1. Basics of Credit

2. Credit Purchasing today, with the promise to pay later. What does credit offer you? – More time to pay – More money – Instant gratification – Safe if used wisely Priceless

3. 4-A Credit Facts Nearly 33% of teens owe money to either a person or company, with an average debt of $230. Nearly 33% of teens owe money to either a person or company, with an average debt of $230. About 26% of teens ages 16-18 already have more than $1,000 in debt. About 26% of teens ages 16-18 already have more than $1,000 in debt. 30% of teens say they understand how credit card interest and fees work. 30% of teens say they understand how credit card interest and fees work. 36% of teens say they know how to establish good credit. 36% of teens say they know how to establish good credit.

4. 4-E Sources of Credit Banks Banks Credit Unions Credit Unions Department Stores Department Stores Automobile Dealers Automobile Dealers Oil Companies (for gas stations) Oil Companies (for gas stations) Federal Government (for student loans) Federal Government (for student loans) Others? Others?

5. What debt will you have?

6. 4-G How Long Will It Take??? APR = 18% Payment: 4% of current balance You owe $3,000. Finance Charge $1715.69 Total cost of original $3,000 loan = $4715.69 After you’ve made the last payment, will what you purchased still be around??? And it will take nearly 11 YEARS to pay off! 1

7. Worst Credit Card First Premier Bank Mastercard – $25 to $95 processing charge – $75 annual fee – APR of 23.9% to 59.9% – $300 credit limit – $50 fee to raise limit $100 – $11 charge to pay bill over the phone Second: Platinum Zero from Applied Bank – $9.95 monthly fee, $35 late fee, no grace period

8. 4-N Credit Score 3 Credit Scores & FICO Score 3 Credit Scores & FICO Score – FICO: Fair Isaac Corporation 3 digit number 3 digit number – Ranging from 300 to 850 = higher better

9. Types of Credit Installment Credit Fixed payments Fixed payments Set period of time to repay Set period of time to repay Set or varying interest rates Set or varying interest rates Car loans and home loans are typical examples. Car loans and home loans are typical examples. Revolving Credit No stated payoff time No stated payoff time Limit to credit Limit to credit Minimum monthly payments Minimum monthly payments Interest rates vary or not Interest rates vary or not Finance charges Finance charges Credit cards most typical example Credit cards most typical example

10. The Language of Credit Credit is the amount of money or something of value that is loaned on trust with the expectation it will be repaid later to lenders. Types of Credit – Page 43 – Borrow up to a predetermined limit (i.e., credit card) – Borrow cash to be repaid by a specific date – Borrow money for a major purchase to be repaid in regular payments over time, typically monthly (i.e., car loan, home mortgage)

11. 4-C-2 The Language of Credit Debt is the entire amount of money you owe to lenders. APR (Annual Percentage Rate) is the total cost to use credit in a year. Term is how long you have to repay a loan, often expressed in months. Fees are charged to use credit. Examples: Annual Credit Card Fee, Loan Origination Fee, Over-the-Limit Fee 42 of

12. 4-C-3 The Language of Credit Credit History is a record of your behavior related to borrowing and repaying loans. Credit Report is a detailed record of your personal credit and financial transactions. Credit Score is a rating used by credit reporting companies to help lenders decide whether and/or how much credit can be extended to a borrower. 43 of

13. 4-F WHEN YOU BUY “STUFF” In fact, you bought $500 worth of “STUFF” with your credit card. You bought “STUFF” with your credit card. Your APR is 18%. You plan to pay $10 a month to pay it off. You will pay $431 in interest Final cost of your purchases = $931.40 And it will take SEVEN YEARS and NINE MONTHS 1

14. 4-I The Cost of Using Credit Interest Rate = 24% Payment = 4% of Current Balance BALANCE TIME TO PAY OFF INTEREST CHARGED TOTAL COST $2,000 11 YEARS 6 MONTHS $1,850$3,850 $6,000 16 YEARS 1 MONTH $5,850$11,850 $10,000 18 YEARS 2 MONTHS $9,850$19,850 321

15. 4-K-1 Financial Consequences of Debt Could put you in a state of overspending and perpetual debt, where you get used to carrying a balance and paying extremely high interest rates. Could adversely affect your credit rating, making it harder to get loans when you really need them. 1 of 2

16. 4-K-1 Financial Consequences of Debt Start building a credit history and be able to qualify for better loans when needed. Earn money back on purchases you were going to make anyway. Be prepared for emergency. 1 of 2

17. Laws Truth-in-Lending Act = Inform of credit terms, known as credit disclosure form – Can compare credit costs (not all the same) Equal Credit Opportunity Act = Cannot be denied credit due to age, gender, marital Fair Credit Report Act = credit bureaus have to fix incorrect information in your file 2009 Credit CARD Act – 45 Day notice of changes in terms

18. Youth Laws Part of 2009 Credit CARD Act If under 21 need – Proof of income – Or, co-signer Offering fee gifts as inducements is banned within 1,000 feet of campuses

19. Laws Continued > $1 bill = sent monthly statement If denied credit = required to send summary of why and source of information Can get free Credit History – www.annualcreditreport.com www.annualcreditreport.com – 3 providers, do once about every 4 months – Lists what credit, paid on time, etc.

20. Credit Score & Statement

21. 4-L The Four “ C s” of Credit Collateral Capital Capacity Character

22. 4-N Credit Score Affects EVERYTHING Affects EVERYTHING FICO® Score Auto Loans 500- 589 590- 624 625- 659 660- 689 690- 719 720- 850 36- month new auto loan 18.59716.20612.2259.4987.3866.674 48- month new auto loan 18.59816.20612.2269.5007.3906.678 Source: myFICO.com

23. When & What Credit All need loan – Look low interest Get a card – Low APR – Good Perks – NO annual fee – Stay away from store cards

24. How to Get Credit Score is not free – Start by checking history – Annualcreditreport.com Check each company 1 a year for free Pick one every 4 months to look at – At 18 or before loans = no credit history

25. What you will do Complete questions on High School Tax form Watch the video