The Power of Credit

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The Power of Credit!

• Understanding How Credit
• Affects Our Lives

Provided by The Credit Education
Bureau 585-256-6080
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Credit is

• An arrangement for deferred payment of a loan or
  purchase.
• Simply put credit is a loan.

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Purpose

• To learn what credit is really about and how to
  use it properly.

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What can be learned about the power of credit?

• Why your credit history is so important.
• How credit cards work.
• How interest works.
• How to get credit.
• How to Use or Abuse Credit.

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1. Why your credit history is so important.
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Your Credit History is Your Financial Report Card!
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By law a lender cannot deny credit because of

• Age, race, gender, marital status, religion,
  national origin, or receipt of public assistance.
• Creditors can only use your income and credit
  history to make their determination.

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Your credit history affects your future

• Having a good credit history will enable you to
  get the things you want.

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Having a bad credit history
Denied!

• will keep you from getting the things you want.
• Negative information is reported for 7 years.

Denied!
Denied!
Denied!
Denied!
Denied!
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In order to have a good credit history
PAID

• You must pay your bills on time.
• You shouldnt have any debt.
• You Shouldnt have too many accounts.

PAID
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One of the biggest problems

• 1.3 million people filed for bankruptcy between
  May 1998 and May 1999
• the negative .6 percent savings rate reported
  during the first quarter of 1999 was the lowest
  since figures in 1946
• Americans owed 1.3 trillion of unsecured
  consumer debt as of April 1999
• 2.38 percent of unsecured accounts were
  delinquent during the first quarter of 1999
• 60 percent of families did not have a work
  sponsored retirement plan as of 1995

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2. How Credit Cards Work.
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Credit Cards Arent Free Money!

• Credit is an arrangement for deferred payment of
  a loan or purchase.
• If you spend 100 on your Visa or MasterCard, you
  have to pay 100 back.
• If you cant pay the 100 back all at once, the
  credit card company will charge you extra.

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It Can Cost More to Use Credit.

• You may only have to pay the minimum payment of
  10 on a 500 balance but
• If you dont pay off the balance every month
• You will be charged interest.

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It Can Cost More to Use Credit.

• Some companies charge annual fees for having a
  card.
• And, if you are ever late making a payment
• You will be charged a late fee.
• Most companies will increase your interest rate.

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3. How Interest Works.
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Interest is a Percent of the Amount You are
Loaned.

• A credit card with a 20 interest rate
• A balance of 1000
• Will be charged 16.60 a month in interest.

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The Longer You Pay, The More You Pay.

• If you only paid the minimum payment of 20 each
  month on a balance of 1000
• It would take 8 years and 5 months to pay off the
  balance.
• It will cost 1087 in additional interest.

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Its all about the APR!

• APR stands for Annual Percentage Rate.
• Its the annual average total cost of the
  interest, principal and finance charges.

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Heres How it adds up

• Lets say your credit card has an APR of 18
• You purchase a new computer for 750
• You only pay the minimum payment of 15
• The interest owed would be 12
• The APR of 18 1.5 interest per month
• You still owe 747

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4. How To Get Credit.
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Demonstrate That You are a Good Risk

• You have to be at least 18 years of age.
• Have a regular source of income.
• Open a checking and savings account.

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Establishing a Credit History

• First, consider a secured credit card.
• Requires a bank account as security.
• Your limit is your deposit.

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Establishing a Credit History

• Secondly, consider applying for a store card.
• Sears, Kaufman's, JC Pennys, etc.
• Easier to be approved but have higher interest
  rates.

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Establishing a Credit History

• Thirdly, if all else fails, consider asking
  someone to co-sign for you.
• Perhaps a relative.
• Someone with an established credit history.
• They promise to pay your debts if you dont..

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None of These Things Will Work Unless

• You use credit wisely.

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5. How to Use or Abuse Credit
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The Bottom Line

• Dont use more credit than you can handle.
• Only spend as much as you can pay off each month.
• Never have more than 2 credit cards at a time.
• Too much credit is just as bad as not having
  enough.

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The Bottom Line

• Pay your bills on time.
• Being as little as 30 days late will stay on your
  credit file for 7 years!
• If you are going to be late, call your credit
  card issuer.
• They can work out some kind of arrangement if you
  call before youre late.

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The Bottom Line

• Credit cards should be used for convenience or
  for emergencies only.
• They should not be used to buy things you could
  not otherwise afford.
• What would we have if there werent any credit
  cards? 18 more stuff!

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Dont Abuse Credit

• If you dont use credit wisely
• It will affect your credit report.
• You will have trouble obtaining future credit.
• You will end up paying more.
• You may have trouble obtaining employment.

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The Power of Credit Comes Down to

• Knowing your credit history affects your future.
• Knowing that credit cards are a loan that must be
  paid.
• Knowing the costs of using credit.
• Knowing how to build a credit history.
• Knowing that credit can be a great tool if its
  used properly.