YOUR MONEY, YOUR FUTURE GAME OF LOANS

What is Credit? Types of Loans Credit Cards LEARNING GOALS What is Credit? Types of Loans Credit Cards

WHAT IS CREDIT? Your credit is your reputation as a borrower. Credit Score: A three digit number that summarizes this reputation. Credit Report: A detailed look at this reputation. Credit History: Your history of borrowing money.

CREDIT BASICS When is my credit checked? Loan Applications Renting an Apartment Applying for a Job Car Insurance Cell Phone Plans Student Loans

WHO TRACKS MY CREDIT? 3 Credit Bureaus track your credit: Credit Scores can range from 300-850

Length of Credit History CREDIT SCORE ACTIVITY Amounts Owed Credit Mix New Credit Payment History Length of Credit History

WHAT MAKES A CREDIT SCORE? A single late payment can lower your score as much at 100 points!

WHAT IS IN A CREDIT REPORT? Trade Lines: Your Credit Accounts Limits Types of accounts Credit Inquiries: Applications for loans Number of times your credit has been requested. Public Records and Collections Any outstanding payments.

WHAT IS IN A CREDIT REPORT? Check your credit report annually Free credit report that will NOT hurt your score at annualcreditreport.com Detect identity theft Errors are common! Call and have them removed.

ROAD TO GOOD CREDIT Pay your bill on time, every time! Any late payment will hurt your credit score…a lot! Use your credit card as a tool to build your credit. Only make purchases you will be able to pay off in 1-2 months. Never max out your cards! Keep your balance owed under 30% of your limit to increase your credit score. ($500 card limit, don’t carry a balance over $150) 500 x .30 = 150

ROAD TO GOOD CREDIT Don’t apply for too much debt at once. Opening too many credit cards or applying for too many loans in a short amount of time can hurt your score. Try to wait at least 6 months between opening accounts. Keep your account open. Once you pay off a card, if the annual fees and charges are low or $0, it may be a good idea to keep the account open in order to maintain a longer credit history (the longer the credit history, the better). Establishing good credit takes time and patience. Stick with it and keep making your payments on time, and it will show in your score.

TYPES OF LOANS Installment Loans Auto Loans Student Loans Personal Loans Mortgages Great for credit if you have no late payments Revolving Loans Credit Cards Lines of Credit Can be good for credit if paid off. Can be very dangerous! Secured Loan A loan that is backed up by your savings. Great way to build or rebuild credit

GOOD DEBT V. BAD DEBT Keep in mind that this is a guideline. Getting an education USUALLY leads to higher wages which means it is worth the investment. If you go $100,000 into debt and get a job that starts at $30,000, it may not pay off. Also, even though auto loans are technically considered bad debt because the car’s value depreciates over time, you may need to get a car loan if you cannot afford a vehicle but are using it for work.

CREDIT CARDS Interest Rate: Usually given as APR (Annual Percentage Rate) Interest usually compounds on a DAILY bases. Fixed vs. Variable APR May have different APRs Grace period of 1 month, then interest is charged on remaining balance. Ex: 21% interest /365 days per year, you get charged 0.057% interest everyday. This interest can earn interest! Will only charge you interest if you do not pay your balance in full at the end of the month. Most cards have variable rates which means they can change at any time, must give 45 days notice unless the increase is due to delinquency or default. *If you credit card company raises your interest rate, you can opt-out by sending a letter and keep paying original interest rate (although the company may cancel your card) Most cards have different APRs for things like regular purchases, cash advance and balance transfers.

CREDIT CARDS Minimum Payment: Now required to cover at least 1% of the principal Annual Fee: A fee to use credit card separate from interest (Tip: Don’t choose a card with one of these)

CREDIT BASICS That’s more than you originally owed! You decide to payoff your credit card. Your current balance is $5,000 at an interest rate of 21%. You stop using the card, but only pay the minimum payment of $100. It will take you 10 years to pay off your card! You will end up paying $6,986.30 in interest! That’s more than you originally owed!

GOTS AND NEEDS Please get an index card and write down: 2 things that you learned today 2 things that you would like to add to this class or still have questions about.