1. BUDGETING FOR COLLEGE: Credit Cards & Credit Reports
Andrea Morgan, Gary Moore, Melissa Greenslade Program Coordinators University of Arkansas, Office of Financial Aid

2. What is Credit?
Credit the extent to which someone, usually a bank, is willing to loan you money and trusts that you will pay it back in the future.

3. Benefits and Rewards of Using Credit
Can be helpful in emergency situations
Can be safer for online purchases or travel
Safer than carrying cash
Establish good credit history

4. Risks of Credit Cards Easy to make impulse purchases
Interest rates (APR) and fees can add up and increase the amount you owe
Could damage your credit report

5. Establish Healthy Credit
Having a good credit history is important!
To qualify to borrow more and at a lower interest rate on future purchases, like buying a car or a house
Types of Credit:
Revolving Accounts: Credit Cards
Secured, Store, Standard
(Retail) Installment Loans
Mortgage Loans
Student Loans
Don’t use over 15-20% of your net income for non- mortgage debt payments

6. Types of Credit:
Secured Credit: something of value is presented to the lender as collateral in case you default on the loan.
Examples: Vehicle or House Loans – if you don’t pay, the lender can take back your car or house.
Unsecured Credit: a loan that does not have collateral securing the loan. If you stop paying, there is nothing for the lender to take back.
Examples: Credit Cards, Student Loans, Personal Loans

7. Dangerous Credit! Payday Loans Cash Advance on your Credit Card
Rent to Own

8. Credit Card Rules for Those Under 21
Anyone under 21 will need a co-signer for a credit card and/or to prove ability to pay
The co-signer must agree in writing to any credit limit increase
Consumers under 21 can sign up for a secured credit card.

9. Evaluating Credit Card Offers
When evaluating a credit card offer consider:
APR (Annual Percentage Rate)
Grace Period
and Fees
(sample credit card offer handout)

10. APR
Annual Percentage Rate: the actual cost of borrowing money, expressed in the form of a yearly measure (monthly interest = APR)
Can be Fixed or Variable
Fixed stays the same throughout the loan
Variable rates can change annually, monthly or quarterly
Average Credit Card Interest Rate: 14.97%
(#1-6 and 12 on sample credit card offer handout)

11. Credit Card Grace Period
The Grace Period is the number of days you have before you’ll be charged interest on your purchase amount, usually between 20 days and 1 month.
(#5 on sample credit card offer handout)

12. Credit Card Fees Annual Fees – between $25 and $60 Cash Advance Fees
Balance Transfer Fees
Late Fees – average $29
Over the Limit Fee - $25 per purchase
(#7, 8, 9 on sample credit card offer handout)

13. What to Look for in a Credit Card Offer
Look for the lowest APR, no annual fees, a grace period, and rewards you might be interested in getting (cash back, airline miles, etc.)
Good credit sources will be able to offer lower interest rates, provide repayment assistance, and remedy errors and correct billing statements
(credit cards tab)

14. Reading Your Credit Card Statement
(sample credit card account statement handout)
Summary of Account Activity
Payment Information
Late Payment Warning
Minimum Payment Warning
Notice of Changes to Your Interest Rate
Other Changes to Your Account Terms
Transactions
Fees and Interest Charges
Year-to-date Totals
Interest Charge Calculation

15. Repayment Example Credit Card Balance = $1000 APR 15%
$20 minimum payment
How long to pay off loan at minimum payment?
7 years!
How much interest will be charged during that time?
$580!
Credit Card Repayment Calculator:

16. Credit Reports and Credit Scores
A credit report is a collection of information about you and your credit history
Includes personal information, account information, some public record information, inquiries into your credit, and creditor information list
Free credit reports available annually at
A credit score is a number predicting how risky it may be to lend you money.
Fair Isaac Score (FICO) or VantageScore

17. What Makes Up Your Credit Scores
FICO Score
VantageScore
Payment History- 35%
Outstanding Balances- 30%
Length of Credit History- 15%
New Credit- 10%
Credit Mix- 10%
Best: 850 Good: 720 Worst: 300
Payment History- 32%
Utilization- 23%
Outstanding Balances- 15%
Depth of Credit- 13%
Recent Credit- 10%
Available Credit- 7%
Best: Worst:

18. Why are Credit Reports and Credit Scores Important?
Lenders usually look at your credit history to help determine whether they will extend you credit, how much, and at what interest rate
Employers and Service Providers may also look at your credit history
Making late payments, having too many credit cards, or being up to your credit limit can have a negative impact on your credit score
Negative information can stay on your credit report for 7-10 years

19. Be a Good Credit Consumer
Wisely consider the types of debt you have
Only borrow for purchases that help you make money, grow your wealth, or satisfy basic needs
Use credit cards sparingly; keep debt balance low
Stop charging the moment you know you can’t pay the entire balance
Pay off credit cards in full and on time each month, or at least pay more than the minimum amount
Know your budget and live within your means

20. What if you Are in Over Your Head?
Set a budget and stick to it!
Pay more than the minimum payment amount
Call your credit card company to see if they can work with you on a payment plan
Pay off debt with the highest interest rate first or pay off debt smallest balance first
Find a reputable credit counselor
Use savings or assets to pay off debt
Maintain a good payment history for months and then petition to lower your interest rate

21. The Long and Short of It…
College Credit for Life

22. Before you go… Please complete and submit your evaluation forms
PowerPoint presentation and handouts will be posted on our website

23. Thank You!
Contact Information:
Office of Financial Aid; Andrea, Gary, and Melissa
Campus location: 114 Silas Hunt Hall
Phone:
Fax:
Website:
And find us on Facebook at University of Arkansas Financial Aid!