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What’s a Credit Score? And how to use credit wisely.

Published byEdith Lewis Modified over 6 years ago

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Presentation on theme: "What’s a Credit Score? And how to use credit wisely."— Presentation transcript:

1 What’s a Credit Score? And how to use credit wisely

2 WACRAO/WASFAA Joint Conference
Objectives Credit report basics Build a positive credit history Request and read your credit report Fraud and identity theft prevention tips Recognize the warning signs of too much debt WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

3 What’s in a Credit Report?
Identifying Information Name, Social Security number, date of birth, address Creditors and Payment History Positive and negative Bankruptcies, Judgments, Liens, Lawsuits Inquiries You Initiated Loan and credit applications (excluding credit card solicitations) Employment Information WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

4 What’s Not in a Credit Report
Income Checking account activity Cell phone bills Medical history Race, gender, religion or national origin Driving record Declined loan applications Criminal records WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

5 What Makes Up Your Credit Score?
WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

6 What Does My Score Represent?
Risk Your score represents your potential credit risk. The higher your score, the less credit risk you pose. WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

7 What’s a Good Credit Score?
Scores range from Average score in U.S. is 673 is considered “good” WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

8 Building Your Credit History – Starting out
Get a secured credit line Pay all bills on time Limit the number of open credit lines Keep balances low Be selective about what you apply for Have a mix of credit (credit cards, mortgage, auto loans, etc.) WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

9 Maintaining/Improving your Credit History
Balance to limit ratios Use lines of credit Big purchases Closing unused cards WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

10 What Does Your Score Mean to Others?
Financial Institutions Difference in interest rates, terms and amounts approved Employers Landlords Utilities Cell phones, electric, etc. Insurance Companies WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

11 30-Year Fixed Mortgage Rates $216,000 Principal
Credit Score Interest Rate Monthly Payment TOTAL Interest 3.49% $970 $133,047 4.10% $1,045 $160,096 5.08% $1,170 $205,290 WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

12 Reviewing Your Credit Report
Retrieve your free credit report at annualcreditreport.com One from each bureau: TransUnion, Experian and Equifax Check your credit score for free Creditkarma.com Your financial institution Your credit card company WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

13 WACRAO/WASFAA Joint Conference
Credit Report Errors Contact the credit bureau to begin a dispute Credit bureau has 30 days to investigate, notify you of results and delete inaccurate or unverifiable information If you disagree with investigation results, write a consumer statement and have it added to your file to provide an explanation (i.e., out of work, medical, etc.) WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

14 WACRAO/WASFAA Joint Conference
Identity Theft Every 3 seconds someone’s Identity is stolen…. Who is most at risk? Children are target 35x more than adults People with social media profiles Smartphone owners College students Deceased people WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

15 WACRAO/WASFAA Joint Conference
Protect Your Money Protect your PIN and account numbers Do not carry your Social Security number Keep operating system up to date, be wary of attachments Strengthen online passwords Use safe websites: https, padlock symbol Never respond to telephone, text or online requests for personal information Check bank statements, credit reports for accuracy WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

16 If You Only Pay the Minimum….
Amount Owed Pay-Off Period Interest Costs Actual Cost $1,800 18 years $3,263 $5,063 $3,900 30 years $9,563 $13,463 Interest Rate: % Payment: $20 or 2% of the balance WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

17 Warning Signs of Too Much Debt
Minimum payments At or near your credit limit Don’t know amount you owe on all debts Use cash advances to pay bills Denied credit or credit purchase Calls from collection agencies Lie to family about spending Most income going toward debt WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

18 WACRAO/WASFAA Joint Conference
Pay Down Your Debt Two schools of thought: Lowest balance accounts first Highest interest rate accounts first Continue applying payments toward other accounts once debts are paid off Send payments to savings when debts are paid WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

19 Canceling Unused Cards
When to cancel High credit lines you don’t use Newer lines you don’t use How to cancel Write a letter to the issuer and request that they notify the credit bureaus Ask the creditor to send confirmation WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

20 WACRAO/WASFAA Joint Conference
Unable to Pay? Contact creditors to work out a payment plan Stop using credit cards. Do not add new debt. Be proactive and don’t wait to act WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

21 WACRAO/WASFAA Joint Conference
Pop Quiz You should keep your revolving balances below the following percentage, so your credit report is not negatively impacted: 75% 50% 30% 10% WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

22 WACRAO/WASFAA Joint Conference
Pop Quiz When will multiple inquires (rate shopping) when you’re shopping around for a specific loan lower your credit score? A) Each time you make an inquiry B) Never within a 30-day window C) Only when you’ve made at least 5 inquiries D) Never WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

23 WACRAO/WASFAA Joint Conference
Pop Quiz What percentage of credit reports contain errors? A) 80% B) 10% C) 35% D) 50% WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

24 WACRAO/WASFAA Joint Conference
Resources Your financial institution Annualcreditreport.com Federal Trade Commission Credit Bureaus WACRAO/WASFAA Joint Conference Milwaukee, WI November 2-4, 2016

25 Sherry Peplinski UW Credit Union speplinski@uwcu.org
Questions? Thank you! Sherry Peplinski UW Credit Union

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