Presentation on theme: "Credit – the ability to borrow money and pay it back later. Good credit means: Lenders want to loan money to you because you have a history of paying money."— Presentation transcript:
Credit – the ability to borrow money and pay it back later. Good credit means: Lenders want to loan money to you because you have a history of paying money back on time and in full. You get more money offered and lower interest rates.
What does it mean to have bad credit? Lenders dont want to loan you money because you dont pay your bills on time or in full. Less money will be offered to you and your interest rate will be higher.
How can you build good credit? Maintain a balanced check book – no bounced checks Consistently paying bills on time Having no criminal history Having a low number of credit cards Checking credit score to remove any errors
Building bad credit Missing a payment Not paying the minimum Having a criminal record Having too much available credit Filing for bankruptcy
Why is building a credit history important? If you plan on making big ticket purchases in your life. It will determine if you will get the loan, credit card, lease and what interest rate you will be charged.
You do not build a credit history if… You dont have any credit in your name. You pay cash for all major purchases You dont have loans Being late with a credit card or loan payment even once your credit report is impacted and will remain on your credit report for the next 7 years.
What is a credit report? A collection of facts about you that tells lenders whether youre a good risk to lend money to
What is part of your credit report? Every loan/credit card youve applied for or received Amount received Monthly payments If youve paid on time If other lenders have asked to see your credit report Your 3 digit FICO score Employment history Public records – criminal history
What will your credit report determine? If you get a loan The interest rate you are charged on the loan The better your credit score the lower your interest rate and the more money you will ultimately save.
Why is a good credit score important: To get a mortgage To finance home electronics/appliances To get a car loan To get a job
FICO Score – tells lenders in a single number how credit worthy you are >750 excellent credit 720-750 very good credit 660-720 Acceptable credit 620-660 uncertain credit <620risky credit http://www.youtube.com/watch?v=pAL7QTbay0o
Your credit score is determined by: 35% payment history – timely manner of paying bills. 30% outstanding debt – amount of current debt 15% credit history – amount of time you have held credit accounts and how often they are used 10% pursuit of new credit - # of accounts opened in a time period. 10% types of credit in use – credit cards, gas cards, store cards, loans