NIBOA Credit Check Module PPT

NIBOA Credit Check Module PPT Introductions INSTRUCTOR’S CONTACT INFO HERE w/ logo were BANK ON logo is. Introduce yourself and the lesson resources we will be utilizing. Be sure to let them know that questions throughout the class are acceptable, but there will be time for questions at the end of the session. Icebreaker: Move to next slide. Ask the question – “Who Loans Money?” Lesson resources provided by Federal Deposit Insurance Corporation, Purdue University Extension and University of Illinois Extension.

NIBOA Credit Check Module PPT Who loans money? Icebreaker: Ask the question – “Who Loans Money?” Give the participants a couple of minutes to come up with a few answers. Then, ask for their answers. Be sure to participate in the discussion yourself and encourage them to answer. Answers (not a complete list): Banks, Credit unions Car companies/dealers Credit card companies Employers Family Friends Government Mortgage companies Pawn shops Payday loan centers Schools/colleges Utility companies [When answers have been exhausted, then move on to objectives. Tie in with -]“So, today’s session, we will learn about how our credit report and credit score affect our ability to receive loans from businesses in our community.”

NIBOA Credit Check Module PPT Objectives Understand what credit is Learn the positive and negative aspects of credit Increase knowledge of the role credit reports and credit scores play in your financial footprint Increase knowledge of how to improve your credit report and score “Today, we will review and rethink what we know about credit and how we use it. Here’s what we’ll learn [read off the objectives].”

NIBOA Credit Check Module PPT What’s the difference? Debt Credit Money you borrow from a business or person. Credit is your ability to borrow money. “Credit is the way in which you can purchase debt. For example, through a loan. However, debt must always be paid back. If it is not, it could cause future issues with your ability to receive a loan and will effect the credit options available to you. Let’s discuss about why credit is important next.” Definition of Debt – something, typically money, that is owed or due; the state of owing money. More formal definition: Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest. Source: investopedia.com Definition of Credit – the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. More formal definition: Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. Credit also refers to an accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. Additionally, on the company's income statement, a debit reduces net income, while a credit increases net income. Source: investopedia.com

Why is credit important? NIBOA Credit Check Module PPT Why is credit important? Useful in times of emergencies Convenient when you do not have cash Allows you to pay for large purchases over time Helps you obtain employment, housing and insurance “Few people are prepared for all financial emergencies. To stay financially stable it is important to be able to get a loan when you need it most. Such as when there is: an emergency no cash a large purchase over time, such as a car, house or business. Businesses who are in the business of providing credit opportunities will check your credit report and credit score to determine whether you are trustworthy and responsible enough to pay back the loan.”

NIBOA Credit Check Module PPT When is credit (debt) worth it to you? “Borrowing money comes with positive and negative consequences. In this exercise, you’ll determine when you would be willing to borrow money from a bank, a credit card company or someone else to have what you need or want and why.” [When complete discuss a few of the questions and answers in class. Encourage the students to have a discussion with their family (and friends, if single) about the answers and to learn more about what their family and friends would do in relation to the questions.] “Remember there are many different ways to utilize credit to borrow money. By knowing the consequences of who you borrow from, it will better stabilize your future financial options.” Handout – When is Credit (Debt) Worth It to You?

Is your credit in good shape? NIBOA Credit Check Module PPT Is your credit in good shape? Are these statements true for you? I have seen my credit report before. My credit report is accurate. I maintain a credit score above 700. I understand the cost of interest. I know how long it will take to repay debt making monthly payments. I know the total amount (principal + interest) of a loan I owe. “Let’s take a moment and consider whether your credit is in good shape by seeing if the following statements are true for you. No need to provide the answer out loud, just keep a tally in your head. If you don’t know, that’s not problem, we’re going to help you figure out some of these answers today. [read the list on the slide allowed.] If you answered yes to ALL the statements then you have a good understanding about what we’re going to talk about today and that your credit is probably in good shape which means that you are more likely able to get a cheaper interest rate when borrowing money or paying insurance bills and even have an easier time getting accepted to rent an apartment or own your a home.”

NIBOA Credit Check Module PPT What is a credit report? It tells lenders: Who you are How much debt you have Whether you have made payments on time Whether there is negative information about you in public records “As I mentioned before, your credit report and credit score affect the way businesses who lend money see your ability to be a good steward of the funding they provide you. Your credit report is a document of your bill paying history. It tells lenders: [say bullet points on slide]”

What is a credit report used for? NIBOA Credit Check Module PPT What is a credit report used for? To obtain loans and other credit To get certain kinds of jobs For housing – rental applications and mortgages To pay less for insurance “A good or bad credit report will affect your ability to: - Obtain loans and other credit - Get certain kinds of jobs - Rent or own a home - Increase or lower some insurance payment It is importance to maintain a good credit report.”

Check your credit report NIBOA Credit Check Module PPT Check your credit report Get a free credit report from each of the 3 credit bureaus once a year at www.annualcreditreport.com “Here’s how you can make sure your credit report is in good standing. Before you apply for a credit card, a job, an apartment or insurance you should check your credit report so that you know if you will have problems in being accepted. You can obtain 3 credit reports a year for free at AnnualCreditReport.com. Be sure you only go to this website to receive you free credit report. There are other websites that offer the same thing, but they typically charge a fee. At AnnualCreditReport.com, you will choose one of the 3 credit bureaus to produce your reports. The bureaus are Equifax, Experian and TransUnion. I would suggest getting one report at a time at different times throughout the year so that you can regular check your report to make sure there are no mistakes, whether intentional or unintentional. We’ll talk about how to clean up mistakes in a few minutes.”

NIBOA Credit Check Module PPT Checking your report Make sure it is correct Name and address Social security number Personal information Is each account listed, a debt you owe? Is the negative information correct? Information listed under public information “So, checking your report. You should look to make sure these 6 items are correct.” [list off the 6 items from the slide and explains.] Handout - Credit Report Review Checklist Good to address items at bottom of handout in class discussion. They are noted below: Issues on the report: When you are finished and you have found a discrepancy on the report, you will need to resolve the issue with the credit reporting agency or creditor that provided the initial information. Begin the process with the credit reporting agency, be sure to explain what you think is wrong and why. Habit & safety: Be sure to do a review checklist each time you request your credit report. Then, keep the completed checklist with your credit report. Remember your credit report contains a lot of personal and financial information, so be sure to keep any hard or electronic copies in a safe place. If you do not wish to hang on to your hard-copies be sure to shred them before getting rid of them. For additional copies of the of the checklist, visit the NIBOA.org resource section.

NIBOA Credit Check Module PPT Credit repair scams Provide you with a credit report for a fee Fix bad credit notations and giving you credit identity Offers to provide a service for payment up front “Companies offering the following services are scamming you. [mention and explain the 3 things listed on the slide.] As we’ve discussed, you can access your own credit report for free, so no need to rely on an outside vendor for this information. Even if your credit history is not in good shape due to bad choices and it is reported accurately on your report, it cannot be removed. It can take years to repair bad credit legitimately and restore your credit report back to good standing. Say you do find an issue on your report, the first place to start repairing the issue is with the credit reporting agency. They will be able to walk you through the process to correct the information on your report. If you have evidence of what is wrong and why, gather the information together to begin the conversation with the credit report agency. They may also have you fill out a form via their website to start the process. And, always remember, most legitimate companies provide service before requesting payment.”

NIBOA Credit Check Module PPT Credit scores “The information in your credit report determines your credit score. So the better the consumer your are the better your credit score. Your score will fluctuate over time based on the volume of credit you are utilizing at a given point in time. Things that affect your score: paying bills on time, number of credit check requested and how much credit debt you have. Your score is determined by a mathematical algorithm (equation) is applied to your credit report to create a 3 digit number. Your credit score is a number that represents your credit worthiness. If you want to improve your credit score you must improve your credit report. The Credit Score scale looks like this. Who here knows their credit score? Or has seen it at a given time? If you don’t know it or want to keep track of it, you can get a free credit score from creditsesame.com. You do have to provide initial information from which they will access your credit report to calculate your score. They also have this it available via a free phone app. If you do add it to your phone, be sure password protect the app so others don’t have access to the information.”

Credit build and repair NIBOA Credit Check Module PPT Credit build and repair PowerPay Secured credit cards Credit building loans Freezing credit – free in Indiana “If you have a bad, low or no credit score, here are a few ways that can help improve your score.” [Explain options and add others if you bank provides something different.]

NIBOA Credit Check Module PPT What’s the real cost? Note: the numbers in the chart above are dollar amounts. “Let’s do a quick real cost calculation about how credit works. Say you want to purchase a $200, including tax, TV. This chart shows 4 options of how to attain the TV. [walk through each option and talk about interest rates and monthly payments. For in-store loan, equate to store credit card.] If you paid cash, then you would buy the TV for $200. You choose one of the other 3 options, you’ll note that each option has an increase in price that varies greatly. The difference in the cost of these larger amounts is called interest rate and it is the cost of borrowing money.” Activity 2 - Split the group into small teams and have them work out the cost calculation on the next slide. Handout – What’s the real cost? Powerpoint slide (Adapted from University of Illinois Extension financial literacy materials).

NIBOA Credit Check Module PPT Want to buy a TV? 1. You get an installment loan from a store that charges 29% interest. If you repay the loan in one year, how much will the TV cost? 2. You decide to lease a TV, and your payments are $12 a week. How much money will you spend in a year for the TV? 3. You save $12 a week. How many weeks will it take you to buy the TV with cash? 4. The currency exchange down the street is an easy place to get a small-dollar loan. Why does it cost over $300 to pay for the TV? 5. What is the cheapest of the four choices to buy the TV? 6. If you wanted a new TV, what method would you use to pay for it? What’s the real cost? activity continued. The chart will provide the information needed for all questions, except #3. This one will require some math. [When complete, continue to slide #17 – this is the What’s the real cost? chart again. And, discuss the answers.]

NIBOA Credit Check Module PPT What’s the real cost? Note: the numbers in the chart above are dollar amounts. “The main thing that affects whether or not you incur interest is your ability to follow contract terms when you borrow the money. Many terms include pay off the loan in the appropriate timeframe or keeping up with monthly payments. Inability to follow contract terms may incur more fees and thus more debt. It’s also important to note that real costs may vary from one business to the next and to ask, “What is the total overall cost?” when making a purchase decision before signing any contracts. In our example, you could spend between $32 and $424 extra in interest or loan fees if you paid for the TV by loan or credit card, instead of paying with cash from your savings account.”

NIBOA Credit Check Module PPT When you get home Get your credit report & check accuracy Check your credit score Opt out of unsolicited credit offers “So, here’s your homework assignment. Think about what the real cost of your future purchases will be when using credit and do these 3 things to make sure you have a good credit report and score. When you get home, order your credit report on annualcreditreport.com and check it against the review checklist, I handed out. Check your credit score on creditkarma.com. And, if you are receiving too many unsolicited credit offers and wish to opt out to avoid getting into more debt , sign up at www.optoutprescreen.com.“ Handout – Class summary sheet. Above website links are found in the assignment section.

NIBOA Credit Check Module PPT Thank You! INSTRUCTOR’S CONTACT INFO with logo HERE “And, with that do you have any questions?” Thank them for coming. At this time, hand out the evaluation form to fill out, then collect them once finished and exchange them for their course completion certificate. If interested in attending more classes, direct them to the website – NIBOA.org Handout – assessment/evaluation form and course certificate Interested in another class? Visit NIBOA.org. Lesson resources provided by Federal Deposit Insurance Corporation, Purdue University Extension and University of IL Extension.