The Good Credit Guide Presented by Ryan Connor

What Is Credit? Credit is the ability to purchase goods with the trust that payment will be made at a later time. “Hey Thundar! Can you spot me a buck? I’ll pay you back tomorrow!” Why does Thundar choose to loan me money? As his friend I have built trust and credibility with him. Much like a bank uses your credit score

What is a Credit Score? A Credit Score is a record of how well you’ve kept your promises to pay back money you’ve borrowed. Your score is 350 – 850. It will affect renting an apartment, car insurance rates, and more.

Property -Mortgages -Missed payments are a killer - Auto Loans - Rent does not help Revolving Credit - Credit Cards - Keep balance as low as possible - Manageable number (2-4 cards) Pursue Credit - Applying too aggressively HURTS your score How do I build credit? Experian TransunionEquifax

Who would you lend to? A BC

Credit Cards DO’s –Pay on time and in full –Look for bonuses –Ask for credit limit increases every 6 months –Limit the amount you carry –Know your credit limit –Only spend a percentage of your limit (25-30%) DON’T –Be late on your payments, or make minimum payments –Apply for lots of cards –Apply for cards with annual fees

Benefits of Using Credit Low risk if you’re smart Fast, Convenient Widely accepted Many bonuses available Lower future interest rates Easier to dispute fraudulent purchases

Drawbacks Easy to spend a lot of money without realizing it Long-term consequences for mistakes Target for thieves APR rates A $1,200 limit does NOT mean you now have an extra $1,200

Making Minimum Payments

Pick Your Card

The BIG Money – Loans & Grants Loans and grants help finance the big purchases you’ll make in life. –Education –Homes –Cars

Educational Grants Grants do not have to be paid back Pell Grants –Need based –Decided on Expected Family Contribution (EFC) and Cost of Attendance (COA) –Maximum amount for = $5,550 Other types of grants available depending on course of study, racial status, etc.

Educational Loans Loans must be paid back Federal Loans are determined by filling out FAFSA –Federal Perkins Loans Highest need based Subsidized Interest rates (~5%) Maximum of $4,000 annually for undergrads, $20,000 cumulative 9 month grace period, payback within 10 years –Federal Stafford Loans Need Based Maximum of $5,500 Subsidized (Gov’t pays the interest while you are in school) Unsubsidized Interest Rates (Interest capitalizes during school) Interest rates around 3-4% 6 month grace period, Up to 25 year payback period

Educational Loans (cont.) Federal PLUS Loans –Not need based –Used to finance the remainder of your education expenses after other federal options have been used. –The loan repayment is the parents’ responsibility, not the student. –Interest rates are high at about 8% –Subject to up to a 4% origination fee with each check. Banks (Private loans) –Typically a last resort due to higher interest rates –Interest rates can vary from 2-11% but many fees are associated with private bank loans as well

Auto & Home Loans Interest rates directly influenced by credit rating –Good ~3.25% –If you have a good enough credit score you may even receive 0%! Given through banks Largest down payment possible Build equity with payments –Home equity loans The Housing Bubble

Let’s Mess It Up! Credit –Missed mortgage payments –Late or missed credit card payments –Making minimum payments Loans –Late or missed payments –Borrowing too much –House depreciates –Not enough money down

Thank You! Questions?

Sources studentloans/a/plusloans.htmhttp://collegesavings.about.com/od/typesof studentloans/a/plusloans.htm CFPB_HELOC-brochure.pdf