Credit Report and Credit Score. Today’s Topics Credit reports Credit score components How to establish positive credit history Credit card features Credit.

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Presentation transcript:

Credit Report and Credit Score

Today’s Topics Credit reports Credit score components How to establish positive credit history Credit card features Credit card rules How to manage your card responsibly

Credit Bureaus Provide information to retailers, financial institutions, insurers, potential employers, and other organizations.

Three Major Credit Bureaus Equifax  Phone: (800)  Website: Experian  Phone: (888)  Website: TransUnion  Phone: (800)  Website:

Credit Report A document that contains factual records of an individual’s credit payment history.

Establishing Credit Open a checking or savings account at your local financial institution. Build a relationship with your financial institution to improve your chances of obtaining a credit card or loan.

Your Credit Report Personal identification Trade lines Inquiries Public records

NameJohn Doe Date of BirthJanuary 1, 1989 Social Security NumberXXX-XX-XXXX Current Address123 Credit Union Lane Raleigh, NC Account TypeCompanyAccount #BalanceNegative Items InstallmentSECUXXXXXX$25,000.00No RevolvingSECUXXXXXX$1,250.00No 2. Accounts Summary 1.Personal Information Credit Report Information

DateCompany requesting credit record 09/01/2010Credit Union 10/08/2010Cell Phone Company Account TypeCompanyStatusDelinquencyDescription RevolvingCredit Union Pays as agreed 60 days past due No 4. Negative Items 3. Inquiries Credit Report Information

Credit Score

Your Credit Score A credit score measures the probability a borrower will make late payments within the next two years. Example of a scoring system:  Equifax  Experian  TransUnion The higher your score, the less risk you represent to lenders and the more favorable they’ll view your application.

Your Credit Score Most financial institutions utilize credit scoring for a loan qualification and rate pricing. At SECU, your credit score alone does not determine your credit worthiness, as the Credit Union will look at several factors for qualification. Additionally, SECU does not utilize a tiered rating system for credit scoring.

Your Credit Score Can Help You Receive better credit offers Obtain lower interest rates Acquire quicker credit approvals

Your Credit Score Can Help You Gain employment Obtain a home Buy a car Pay for education

Negative Information Accurate negative information- 7 years Bankruptcy information- 10 years Criminal convictions- no time limit Default information on government insured or guaranteed student loans- 7 years after guarantor actions Unpaid judgment- 7 years

Improving Your Credit Report Contact the consumer reporting company and creditor in writing for disputes. Pay your bills on time. Catch up on missed payments immediately and avoid future late payments.

Improving Your Credit Score Keep your credit card balances low. Note: Paying off a collection account or closing an account with a missed payment will not remove it from your report. This type of information may remain on your report for 7 years.

Your Free Credit Report Web: Toll Free Number: Annual Credit Report Request Service P.O. Box Atlanta, GA

Credit Cards

Features of a Credit Card Annual percentage rate (APR) Annual fee Credit limit Grace period Other fees Information provided by

Did You Know? There is no defined payoff date- credit card payments could go on forever. Monthly minimum payments vary, and is based on your balance. Credit cards usually have higher interest rates than most types of credit. The least-favorable type of debt is called consumer debt, which is debt for items that won’t increase in value over time.

$25 purchase at grocery store Card is approved & consumer signs receipt Grocery Store deposits receipt to their financial institution Financial Institution sends transaction electronically to VISA Financial Institution bills member for purchase Credit Card Payment Process VISA processes transaction: credits merchant account and debits the financial institution account since the financial institution is the card issuer. Member pays credit card bill

Credit Card: Advantages Purchase items now Safer than carrying cash Record of purchases (statement ) Convenient

Credit Card: Disadvantages Interest Fees Risk of increased debt May have difficulty repaying if you have a high balance

Credit Card Rules! Your credit card company must notify you:  When they increase your rate or change certain fees  When they make significant changes in terms of your card Information provided by the Federal Reserve “What You Need To Know: New Credit Card Rules”

Credit Card Rules! No interest rate increases for first year Increased rates apply to new charges only Restrictions on over-the-limit transactions:  You must opt-in to allow transactions that take you over your credit limit Information provided by the Federal Reserve “What You Need To Know: New Credit Card Rules”

Credit Card Rules! Underage consumers protection  If under 21, you must prove that you can make payments or you need a cosigner to open a credit card. For more information visit the Federal Reserve’s website  Information provided by the Federal Reserve “What You Need To Know: New Credit Card Rules”

What Are Your Responsibilities? Read and understand the terms/conditions Pay your debt on time Contact your creditor if you are unable to make a payment

Report your card if it is lost or stolen, immediately. Protect your card - don’t give your card information to anyone over the phone unless you initiated the call and know with whom you are speaking. What Are Your Responsibilities?

Bottom Line… Always pay more than the minimum on your credit card or you may find you are only paying towards the interest every month. Be cautious when making purchases on your credit card, only charge what you can immediately pay off.

Questions?