1. 7.4.2.G1 Credit Reports

2. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What is a Credit Report? Credit report - a record of a consumer’s credit history Credit history - a record of transactions involving credit use Individuals do not have a credit report if they have not previously used credit They affect one’s ability to acquire credit

3. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Information can be divided into 4 categories: Personal Information Accounts Summary Negative Items Credit Inquiries Information in a Credit Report Lenders may not report information to all three credit reporting agencies. An individual’s information may be different in each report. Lenders may not report information to all three credit reporting agencies. An individual’s information may be different in each report.

4. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Information on a Credit Report Personal Information Name and aliases Current and past addresses Social security number Date of birth Employment history Accounts Summary Types of accounts Date the account was opened Credit limit or loan amount Account balance Payment history

5. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Information on a Credit Report Negative Items Missed payments Late credit card payments Bounced checks Collection agencies Public records Bankruptcy Tax liens Legal suits Foreclosures Credit Inquiries Requests for an individuals credit report Completed by: Insurance agencies Potential credit companies Financial institutions Landlords Potential employers, etc.

6. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona How Can I Get My Credit Report? Three main credit reporting agencies in the U.S: Experian * Equifax * Transunion By law – you are entitled to one FREE credit report from each agency once every 12 months. It is against the law for anyone to obtain another person’s credit report without their consent. www.annualcreditreport.com (government & free)www.annualcreditreport.com Lenders may not report information to all three credit reporting agencies. An individual’s information may be different in each report. Lenders may not report information to all three credit reporting agencies. An individual’s information may be different in each report.

7. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Who looks at your credit report Lenders (banks, retail stores, etc) will look at your credit report anytime you apply for a credit card or loan. When you apply to rent an apartment or to purchase a cell phone. Employers will look at your credit report during the hiring process

8. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Credit Inquiries Not all credit inquiries are the same! Type of inquirySoft checkHard check Do they impact your credit score? Not usuallyYes ExamplesIndividuals checking their free reports Permission given by the individual when seeking credit Automobile loan Individuals should avoid too many hard credit checks at one time!

9. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What is a Credit Score? A number that reflects your creditworthiness. (based on the 4 C’s of Credit. Helps lenders evaluate what risk they take in lending you money. It is your “adult report card” Scores range from 300 – 850. Low score = high credit risk High score = low credit risk

10. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona How are Credit score’s reported? Most common scoring system is FICO Credit scores are not included in the free credit report. You must pay for them. All 3 credit agencies have a credit score. Lenders will usually average them.

11. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Components of a Credit Score Payment History Outstanding Debt Credit History Pursuit of New Credit Types of Credit in Use

12. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Payment History The timely manner which a consumer did or did not repay debt 35% of credit score Includes: Several types of credit accounts Late or missed payments Public records and collection items

13. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Outstanding Debt The amount of debt currently held 30% of credit score When a high percentage is used it negatively impacts a score

14. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Credit History Amount of time a consumer has held accounts How often accounts are used A longer credit history will generally increase a credit score 15% of credit score

15. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Pursuit of New Credit Looks at how much credit is acquired over the length of a consumer’s credit history Includes how many new accounts are requested Opening too many accounts in short period of time has a negative affect 10% of credit score

16. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Types of Credit in Use Analyzes the types of credit in use Credit cards, retail cards, mortgages, automobile loans, etc Variety is generally good to have 10% of credit score

17. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Information not included in a FICO score FICO score is only based upon credit use Information not included is: Personal information such as age, where you live, marital status, race, color, religion, national origin, gender Employment information Interest rates charged on accounts Overall wealth (assets an individual may have)

18. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona When Credit is not established Although the following are all positive financial habits, no credit is established when: Credit is never used Accounts are not in own name Cash is paid for all major purchases Phone and utility bills are paid on time It only negatively impacts a score if payments are late

19. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Building credit history Important for consumers to build a credit history to be able to purchase items on credit For example – house, vehicle Affects a young adult’s ability to make a purchase on credit in the immediate future including: Renting an apartment Buying a car Purchasing electronics or other merchandise

20. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What Contributes to a Good Credit Score? Always pay your bills on time. The most important way you can show lenders that you are responsible with money. Establish a savings account. Make regular deposits, no matter how small the amount. Lenders like to see a consistent savings pattern.

21. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What Contributes to a Good Credit Score? Carefully choose your credit cards and loans. Apply for only the cards you really need and keep them for a long time (builds history) Keep a low balance on one credit card. Charging a small amount and paying it in full each month is better than having no balance at all.

22. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What Contributes to a Bad Credit Score? Making Late Payments Even ONE missed payment can affect your credit report. Having a lot of credit cards and loans Too much credit available makes you a risky customer.

23. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What Contributes to a Bad Credit Score? Maintaining high balances on your credit cards and loans. Lenders will not want to lend you more money if you carry high balances and are too close to your credit limit. Changing credit cards frequently. Maintain long relationships with credit card companies. Your score will go down if you are always switching to another credit card with a good introductory offer.

24. 7.4.2.G1 Bankruptcy

25. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona What is Bankruptcy Bankruptcy is the legal status for an individual or company unable to pay off outstanding debt. It is a status that can only be granted by a state or federal court. Generally, personal bankruptcy is considered a last resort for people inundated with loans or bills. Although going bankrupt is an effective way to wipe out most or all debt obligations, there are long-lasting consequences.

26. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Bankruptcy in the U.S. This is informational only – do not need to include in notes!! There were 1,170,324 bankruptcy filings in 2013, a 14.5% drop from 2012. Still, that is four times as many as there were in 1980. There was a steady climb that peaked in 2005, with 2.08 million bankruptcies, and the number has gone up and down since then. Of the 1,170,324 filings….37,552 were businesses and 1,132,772 were individuals.

27. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Bankruptcy in the U.S.

28. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Filing For Bankruptcy Before you file for bankruptcy, you are almost always required to receive credit counseling within 180 days before filing your case. You must obtain counseling from one of the approved providers listed on the United States Courts website.United States Courts While very few counselors are approved for this purpose, most offer online or telephone counseling sessions and do not require you to travel.

29. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Filing For Bankruptcy After you receive the necessary credit counseling, look into hiring a lawyer to help you file your claim. Legal counsel is not a requirement for individuals filing for bankruptcy, but the U.S. government strongly urges you to seek the advice of an attorney. If you cannot afford to hire an attorney, you may have options for free legal services.. Before you prepare to file for bankruptcy, keep in mind that the process must be completed in a federal court rather than a state court and can cost several hundred dollars in fees.

30. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Two Types of Bankruptcy Chapter 7 Chapter 13

31. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Chapter 7 Chapter 7 bankruptcy filings make up about 70% of non-business bankruptcy cases, and under this your debts are discharged and you are no longer responsible for repaying them. Some of your assets may be sold by a court- appointed bankruptcy trustee. The proceeds go towards paying the trustee, covering administrative fees and, if funds allow, repaying your creditors as much as possible.

32. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Chapter 7 You are allowed to keep key assets, but property exemptions vary from state to state. You may choose to follow either state law or federal law, which may allow you to keep more possessions. You must be employed or have very low income to qualify Undergo financial consulting Much more difficult to file for

33. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Chapter 13 Chapter 13 bankruptcies make up for about 30 percent of non-business bankruptcy filings. A Chapter 13 bankruptcy involves repaying some of your debts to have the rest forgiven. This is an option for people who do not want to give up their property or do not qualify for Chapter 7 because their income is too high.

34. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Chapter 13 Under Chapter 13, you must design a three- to five-year repayment plan for your creditors. Courts oversee the payments. Once you successfully complete the plan, the remaining debts are erased.

35. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Debts that cannot be Erased Alimony Child Support Debts that arise after bankruptcy is filed Some debts incurred in the six months prior to filing bankruptcy Loans obtained fraudulently Debts from personal injury while driving intoxicated Debts from willful and malicious injuries to person or property Student Loans

36. 7.4.4.G1 © Family Economics & Financial Education – Revised August 2009– The Essentials to Take Charge of Your Finances – Credit Reports Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Consequences of filing for bankruptcy More difficult to get a home loan More difficult to get a credit card More difficult to get a car loan Credit cards may be suspended or closed Interest and fees WILL increase Credit score is severely lowered Listed on credit report for 10 years