2. CREDIT

3. Why Worry About Credit? 1.You can easily get credit if you have never borrowed before and have not had any credit problems. Answer: False 2.You can help yourself to obtain larger amounts of financing if you use small amounts of credit first, and repay them as agreed. Answer: True

4. 3.Interest rates can vary greatly from lender to lender. Answer: True 4.Applying for as many credit cards as possible will improve your credit rating. Answer: False 5.Credit cards are convenient but can be risky if not used carefully. Answer: True

5. 6.A complete history of how you pay your bills is accumulated by companies known as “credit bureaus”. Answer: True 7.When making a decision on a loan application, a lender does a full review of the applicant’s income, existing commitments and expenses, and past credit experience. Answer: True

6. 8.Credit bureau information is available to anyone who will pay to receive a report. Answer: False 9. The most important thing you do when borrowing is to read and understand the loan agreement before you sign. Answer: True 10. If you have trouble paying bills you should call your creditors to explain the situation. Answer: True

7.  What is credit? Credit is a promise to repay an obligation.  Who is involved in a credit transaction? The lender and the borrower are involved in a transaction.

8.  Credit is given based on the “Three C’s of Credit”. 1. Capital 2. Capacity 3. Character

9. How do you establish Credit? Open a checking and/or a savings account Borrow good credit (Be added to an active credit account of family member with good standing credit) Borrow against savings

10. How do you establish Credit? Cont. Take out a small installment loan Begin with a single credit card Pay attention to your payments

11. What’s a Good Credit Score? FICO scores range from as low as 300 (worst) to as high as 850 (best).

12. FICO SCORES 650 or above :  very good credit history  will get credit more quickly  get credit for higher amounts and at better rates

13. 625 – 650:  good credit history  lenders will take closer look at you for risks  slower processing of credit acceptance  loans may be smaller with higher rates

14. 620 or lower:  Less favorable credit history  May prevent you from getting reasonable interest rates  May prevent you from getting credit entirely

15. How FICA Scores are Calculated  Payment History 35%  Amounts Owed 30%  Length of Credit History 15%  Types of Credit Used 10%  New Credit 10%

16. 3 Companies that compute credit scores: 1. Equifax 2. Experian 3. Transunion

17. The Fair Credit Reporting Act: Credit Reporting Agencies protect the consumer with confidential procedures that provide businesses with correct and complete information.