1. Personal Financial Literacy - Credit
March 15, 2018
Bart Flewelling—Presenter

2. Introduction of Presenter
Bart Flewelling
Manager - Center for Action and Contemplation
Worked for:
Capital One
Toyota
MCI Worldcom (now Verizon)
Jobs include:
Project Management
Customer Service Management
Fraud Investigator
Credit Analyst

3. Personal Credit Agenda
Introduction and Overview of Personal Credit
What is credit history and what are credit reports?
When is it good to start building up credit?
How do banks play a role in my credit?
How do I apply for credit?
Using credit for purchases
What is an installment loan?
How do interest rates get set?

4. Personal Credit – Your ticket to cars, houses and other fabulous prizes (that you still have to pay for)
Personal Credit:
“That credit which a person possesses as an individual, and which is founded on the opinion entertained of his character and business standing.” The Law Dictionary.
The 3 C’s of Credit
Character—your credit history and score
Capital—property or cash to secure the loan
Capacity—your ability to repay, taking into account your job and expenses
There are many websites which cater to credit education—one of the better ones is

5. How Does One “Build” Credit?
Typically, people do not establish credit until they are legally able to enter into a contract (18 yrs)
These days, many younger than 18 start establishing a credit history though they have no ability to use that credit
Common examples
Establishing a checking account
Become an authorized user on someone else's credit card
Risks
Applying for and opening too many credit accounts
Maxing out credit accounts
Failing to pay on-time

6. How to Apply For Credit
When you are 18, you are legally able to enter into a contract
Credit card companies like Premier Bankcard target college-age students, offering low limit, high interest credit lines (and also require a deposit)
Other types of credit, such as car loans, are difficult to establish without a co- signer (like a parent) until one has 3-5 years of credit experience
More important question—how do I get approved?
Have a steady job and/or income
Know your credit score
Don’t apply for the first offer you see—shop around

7. Credit History Summary of all credit accounts you have been granted
Captured by the CRAs (Credit Reporting Agencies)—Commonly Experian, Equifax, TransUnion
Credit limit, balances, payments, past due statuses, addresses, and many other pieces of info
Past behavior is used to determine future creditworthiness
For example:
You apply for and are granted a credit card account but you do not make your payments on-time each month
When you apply for a car loan, the car finance company will likely deny your application because you do not make your payments on-time
What can I do to make sure I have good credit?
Monitor your credit reports
Dispute anything on the report that is not right
Make your payments as agreed to credit accounts (on-time and at least the minimum amount)
Do not overdraw your bank accounts

8. Your Credit Report A report that contains your credit history
A credit score is given to determine how good your credit may be
You can get it FREE from credit reporting agencies
You may also use free services such as Credit Sesame and Credit Karma which are also provided by the agencies
Why is it important?
Credit grantors and other businesses use your credit score and report to determine if you are worthy of new credit, if you are “risky”
Who other than banks use my credit report?
Landlord-rentals
Utilities like telephone, gas, electric, water
Insurance for car, house, life
Employer

9. Credit Report Example: I- Name and Prior addresses II-Employment III-Court Records IV-Fraud Alerts V-Credit Summary VI-Collection Accts VII-Payment History VIII-Credit Inquiries

10. Banks…Friend or Foe?
Banks set up checking, savings, retirement, credit card and many other types of accounts
Banks can help you establish credit history and a good credit score
Banks are required by law to make sure they do not give you more credit than you can pay for
Banks will charge you fees, many fees, for establishing and using bank accounts
ATM fees for cash
Late fees for late payments
Interest charges for credit accounts
Banks can negatively affect your credit history if you pay late or less than the minimum
Either way, Banks are the most common method of establishing and maintaining personal credit!

11. What is an Installment Loan? How do Interest Rates get set?
A loan that is repaid over time with a set number of scheduled payments
The term of loan may be as little as a few months and as long as 30 years—A mortgage, for example, is a type of installment loan
When you apply for credit, based on the information on your application, the lending institution will assess an interest rate designed to manage any risk of default (nonpayment) of the loan
Higher % rate = higher risk
Lending discrimination is illegal—it is the practice of banks, governments or other lending institutions denying loans to one or more groups of people primarily on the basis of race, ethnic origin, sex or religion

12. Summary of Lesson
Banks can help you establish and maintain your Personal Credit…but be sure to treat them well or they will not treat you well!
Authorized User—your ticket to building credit
Avoid Credit Cards until you have a steady job
Request your credit report at least once per year (freecreditreport.com, etc.)
Use Credit Karma, Credit Sesame, or many other services that track your credit score on a daily basis
Review the credit report and dispute any history or transaction that is inaccurate (not yours, paid on time, credit limit inaccurate, etc.)
For more personal finance training and information, go to wise.org