WED. March 29, 2017 TODAY’S AGENDA OBJECTIVES (81) Identify the elements of creditworthiness. (84) Explain the importance of credit reports. HOMEWORK Checking Account Project past due All Q3 late work is due no later than 4 PM this Friday, March 31st. TODAY’S AGENDA BRO Time Finish your “Calculating Credit” worksheet. Creditworthiness PowerPoint + Notes. Reading a Credit Report. Celebrity Calamity BYOT or sign out your school laptop – use link on VISION. CLOSING TASK Explain why you might use a credit card instead of a debit card (checking) to make a purchase. Provide an example.

Identify the elements of creditworthiness. Process/Skill Questions Why does a lender look at a consumer’s credit history to determine future creditworthiness? How do interest rates correlate to creditworthiness? How can a consumer or business establish credit? What items can be used as collateral for a loan? What factors are considered when assessing a consumer’s capacity to repay a loan? Task 81

How do you get credit? Creditworthiness is the measure of a person’s ability and willingness to repay credit on time. In addition to reviewing credit history or a credit score, lenders also consider 3 C’s.

Creditworthiness Lenders want to know that you are worth the risk. Capacity Character Collateral Lenders want to know that you are worth the risk. The 3 C’s include: capacity: ability to repay character: trustworthiness to pay collateral: consumer’s available cash or assets (other than debts) Past history (credit report) is the best indicator of creditworthiness. Someone with good credit has a record of paying bills and has a history of paying bills on time. Someone with bad credit has been inconsistent in paying bills, has paid bills late, and has abandoned debts or filed for bankruptcy.

Your Credit History Matters! Buying a Home Renting an Apartment Getting Phone Service Financing a Car Getting Student Loans Qualifying for Insurance

Reasons Credit is Denied No (or little) credit history Irresponsible use of credit Too much outstanding credit high balance Victim of fraud i.e., identity theft

Borrowers’ Responsibilities Read & understand the credit contract. Borrow only what you can repay. Pay your debts promptly! Notify the creditor if you cannot meet payments on time. Report lost or stolen credit cards.

Explain the importance of credit reports. Process/Skill Questions How can a consumer’s spending habits affect his/her credit report? What can a consumer do about a bad credit score? Who can obtain a credit report? Why? How can a consumer build a good credit rating? How can unfavorable data be removed from a consumer’s credit file? What can a consumer do to correct incorrect data included in his/her credit file? Task 84

Credit Reports: Purpose Data Collection Credit History Employment Protection against Identity Theft Data Collection Track your personal, financial and employment information over time Credit History Lenders examine your past behaviors to determine how you might handle credit with them in the future Employment Some employers want to see that you have demonstrated responsibility in your personal and professional life.

Credit Reports: Content Personal Information Name, Address, SSN, Date of Birth, Employment Credit Accounts Type of Credit, Date Opened, Limit or Loan Amount, Current Balance, Payments Credit Inquiries includes creditors from the past two years Public Record / Collection Items includes bankruptcies, foreclosures, overdue debt collection, etc.

What is a credit score? A credit score is a fast, objective measurement of credit risk. Used as an alternative to reading the full credit report FICO scores are used by 90% of top U.S. lenders. Credit scores are calculated with software developed by Fair Issac and Company (FICO). Scores range from 300 to 850. Excellent: 750+ Good: 700 – 750 Fair 600 – 700 Poor < 600

Annual Credit Reports Credit Bureaus You can… Equifax Experian TransUnion Request one free credit report per year from each credit bureau. Protect yourself from identity theft! FTC: Consumer Information https://www.consumer.ftc.gov/articles/0155-free-credit-reports Annual Credit Report annualcreditreport.com

goo.gl/ FxXnbU Post Sample Credit Report.pdf on VISION for students to answer the seven questions at the end of the note guide. Read the SAMPLE CREDIT REPORT to answer the questions on your “creditworthiness” notes.