All Things Credit: Reports, Scores,

1
All Things Credit Reports, Scores, Credit
Card Offers Vanderbilt University School of
Medicine February 26, 2009
Mary B. W. Fenton, MA National Executive, Health
Professions and Graduate Schools American
Student Assistance
2
Participants In The Life Of A Student Loan(s)
3
YOUR Financial Plan
Key to managing your
Keys to keeping you solvent
dont let it get out of whack!!
4
Objectives .

• Define credit
• Identify elements of a credit REPORT
• Establish the difference between a credit SCORE
  a credit report
• Identify the weighting factors that influence a
  credit SCORE
• Realize impact of negative credit score
• Clarify value of a good credit history/score
• Review assessing desirability of credit card
  offers
• Clarify assignment of interest rates and other
  fees assessed on credit cards

5
What Is Credit?

• Websters New World Dictionary defines it as
• belief confidence trust faith
• the favorable estimate of a persons character
  reputation good name
• the amount of money remaining in a persons
  account in a bank
• trust in ones integrity in money matters and in
  ones ability to meet payments when due IT IS
  NOT defined as a 2 x 3.5 piece of plastic!!!

6
Thoughts About Credit Money

• The only man who sticks closer to you (in
  adversity than a friend) is a creditor. 
  Unknown
• Creditors have better memories than debtors. 
  Benjamin Franklin
• There are plenty of ways to get ahead.  The first
  is so basic I'm almost embarrassed to say it 
  spend less than you earn.  Paul Clitheroe
• If you cant afford it, dont buy it. Warren
  Buffett

7
Elements of A Credit Report

• historical summary of financial payment
  activity ?mortgages, rent payments, car
  payments, utilities, revolving loans, student
  loans, credit cards, library fines, parking
  tickets, apartment rental agreements, etc., ANY
  CONTRACTUAL FINANCIAL ARRANGEMENT!!
• including ?current balances on all outstanding
  debts ?amount of available credit - per credit
  card ?bankruptcies, liens, any judgements,
  etc. ?inquiries about credit from various
  companies ?public record, collection items,
  liens, bankruptcies, etc.
• person with a good credit report is likely to get
  a better interest rate than someone with a poor
  credit report because it will equate to a good
  CREDIT SCORE.

8
Credit Report . How Should I Monitor It?

• FREE, annual credit report FAQs
• ?Experian, Equifax, TransUnion
• ?www.annualcreditreport.com ?Stagger your
  requests, quarterly, to keep an eye on your
  credit
• Check for erroneous information
• ?similar names ?similar SS s ?identify
  theft
• Each offers a credit score (for a fee)
• Finances get out of whack . put
  everything else ON HOLD

9
What Is a Credit (FICO) Score?

• FICO Fair Isaac Corporation (company that
  specializes in predictive analytics)
• A multi-variate, multi-equation model which
  calculates a number based on your personal credit
  BEHAVIOR ?Credit GRADE ?how well you handle
  money!!
• FICO score is calculated based on payment
  information on your Credit Report (historical
  financial summary)
• ?real-time
• Measure used to indicate the likelihood someone
  will repay a loan

10
What Does Not Count (against you) in a Credit
Score?

• Shopping for best mortgage rates
• Shopping for best car loan rates
• Shopping for best home equity loan rates
• ?historically, a person with 6 or more hard
  inquiries on their credit report is 8 times more
  likely to declare bankruptcy than someone with NO
  inquiries
• ?so having more hard inquires makes you appear
  more risky to potential lenders

Within a 60 day window!!
11
Factors influencing your credit score ..
Types of credit used
Payment history
New credit
10
1o
35
15
30
Length of Credit History
Amounts owed (debt-to-credit limit)
Source www.myfico.com
12

U.S. FICO score ranges Where Are You?
13
Managing Your Credit .

• Know what you owe and live within your means.
• Borrow only what you can afford.
• Use credit wisely check your credit report
  annually/QUARTERLY.
• Recognize the warning signs of financial
  difficulty.
• Pay your bills on time.
• Reduce the number of department store cards.

• No more than 1 or 2 credit cards.
• Keep balances less than 50 of available credit.
• Pay more than the minimum payment required.
• Limit credit balance transfers.
• Know a scam when you see one.
• Guard against identify theft.
• Treat bankruptcy as a last resort.

14
Mismanaging Your Credit

• Exceeding your credit limit
• Opening and closing (or transfer) credit accounts
  in a short period of time
• Paying late, or even worse, defaulting on a loan
• Writing bad checks. ?doesnt hurt FICO, but gets
  reported
• Opting for 100 financing on depreciating items
  such as automobiles ?think about previously
  owned with a warranty
• Declaring bankruptcy

15
Impact of Credit .30 year fixed mortgage ..
300,000
16
Impact of Credit .15 year home equity line
50,000
17
Impact of Credit .36 month auto loan
25,000
18
Cost of Poor or Mediocre Credit .. Over Ones
Lifetime

• EMILY .
• Credit Score 750
• Always paid on time usually, more than what was
  due ..
• Interest on Credit Cards 9.90
• Interest paid 39,600
• Interest on car loan(s) 5.00
• Interest paid (lifetime of cars) 21,166
• Mortgage (1st) 5.50
• Interest paid (10 years) 174,760
• Mortgage (2nd) 5.50
• Interest paid (30 years) 417,616

• KAREN .
• Credit Score 650
• Not always on time frequently, only minimum
  due ..
• Interest on Credit Cards 19.90
• Interest paid 79,600
• Interest on car loan(s) 8.00
• Interest paid (lifetime of cars) 34,653
• Mortgage (1st) 7.375
• Interest paid (10 years) 243,020
• Mortgage (2nd) 7.375
• Interest paid (30 years) 594,572
• Karens PENALTY 176,956

Does not include loss of investment return had
she had good credit and invested the money she
saved!! Source Your Credit Score by Liz Pulliam
Weston
19
Paying the Minimum The Power of Compounding
Interest

• Charge 500
• Interest 15
• Minimum Pmnt 12.50
• At this payment rate,
• how long will it take to pay the balance?
• 74 months (6.17 years)
• How much interest was paid?
• 258.03 or 51.61 of initial loan amount

• Charge 5000
• Interest 15
• Minimum Pmnt 125
• At this payment rate,
• how long will it take to pay the balance?
• 257 months (21.42 years)
• How much interest was paid?
• 4757.98 or 95.16 of initial loan amount

The minimum payment on credit card debt is
calculated as a percentage of your current
balance. The minimum payment drops as your
balance is paid, but thanks to the magic of
compounding, you'll end up paying for a long,
long time. Source Bankrate.com
20
Impact of Credit .

• It will affect whether or not you are qualified
  to receive a GradPlus.
• It can affect whether or not you receive an
  Alternative loan and the interest rate you
  receive.

• If affecting the cost of borrowing isnt bad
  enough ..
• It can affect employment opportunities!!
• It can affect licensure!!

21
The Fine Print of Credit Cards
22
Interest Rates

• Types of Annual Percentage Rates (APRs)
• Introductory Rate the interest rate a credit
  card will charge you for a specified period of
  time. ?After the introductory period ends,
  your introductory APR will convert to a standard
  APR.
• Standard Rate the interest rate a credit card
  company will charge you once the introductory
  period expires
• Fixed a set interest rate ?the credit card
  company will notify you of any interest rate
  changes
• Variable based on an index usually resets
  quarterly, etc.
• Periodic rate is used to calculate finance
  charges
• ?Often, the Annual Percentage Rate (APR) is
  determined by your credit score.

23
Fees .

• CASH ADVANCE FEE usually (2 4) ?typically,
  at a higher interest rate
• ?may not have a grace period
• LATE FEE assessed when payments arrive late (15
  to 50)
• OVER LIMIT FEE assessed when card exceeds credit
  limit
• ?not necessarily a one-time fee
• UNIVERSAL DEFAULT FEE assessed if a late payment
  is made on an account or if several late fees
  (in a specific time period) are assessed
• ?any other creditor can also raise your APR to
  the default interest rate on any other credit
  card

24
Trouble Reading the Fine Print

• ?33 of consumers cant read or understand
  disclosure, or fine print
• ?20 could not find critical terms
• ?44 did not know the APR on their credit cards
• ?20 did not know their credit limit
• ?70 were unaware of universal default policies
• Source Braun Research, 2006

25
Too Many Credit Card Offers?

• You can remove your name from the marketing lists
  of the three credit reporting bureaus
• Call
• 888-5-OPTOUT ( 888-567-8688)
• or
• go online to www.optoutprescreen.com

26
Definition of a Deadbeat

• Deadbeat a person who tries to evade paying for
  things sponge (Websters New World
  Dictionary)
• Deadbeat according to Credit Card Nation (by
  Robert D. Manning)
• ?individuals who pay their credit card balances,
  in full, each month

27
Housestaff Salaries .

• ACADEMIC YEAR 2008-09 2007-08 ?
• 1st PGY 46,245 44,747 3.35
• 2nd PGY 48,092 46,487 3.46
• 3rd PGY 50,128 48,419 3.53
• 4th PGY 52,154 50,363 3.56
• 5th PGY 54,164 52,372 3.43
• 6th PGY 56,463 54,494 3.62
• 7th PGY 58,520 56,454 3.66
• 8th PGY 60,278 58,833 2.46

28
Helpful Websites .

• www.myfico.com
• www.annualcreditreport.com
• www.optoutprescreen.com
• www.equifax.com
• www.experian.com
• www.transunion.com
• www.quicken.com
• www.bankrate.com
• www.tcalc.com/calculators.asp
• www.lizweston.com

29
Bibliography ..

• Weston, Liz Pulliam. Your Credit Score, How To
  Fix, Improve, and Protect the 3-Digit Number that
  Shapes Your Financial Future. 2nd Edition. 2007.
  New Jersey (Pearson Education, Inc.) FT Press.
• Manning, Robert D., Credit Card Nation, The
  Consequences of Americas Addiction to Credit.
  2000. New York Basic Books.
• Ramsey, Dave. The Total Money Makeover, A Proven
  Plan for Financial Fitness. 2003. Tennessee
  Thomas Nelson, Inc.
• Morris, Kenneth M., Siegel, Alan M., The Wall
  Street Journal Guide to Understanding Personal
  Finance. 1997. New York Lightbulb Press, Inc.
  and Dow Jones Co.
• Warren, Elizabeth, Warren Tyagi, Amelia, All Your
  Worth, The Ultimate Lifetime Money Plan. 2005.
  New York Free Press.
• Strauss, Steven D., Jaffe, Azriela., The Complete
  Idiots Guide to Beating Debt. 2000. Indiana
  Alpha Books.
• Morris, Kenneth, M., Siegel, Alan, M., and
  Morris, Virginia, B., The Wall Street Journal
  Guide to Planning Your Financial Future. 1998.
  New York Lightbulb Press, Inc. and Dow Jones
  Co.
• Klosowski, Allen, CFP. Personal Financial
  Fitness, A Practical Guide to Improve The Health
  of Your Wealth. 1997. Menlo Park Crisp
  Publications.
• Quinn, Jane Bryant. Making the Most of Your
  Money. 1997. New York Simon Schuster.

30
THANK YOU .. Mary B. W. Fenton, MA National
Executive, Health Professions Graduate
Schools 1-800-999-9080 ex. 2199 mfenton_at_amsa.com
American Student Assistance 100 Cambridge
Street, Suite 1600 Boston, MA 02114
[phone] [phone] F A X (800)
999-0923 T D D
www.amsa.com