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

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

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?

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 www.money-wise.org

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

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

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

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

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!

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 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

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

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! 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 www.money- wise.org