1. Good Debt, Bad Debt:
Using Credit Wisely

2. What Do You Think?
Nearly ____ % of teens agree it’s important to know how to live within your means and have good money to be successful in live?
____% of teens know how to establish good credit.
____ % of teens that agree it’s easier to buy things with a credit card than cash.
___ % of teens believe that their parents are not concerned about making sure they learn the basics about smart money management. 93 31 51 30
From Charles Schwab “Teens and Money” survey 2007

3. Objectives What is credit
The advantages and disadvantages of using credit
How to manage credit responsibly.
How to obtain and maintain your credit report
What is a credit score

4. What is credit? The ability to buy something NOW and pay for it LATER
This can be a valuable addition to your financial tool box if you use it carefully and sensibly.
It can be both a blessing or a disaster based on use.

5. Types of credit Include………. Installment Loans Credit Cards
Student Loans
Mortgages

6. Cost of Using Credit Of course nothing comes for free.
The price of using someone else’s money is interest.
Low payments can sound good, but what are you really paying?
The power of compounding interest.

7. Other Costs
Make sure you know the terms of any credit some things many consumers overlook are:
Annual Fees
Credit Limits
Finance Charge (APR)
The ‘term’ or length
Grace periods
Introductory / ‘teaser’ rates

8. The BIGGEST Cost
Late Fees - the obvious penalty for making payments after the due date.
These can end any introductory rates
They can also result in a default rate that is much higher than the APR (annual percentage rate) you thought you would be paying.
Damage your credit score

9. And even Worse Universal Default
This means creditors can hike up your interest rate if you make just one late payment – even if that late payment is made to a different creditor for a different type of payment.
The credit CARD act passed by Congress in 2009 and became effective in February bans this practice.

10. The good about credit It is a fact in today’s society we need credit.
Major purchases
Emergencies
Investing in education

11. Managing Your Credit Understanding your credit score,
In the USA three main credit reporting agencies collect and provide information about people’s credit history.
Your credit report is a detailed report about your current and past borrowing record.
Your credit score often called a FICO score is a number that reflects your creditworthiness.

12. The Big 3 The three main credit agencies are. Equifax Experian
TransUnion
By law, you are entitled to a free copy of your credit report from each of these companies once every 12 months.

13. Your credit score
If you want your FICO score, there is only one place online to get it.
MyFICO.com
All of the others can be considered FAKOs.
This includes Experian’s Credit Plus score and Trans Union’s TrueCreditScore as well as many others.

14. What hurts your credit score
The #1 negative is late payments.
It is predicted that just 1 30-day late payment will lower a 680 credit score points.
Why? FICO scoring is a future risk assessment, so it assumes there is a high likelihood that the late payment is caused by a real cash shortfall.
FICO is anticipating that the consumer is essentially broke and this is the first sign of future defaults.

15. What hurts your credit score
Time Heals, Recency Kills
Bad events seem to lose their punch over time, but credit lenders live in the now and worry about the future.

16. What hurts your credit score
Revolving accounts matter the most.
Revolving credit (most credit cards) is extended in advance of any transaction so that the borrow does not need to reapply each time credit is desired. As the principal is repaid, it can be used again. (Short term)
Installment loans were created for different reasons and have a significantly different influence on your score. (Long term)

17. What hurts your credit report
Having balances over 50% of your credit limit.
It is not the dollar amount of credit card balances that influence score, but the ratio of the balance to the limit.
Assessing future risk, it is assumed every dollar on a credit card is a dollar you don’t have.

18. What hurts your credit report
Applying for many card
Timing is everything!
Never open a new account within eight months of a major purchase.
The more new accounts opened in a short time span, the riskier it is to give them one more account.

20. Fixing your Credit Report
You are entitled to free credit reports once a year.
One place to attain your credit report is
Do not pay to get a credit report.

21. If there is a mistake on your report there is a policy to dispute any inaccurate information.
By law, the agency must research the questionable item and either verify it, correct it, or delete it.
You can do this just as good as anyone else, so research before paying to have someone ‘fix’ your credit report.

22. How to avoid the pitfalls
Always read the fine print.
Avoid high interest rates for large purchases.
Don’t apply for more credit than you need.
Pay a bill as soon as possible to avoid late fees. Automatic payments are best if possible.
Get into a habit of saving and using cash and only using credit when needed.

23. Who’s looking at your credit?
Obviously credit lenders.
Landlords
Employers
And hopefully YOU!

24. Managing Debt Having a lot of debt can take a toll on you.
The stress of worrying about bills can affect your health, family life, and job.
Don’t allow debt to control your life. Learn to manage your finances so they don’t manage you.

25. Resources
NEFE High School Financial Planning Program
National Center for Financial Education
National Foundation for Consumer Credit
Debt Counselor of America
Association of Independent Consumer Credit Counseling Agencies