Presentation is loading. Please wait.

Presentation is loading. Please wait.

Understanding Credit and Borrowing

Published byAustin Palmer Modified over 6 years ago

Similar presentations

Presentation on theme: "Understanding Credit and Borrowing"— Presentation transcript:

1 Understanding Credit and Borrowing
Jade Beckman Vice President Consumer Loans Mountain America Credit Union

2 How a Lender Makes Decisions
Is it random? What is it based on? What do they look at? Is my credit score all that matters? Does my relationship matter? What rate will I get? Can I afford it?

3 The 3 C’s Category Measure What is Tells Us
Credit Score Willingness to Pay Collateral LTV Secondary payment Capacity Debt Ratio Ability to Pay

4 Credit Scores (not one score) Who uses credit scores? FICO Score
Vantage Score Others (Bankruptcy scores, etc) All scores are not the same thing Who uses credit scores? Lenders Landlords Employers Insurance companies

5 Credit What is a good score? What does a score tell a user?
FICO works on a scale of 350 – 850 Vantage works on a scale of 1000 Both scores higher is better What does a score tell a user? Predictor of default Statistically modeled to predict 24 months in future RISK Rate charged is commensurate with risk

6 Credit What goes into a score? Payment history
Capacity of revolving credit (i.e. balance-to-limit ratio) Length of credit history Number of trade lines Types of trade lines Presence of derogatory items Inquiries of other creditors

7 Credit Where does the information come from?
The three main credit bureaus Experian, Equifax and TransUnion Creditors report history to one or all Collection records Public records Judgments Bankruptcy

8 Credit How can I obtain a copy of my report?
1 free copy per year Upon receipt of a loan denial Various “free” sources Various subscriptions with cost Scores are not free (with some exceptions)

9 Credit What if my credit is not good?
First, know what your credit looks like Dispute inaccuracies Be judicious about use of credit, especially credit cards PAY ON TIME Beware of “credit repair”

10 Collateral The lender’s last resort Something to lose
Measured by Loan-to-Value (LTV) Loan amount divided by valuation of collateral Lower is better Shows degree of risk Autos depreciate in value Homes?

11 Collateral Tools to be a smart consumer Difference in rates
Know the value of what you are buying Know about your collateral’s future value NADA, Kelly Blue Book for autos Appraisals and automated valuations for real estate Difference in rates Secured is less risky Therefore, lower rates on secured, higher unsecured High LTVs (negative equity) can result in higher rates

12 Capacity Ability to repay Debt ratio What can I afford?
Monthly debt payments divided by gross monthly income Payment-to-income Overall debt-to-income What can I afford? Know your debt situation Debt ratio does not equal affordability Fit within your budget Targets for ratios

13 Shopping for Credit How to compare Is rate all that matters?
Read credit card terms closely Look for default APRs Read intro offers carefully CARD Act has helped some (also some unintended consequences) Mortgage products Good Faith Estimates Compare costs as well as rates

14 Summary Be an informed consumer Know your credit situation, monitor
Make sure your report is accurate Know your own budget situation Know what you are purchasing and compare Be aware of what creditors are looking for Know the rules of the game before you play

Download ppt "Understanding Credit and Borrowing"

Similar presentations

Personal Finance Credit Review JEOPARDY 100 Definitions Types of Types of Credit 4 C’s of 4 C’s of Credit Your Rights Credit Report Potpourri 100 200.

Personal Finance Credit Review JEOPARDY 100 Definitions Types of Types of Credit 4 C’s of 4 C’s of Credit Your Rights Credit Report Potpourri
Introduction to Business & marketing

Introduction to Business & marketing
HOW TO QUALIFY FOR CREDIT CH 10, 10.2 How to get credit.

HOW TO QUALIFY FOR CREDIT CH 10, 10.2 How to get credit.
CREDIT HISTORY & SCORES. CREDIT REPORTS  aka: credit history  3 Credit Bureaus receive and maintain information on consumers: Experian, TransUnion,

CREDIT HISTORY & SCORES. CREDIT REPORTS  aka: credit history  3 Credit Bureaus receive and maintain information on consumers: Experian, TransUnion,
Understanding Credit Reports & Credit Scores Presented by Rich Call Consumer Credit Counseling Service.

Understanding Credit Reports & Credit Scores Presented by Rich Call Consumer Credit Counseling Service.
A Four Corners Activity. What is a “credit report?” How does someone’s credit report impact his or her financial opportunities?

A Four Corners Activity. What is a “credit report?” How does someone’s credit report impact his or her financial opportunities?
Staying on Top: Credit Reports and Scores. What’s in Your Credit Report? Personal identification information Name, address, date of birth, SSN, employment.

Staying on Top: Credit Reports and Scores. What’s in Your Credit Report? Personal identification information Name, address, date of birth, SSN, employment.
CREDIT How do you build credit? Mr. Jones and Mrs. Smith make the same amount of money, but on loans, Mr. Jones pays more. Why? What may determine if you.

CREDIT How do you build credit? Mr. Jones and Mrs. Smith make the same amount of money, but on loans, Mr. Jones pays more. Why? What may determine if you.
You and Your Credit Score FICO. The Score The most widely used credit score is the FICO Score, the credit score created by Fair Isaac Corporation. Lenders.

You and Your Credit Score FICO. The Score The most widely used credit score is the FICO Score, the credit score created by Fair Isaac Corporation. Lenders.
1. 2 Welcome  3 rd of 16 Sessions No cost to participate.  Financial Support: FINRA Foundation & United Way Worldwide  Solid Finances Webpage:  www.msuextension.org/solidfinances.

1. 2 Welcome  3 rd of 16 Sessions No cost to participate.  Financial Support: FINRA Foundation & United Way Worldwide  Solid Finances Webpage: 
CREDIT HISTORY & SCORES. CREDIT REPORTS  3 Credit Bureaus receive and maintain information on consumers: Experian TransUnion Equifax  Get a copy of.

CREDIT HISTORY & SCORES. CREDIT REPORTS  3 Credit Bureaus receive and maintain information on consumers: Experian TransUnion Equifax  Get a copy of.
Building Good Credit & Improving Your Credit Score.

Building Good Credit & Improving Your Credit Score.
© 2006 Consumer Jungle Credit Scores & Reports. Are you Creditworthy? Have you ever borrowed money? Did you pay it back? Did you pay it back quickly?

© 2006 Consumer Jungle Credit Scores & Reports. Are you Creditworthy? Have you ever borrowed money? Did you pay it back? Did you pay it back quickly?
 the ability to borrow money in return for the promise of REPAYMENT  Before using credit you should ask your self:  Is it a want or a need?  Do you.

 the ability to borrow money in return for the promise of REPAYMENT  Before using credit you should ask your self:  Is it a want or a need?  Do you.
Chapter 4.  What is Credit? ◦ Principal + Interest  Installment Debt ◦ Equal Payments ◦ Durable Goods ◦ Longer Term = Lower Payment BUT ◦ More Interest.

Chapter 4.  What is Credit? ◦ Principal + Interest  Installment Debt ◦ Equal Payments ◦ Durable Goods ◦ Longer Term = Lower Payment BUT ◦ More Interest.
Credit Reports. What is a Credit Report? Credit Report: A record of past borrowing and repayment of debts.

Credit Reports. What is a Credit Report? Credit Report: A record of past borrowing and repayment of debts.
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports Funded by a grant from Take Charge America,

© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports Funded by a grant from Take Charge America,
Personal Finance. The three Cs of Credit 1. Capacity  Do you have a steady job?  What is your salary?  How reliable is your income?  Do you have other.

Personal Finance. The three Cs of Credit 1. Capacity  Do you have a steady job?  What is your salary?  How reliable is your income?  Do you have other.
Credit Cards Rules and Legislation. How does a credit card work?  Purchase Item: Approval: Sign  Merchant sends receipt to bank gets credit for transaction.

Credit Cards Rules and Legislation. How does a credit card work?  Purchase Item: Approval: Sign  Merchant sends receipt to bank gets credit for transaction.
CREDIT RATING CREDIT RATING& CREDIT REPORTS. Credit Reports A credit report is a document which includes information on your level of indebtedness and.

CREDIT RATING CREDIT RATING& CREDIT REPORTS. Credit Reports A credit report is a document which includes information on your level of indebtedness and.

Similar presentations

Ads by Google