Personal Finance

 Who comes up with my credit score? One of the three credit bureaus  TransUnion  Equifax  Experian  How do they determine my score? All creditors report monthly about your activity with them. Over 2 BILLION reports are made every month in the United States.

 How do I know if my score is good? A possible credit score will fall somewhere between 300 and 850 The higher the better Excellent – 800 or better Good – 680 – 799 Fair – Bad – 619 Horrible – 579 and below

 The three credit bureaus look at the 5 Cs Character Capital Capacity Collateral Conditions

 Character This is a big one. They look at your history of repaying your debts. Things that hurt your Character score-  Missed payments  Late payments  Getting turned into a collection agency  Repossession of items  BANKRUPTCY – 10 years

 Capital Basically if you are rich or not What you own vs what you owe House + Car + Jewelry + Extras – All Debts = Capital Things that hurt your Capital score –  Having a lot of debt  Not owning (renting)

 Capacity How much money you earn The amount of time you have been employed Things that hurt your Capacity score –  Changing jobs often  Unemployment  Low salary

 Collateral Items that can be taken from you Large items – House, Car, Jewelry, Extras Creditors more likely to give loans for these items….why? Things that hurt your Collateral score –  Getting loans for small items  Getting loans for items that can’t be taken back

 Conditions Simply, the current state of the economy Creditors are more likely to approve loans when things are going good Things that hurt your Condition score –  The economy is poor  The bank isn’t doing well

 Which of the 5 Cs is the most important? How about the least? Quickly, rank the 5Cs based on how important they are to lenders. #1 – is most important; #5 is least important

 We are going to look at five different people. You and your partner consider the five Cs when giving them their credit score. We will discuss each one, so be prepared to defend your score.

 John is applying for a loan to purchase a new car. He is 24 years old and has a full time job which he has worked at for 2 years. John currently earns $32,000 per year. John has three credit cards, one of which has been sent to a collection agency because of his refusal to pay. He currently rents an apartment and this will be his first car. The economy is doing well.

 Paul has a mortgage on a house and has a monthly car payment. He has paid both of these loans on time every month since he got them. Paul is applying for a credit card through Visa. The economy is poor right now. Paul has worked at his job for 7 years and currently earns $55,000 per year.

 The economy is fair when George applies for his student loan. He is only 18 years old and doesn’t have a car or a house since he just graduated from high school. In fact, George has never had a loan in his life. George currently has a part-time job at a local grocery store and he earns about $14,000 per year.

 Ringo is applying for a credit card through MasterCard. He is 40 years old and has been unemployed for the past 6 months. Ringo lives with his girlfriend, therefore he doesn’t own or rent. He has an old used car that is fully paid off. The economy when Ringo applied for his loan was fair. Ringo has had two credit cards in the past and both of them have been sent to a collection agency.

 Jude is 33 years old and has been employed at the same place for 10 years. She currently earns $78,000 per year. Jude and her husband own their house and have two cars in which they are currently still paying for. They have never missed a payment. The economy is very good when Jude applies for her loan. Jude is applying for a loan to do some work on her house.