principal


Things to Keep in Mind

One card is probably enough

Keep a low credit limit

Pay-off balance each month

Make on-time payments

Try to use the card for emergencies

Never let others use your card

Record credit card use

Create a budget


Ten Questions to Ask Before You Sign

1. Do I really need thisright now?

2. Can I qualify for credit?

3. What is the Interest rate?

4. Are there additional fees?

5. How much is themonthly payment?

6. Can I afford the monthly payments?

7. What will happen if I do not make on-time payments?

8. What will be the extra cost of using credit?

9. What will I have to give up to pay for it?

10. Is using credit worth it?



The Five C’s of Credit

Capacity – your ability to pay Character – your good name Collateral – using an item to secure

the loan, such as your car. Capital- amount of assets you own Conditions- what are the economic

conditions




Overview of CreditTo use credit wisely you need to

understandthese key credit terms.

_____________is the original amount of money borrowed.

_____________ is what you get when someone is willing to loan you money.

_____________ is the amount you pay to use a financial institution’s money.

CREDIT

INTEREST

PRINCIPLE


Questions

Economy & Finance

Credit klein version