Activity 1………….…………The ABCs of Credit

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• Activity 1.The ABCs of Credit
• Activity 2.Credit Scores
• Activity 3.Establishing Credit
• Activity 4.Maintaining Good Credit
• Activity 5..Credit Cards
• Activity 6.Managing Credit Challenges
• Activity 7...Identity Theft
• Activity 8Prime and Subprime Lending
• Activity 9..Predatory Lending
• Activity 10..Bankruptcy

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Credit - Activity 1

• ACTIVITY 1
• The ABCs of Credit
• Overview
• What is credit?
• The five Cs of credit
• Pros and cons of using credit
• The big decisionShould I use credit?

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CREDIT DEFINITIONS Credit Trust given to another
person for future payment of a loan, credit card
balance, etc. Creditor A person or company to
whom a debt is owed.
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Slide 1 Credit Definitions Lesson Reference
Credit, Activity 1 Handout 1
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Slide 2 - The Five Cs of Credit Lesson
Reference Credit, Activity 1 Overhead 1
THE FIVE Cs OF CREDIT C Capacity C
Capital C Collateral C Conditions C
Character
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WHEN TO USE CREDIT Can you describe a situation
when it is a good time to use credit and when it
is NOT a good time to use credit?
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Slide 3 When to Use Credit Lesson Reference
Credit, Activity 1 Handout 2
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QUESTIONS TO ASK BEFORE USING CREDIT 1. 2. 3. 4.
5. 6. 7.
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Slide 4 Questions to Ask Lesson Reference
Credit, Activity 1 Handout 3
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• ACTIVITY 2
• Credit Scores
• Overview
• Credit scores and their impact
• The factors that make up a credit score
• Strategies to improve your credit score

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Credit - Activity 2
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• WHAT IS A CREDIT SCORE?
• A credit score is a number that helps a lender
  predict how likely an individual is to repay a
  loan, or make credit payments on time.
• A credit score is a number that changes as the
  elements in a credit report change.
• A credit score has broad use and impact. Your
  credit past is your credit future.
• FICO scores, one of the most common credit
  scoring systems, vary between 350 and 850.
• VantageScoreSM, a new credit scoring system
  developed by the three credit bureaus, ranges
  from 501-990.

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Slide 1 What Is a Credit Score? Lesson
Reference Credit, Activity 2 Overhead 1
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WHAT MAKES UP A TYPICAL CREDIT SCORE?
Source Fair Isaac and Consumer Federation of
America, 2005
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Slide 2 What Makes Up a Typical Credit Score?
Lesson Reference Credit, Activity 2 Overhead 2
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• IMPROVING YOUR CREDIT SCORE
• Pay bills on time.
• Get current and stay current.
• Dont open a lot of new accounts too rapidly.
• Correct mistakes.
• Shop for loan rates within a focused period of
  time.
• Keep balances low on revolving credit.
• Pay off debt.
• Check your credit report.

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Slide 3 Improving Your Credit Score Lesson
Reference Credit, Activity 2 Handout 2
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Credit - Activity 3

• ACTIVITY 3
• Establishing Credit
• Overview
• Types and sources of credit
• Credit safeguards
• Applying for credit
• Questions to ask when applying for credit

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TYPES OF CREDIT Cash Credit Sales
Credit Secured Credit Revolving Credit
I.O.U. Single Payment Credit Installment
Credit Other Types of Credit
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Slide 1 Types of Credit Lesson Reference
Credit, Activity 3 Handout 1
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Slide 2 - Sources of Credit Lesson Reference
Credit, Activity 3 Overhead 1
SOURCES OF CREDIT
Banks Mortgage Loan Companies
Retail Stores Finance Companies
Credit Unions Caisses Populaires Internet
Stores
What are other sources of credit? What sources
of credit should be avoided? Why?
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• STEPS TO TAKE TO AVOID
• ABUSIVE LENDING
• Have you shopped around for the best deal?
• Do you feel the lender pressured you to take the
  loan?
• Do you understand the terms of the loan?

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Slide 3 Avoiding Abusive Lending Lesson
Reference Credit, Activity 3 Handout 2
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• COMMON PARTS OF A
• CREDIT APPLICATION
• Reason for Loan
• Personal Identification Information
• Employment Information
• Mortgage/Rental Information
• Documentation Required (for some applications)
• Current Debts
• Credit References
• Collateral (for some applications)
• Bank References
• Signature and Date

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Slide 4 Parts of a Credit Application Lesson
Reference Credit, Activity 3 Handout 3
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SAMPLE CREDIT APPLICATION
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Slide 5 Sample Credit Application Lesson
Reference Credit, Activity 3 Handout 3
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• QUESTIONS TO ASK WHEN
• APPLYING FOR CREDIT
• What is the annual fee?
• What is the annual percentage rate (APR)?
• When are payments due?
• What is the minimum payment required each month?
• Is there a grace period?
• Are there other fees associated with the credit,
  such as minimum finance charges?
• What is the credit limit?
• What are the penalties for late or missed
  payments?
• What are the terms and conditions of the credit?
  What else is included in the fine print?

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Slide 6 Questions to Ask Lesson Reference
Credit, Activity 3 Handout 5
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Credit - Activity 4

• ACTIVITY 4
• Maintaining
• Good Credit
• Overview
• Debt to income thermometer
• Credit process
• Credit reporting agencies
• Credit safeguards for consumers
• Credit reports, ratings and scores
• Establishing a credit history

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Slide 1 Debt-to-Income Thermometer Lesson
Reference Credit, Activity 4 Overhead 1
DEBT-TO-INCOME THERMOMETER
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Slide 2 - The Credit Process Lesson Reference
Credit, Activity 4 Overhead 2
THE CREDIT PROCESS CREDIT HISTORY CREDIT
BUREAU CREDIT REPORT CREDIT SCORE CREDIT
RATING
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SAMPLE CREDIT REPORT
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Slide 3 Sample Credit Report Lesson Reference
Credit, Activity 4 Handout 2
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Slide 4 - Credit Safeguards for Consumers Lesson
Reference Credit, Activity 4 Handout 3
CREDIT SAFEGUARDS FOR CONSUMERS Bank Act (Cost
of Borrowing Regulations) Consumer Protection
Act Personal Information Protection
Electronic Documents Act (PIPEDA) Credit
Reporting Acts Collection Agencies Acts
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Slide 5 - Things to Establish Good Credit Lesson
Reference Credit, Activity 4 Overhead 3
THINGS TO DO TO ESTABLISH AND MAINTAIN GOOD
CREDIT What can everyone do to establish and
maintain good credit? 1. Pay all bills on
time. 2. Avoid late fees. 3. 4. 5. 6.
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Credit - Activity 5

• ACTIVITY 5
• Credit Cards
• Overview
• Types of credit cards
• Shopping for a credit card
• Costs of credit

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Slide 1 - Types of Credit Cards Lesson
Reference Credit, Activity 5 Overhead 1

• TYPES OF CREDIT CARDS
• Private Label
• Issued by a single source
• Can only be used at a single source
• Examples Department Stores, Gasoline Companies
• General Label
• Issued by a single source
• Can be used in many places
• Examples Bank Card, Major Credit Card

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Slide 2 - Shopping for a Credit Card Lesson
Reference Credit, Activity 5 Overhead 2
SHOPPING FOR A CREDIT CARD DECISIONS,
DECISIONS... ANNUAL FEE? APR? COMPUTATIO
N METHOD? GRACE PERIOD? FINANCE
CHARGE? CREDIT LIMIT? CARD INCENTIVES?
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• QUESTIONS TO ASK WHEN SHOPPING FOR A CREDIT
  CARD
• Annual fee
• Annual percentage rate (APR)
• Minimum payment
• Computation method
• Grace period
• Finance charges
• Card incentives

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Slide 3 Questions to Ask Lesson Reference
Credit, Activity 5 Handout 1
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COSTS OF CREDIT How much can credit cost? If you
make only the minimum payment for an item, here
are some examples of what you might actually pay
and how long it will take you to pay it.
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Slide 4 Costs of Credit Lesson Reference
Credit, Activity 5 Handout 2
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Credit - Activity 6

• ACTIVITY 6
• Managing Credit
• Challenges
• Overview
• Warning signs of credit abuse
• Credit card reductions
• Correcting credit errors
• Resources and assistance

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MEASURING THE SERIOUSNESS OF CREDIT TROUBLE
SIGNS Rate how serious you think each of the
following trouble signs is. 1 Not
Serious 4 Very Serious Trouble Signs

• Delinquent Payments
• Default Notices
• Repossessions
• Collection Agencies

• Lien
• Garnishment
• Others?

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Slide 1 Rating Trouble Signs Lesson Reference
Credit, Activity 6 Handout 1
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WARNING SIGNS OF DEBT PROBLEMS

• Delinquent Payments
• Default Notices
• Repossessions
• Collection Agencies
• Judgment Lien
• Garnishment

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Slide 2 Warning Signs Lesson Reference
Credit, Activity 6 Handout 2
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CREDIT CARD REDUCTIONS Paying only the minimum
payments on your credit card may seem appealing,
but if only minimum payments are made, it can
take years, and sometimes decades, to achieve
full repayment. Paying the minimum amount due
keeps your credit history clean, but it also
costs you more.
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Slide 3 Credit Card Reductions Lesson
Reference Credit, Activity 6 Handout 3
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• CORRECTING CREDIT ERRORS
• Circle the incorrect items on your credit report.
• Write a letter to the reporting agency, telling
  them which information you think is inaccurate.
  Provide supporting documentation.
• Send all materials by certified mail.
• Send a similar letter to the creditor whose
  reports you disagree with.
• The reporting agency will conduct an
  investigation.
• If negative information is accurate, it can stay
  on your report for 7-10 years.

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Slide 4 Correcting Credit Errors Lesson
Reference Credit, Activity 6 Handout 4
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• CORRECTING CREDIT PROBLEMS
• Take responsibility for actions.
• Communicate with creditors.
• Debt Consolidation
• Credit Counseling
• Bankruptcy

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Slide 5 Correcting Credit Problems Lesson
Reference Credit, Activity 6 Handout 5
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• ACTIVITY 7
• Identity Theft
• Overview
• The growing problem of identity theft and how it
  occurs
• Strategies to protect your personal information
• Steps to take if your identity has been stolen.

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Credit - Activity 7
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IDENTITY THEFT Identity theft occurs when
someone uses your personal identifying
information to either establish credit under your
name or to take over an existing account that you
established without your authorization. This
information may include

• Social Insurance Numbers
• Name
• Address
• Date of birth

• Mothers maiden name
• Passwords
• PINs

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Slide 1 Identity Theft Lesson Reference
Credit, Activity 7 Overhead 1
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• HOW TO AVOID IDENTITY THEFT
• Monitor your credit report.
• Dont give out personal information to unknown
  persons or companies.
• Protect your credit and debit cards.
• Protect your mailbox.
• Protect your wallet.
• Use passwords and PINs that cant be easily
  guessed.
• Use anti-virus software on your computer.
• Notify your bank when you change your address or
  phone number.
• Other suggestions?

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Slide 2 How to Avoid Identity Theft Lesson
Reference Credit, Activity 7 Handout 2
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WHAT TO DO IF YOUR IDENTITY HAS BEEN STOLEN If
you think your identity has been stolen, take the
following steps

• Contact the three major credit bureaus (Equifax,
  Northern Credit Bureaus, and Trans Union).
• Close accounts.
• Contact all creditors involved.
• File a police report.
• Keep a record of your contacts.

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Slide 3 What to Do Lesson Reference Credit,
Activity 7 Overhead 2
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• ACTIVITY 8
• Prime and Subprime Lending
• Overview
• Prime and subprime lending definitions
• Alternative institutions that provide higher-cost
  loans
• Strategies to improve credit in order to qualify
  for prime loans.

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Credit - Activity 8
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PRIME AND SUBPRIME MORTGAGE LENDING Prime
Prime credit is typically available to an
individual who has paid his or her outstanding
credit on time. Subprime A subprime loan is
typically available to a person with either no
credit history or a damaged credit history and
who is considered to be a high-risk borrower.
Subprime loans have higher-than-average interest
rates.
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Slide 1 Prime and Subprime Lending Lesson
Reference Credit, Activity 8 Overhead 1
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THE PRICE OF SUBPRIME LENDING How much does a
subprime loan cost you? If you are making
payments on a car, for example, you could be
paying significantly more just for getting a loan
with a higher interest rate. This added interest
is significant over the life of the loan.
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Slide 2 The Price of Subprime Lending Lesson
Reference Credit, Activity 8 Handout 1
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• MOVING FROM
• SUBPRIME TO PRIME
• Pay bills on time.
• Correct mistakes.
• Pay more than the minimum required.
• Use credit sparingly.
• Work with a reputable nonprofit credit counseling
  organization.

If you currently have a lower credit score and
want to be able to qualify for prime loans in the
future, you should take steps to improve your
credit. The following steps can help.
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Slide 3 Moving from Subprime to Prime Lesson
Reference Credit, Activity 8 Handout 2
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• ACTIVITY 9
• Predatory Lending
• Overview
• Characteristics and warning signs of predatory
  lending.
• The key targets of predatory lending.
• Common abuses and scams.
• Nonprofit organizations that can help consumers
  plagued by predatory lending.

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Credit - Activity 9
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• PREDATORY LENDING
• Sell properties for much more than they are
  worth, using false appraisals.
• Encourage borrowers to lie about their income,
  expenses, or cash available for down payments in
  order to get a loan.
• Knowingly lend more money than a borrower can
  afford to repay.
• And many other scams.

In communities across Canada, some people are
losing their homes and their investments because
of predatory lenders, corrupt appraisers,
mortgage brokers, and home improvement
contractors who
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Slide 1 Predatory Lending Lesson Reference
Credit, Activity 9 Overhead 1
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• IDENTIFYING
• PREDATORY LENDING
• Packaging a loan with single-premium credit
  insurance products
• Repeatedly refinancing a loan in a short period
  of time
• Charging excessive rates and fees to a borrower
  who qualifies for lower rates and fees

Predatory lending is not defined by provincial
law except to the extent that a loan is a
high-cost loan and contains one of a fixed list
of terms or conditions. Predatory or abusive
lending practices can include
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Slide 2 Predatory Lending Lesson Reference
Credit, Activity 9 Handout 1
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• TEN WARNING SIGNS OF
• PREDATORY MORTGAGES
• Unreasonably high interest rates
• Multiple refinancing
• Unnecessary debt consolidation
• Balloon payment
• Negative amortization
• Door-to-door solicitation
• Back-dating of documents
• Large loan broker fees
• Kickbacks between lender and broker
• Single-premium credit life insurance

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Slide 3 Ten Warning Signs Lesson Reference
Credit, Activity 9 Handout 1
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• COMMON SCAMS
• Advance fee schemes
• The prize that will cost you
• Online auctions
• Fraud jobs
• Moneymaking schemes
• Bogus charities
• Scam schools

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Slide 4 Common Scams Lesson Reference
Credit, Activity 9 Handout 2
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• TOP STRATEGIES TO AVOID SCAMS
• Dont become a victim.
• Investigate strangers who have deals too good to
  be true.
• Always stay in charge of your money.
• Dont be fooled by appearances.
• Watch out for salespeople who prey on fears.
• Monitor your investments.
• Report fraud or abuse.
• Do your homework.
• Be wary of door-to-door solicitations.

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Slide 5 Top Strategies to Avoid Scams Lesson
Reference Credit, Activity 9 Handout 2
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• ADDITIONAL RESOURCES
• PhoneBusters - The Canadian Anti-fraud Call
  Centre -
• [phone] http//www.phonebusters.com
  info_at_phonebusters.com.
• Office of Consumer Protection - Quebec Provincial
  Government - There are 11 regional offices of the
  Office of Consumer Protection. One toll-free
  number serves them all [phone].
• Office of Consumer Affairs - Canadian Federal
  Government - [phone] http//www.consumer.i
  c.gc.ca.
• Ministry of the Attorney General Ontario -
  [phone].

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Slide 6 Additional Resources Lesson Reference
Credit, Activity 9 Handout 3
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• ACTIVITY 10
• Bankruptcy
• Overview
• Personal bankruptcy and consumer proposal
• Provisions of the new bankruptcy legislation
• Strategies to avoid bankruptcy

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Credit - Activity 10
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BANKRUPTCY Personal Bankruptcy wipes out all
allowable debts and allows certain personal
property exemptions. The debtor gives up all
property unless the state deems it necessary to
support the debtor and his or her dependents.
Eligibility is determined by a means test that
measures income against expenses. Consumer
Proposal is a negotiated settlement between a
debtor and his or her creditors. A typical
proposal will involve the debtor making monthly
payments for a maximum of five years, with the
funds distributed to their creditors.
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Slide 1 Bankruptcy Lesson Reference Credit,
Activity 10 Overhead 1
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• PROVISIONS OF THE CANADIAN BANKRUPTCY REFORM
• Debtors who have surplus income will no longer be
  eligible for an automatic discharge after nine
  months.
• Bankrupt individuals with more than 200,000 in
  personal income tax debts will not be eligible
  for an automatic discharge.
• Student loans may be written off.
• A consumer can file a consumer proposal that is
  as high as 250,000.

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Slide 2 Provisions of Bankruptcy Reform Lesson
Reference Credit, Activity 10 Handout 1
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• THINGS TO CONSIDER BEFORE FILING FOR BANKRUPTCY
• A bankruptcy filing could determine whether or
  not you get a job.
• Your insurance rates could rise.
• You may find it difficult to rent an apartment or
  qualify for a home loan.
• Bankruptcies stay on your credit report for 10
  years.
• Bankruptcy can lower your credit score.

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Slide 3 Things to Consider Lesson Reference
Credit, Activity 10 Overhead 2
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• THINGS TO DO BEFORE DECIDING TO FILE
  BANKRUPTCY, CONT.
• Reduce your spending
• Talk with your creditors.
• Talk with a nonprofit counseling agency.
• Talk with an attorney and understand the
  consequences of declaring bankruptcy.
• Consider consolidation carefully.

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Slide 4 Things to Do Lesson Reference
Credit, Activity 10 Handout 2
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• TIPS TO REMEMBER
• Keep track of your daily expenses.
• Save money on a regular basis.
• Make changes right away if you see yourself
  starting to get into financial trouble.
• Pay attention to your household finances,
  especially if you are married.

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Slide 5 Tips to Remember Lesson Reference
Credit, Activity 10 Handout 2