Extra Credit Understanding Credit

1
Extra CreditUnderstanding Credit Debt
Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
2
Benjamin Franklin On Debt

• Creditors have better memories than debtors.

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
3
What Well Talk About

• Debt How To Handle It
• Your Credit Score How To Raise It
• Credit Reports How To Obtain One
• Credit In The Current Market
• Talking To Your Students

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
4
Not All Debt Is Evil

• Credit is a valuable tool, yet many people misuse
  and overuse it.

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
5
Warning SignsToo Much Debt

• Signs of someone who may be in trouble
• Making only the minimum payment
• Maxing or nearly maxing out credit cards
• Not knowing how much is owed

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
6
Warning SignsToo Much Debt

• Signs of someone who may be in trouble
• Using credit cards to purchase items that used to
  be purchased with cash
• Paying off one card with another card
• Phone calls or letters from creditors

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
7
Lowering Your Debt

• Ask Your Credit Card Company To Lower Your
  Interest Rate
• If Your Card Company Wont Lower Shop For A
  Lower Rate Card
• Set up a tight budget and stick to it. Find ways
  to save money America Saves
• Set realistic goals

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
8
If You Are In Trouble

• Stop Borrowing
• Contact Your Creditors
• Review the Fair Debt Collection Act
• Speak with a credit counselor

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
9
Where To Turn For Help

• Credit Counselors
• National Foundation for Credit Counseling
  www.debtadvice.org
• Debt Management Plans
• Friends or Family
• Ask to borrow money from a friend or family
• No to low-interest loans

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
10
Protect Yourself

• Be wary of organizations or individuals that
• Promise to solve your problem overnight
• Charge high up front fees
• Wont disclose the costs for their services
• If It Sounds Too Good To Be True It Probably
  Is

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
11
Credit Scores Reports
Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
12
Do You Check Your Score?

• Raise your hand if you have checked your credit
  score within the past two years?

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
13
How About Others?

• Only 49 of Americans have obtained their credit
  score in the past two years. (Consumer
  Federation of America, 2008)

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
14
Credit Scores

• What Is A Credit Score?
• The score given to an individual to determine
  their credit worthiness. FICO and Vantage.
• Who checks your credit score?
• Credit card companies
• Lenders
• Insurance Companies
• Employers
• Phone companies

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
15
Credit Scores

• How your score can affect you
• Interest Rates
• If your rate goes up on 1 card it can go up on
  another
• Insurance Rates
• Some Employers Use It When Hiring

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
16
An Example

• On a 225,000 home
• 6 Interest Rate
• 30-year fixed 1348/mo
• 5 Interest Rate
• 30-year fixed 1207/mo.
• 141.14/mo. difference
• 50,810 over 30 yrs

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
17
How Your Score Is Calculated

• FICO scores are calculated based on your rating
  in five general categories
• 1) Payment History2) Amounts Owed3) Length Of
  Credit History
• 4) New Credit5) Types Of Credit Used

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
18
Whats A Good Score?

• FICO Scores Range From 300 850
• In the eyes of most lenders, FICO credit scores
  above 700 (750) are very good.
• Recent changes in the economy have changed what
  lenders as a very good score

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
19
Your Credit Report

• A credit report is a report containing a detailed
  credit history of an individual.
• Whats On Your Credit Report?
• Personal Information (Name, SSN, Etc.)
• Public Records Collection Accounts
  (Bankruptcies, Foreclosures, Etc.)
• Your Credit History Current Obligations
• Credit Inquiries

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
20
How To Check Your Credit Report Score

• You are entitled to 1 free credit report a year
  from each of the 3 major credit bureaus.
• To request your free credit report visit
  www.annualcreditreport.com
• You can also request your credit score. A small
  fee may apply.

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
21
Improving Credit Scores

• Pay Bills On Time (Get current, stay current)
• Pay Off Debt Dont Move It Around
• Dont Close Unused Credit Cards As A Short-Term
  Strategy To Raise Your Score
• Dont Open New Credit You Dont Need.

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
22
More Tips For Improving Credit Scores

• Repair Errors (Outstanding Debts You Paid)
• Pay Down Balances To 20-30 Of Credit
• If You Have 1 Or 2 Old Cards You Haven't Used Put
  A Little On The Card And Then Pay It Off
• Do This About 1 Every 6 Months

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
23
Credit In The Current Market

• Lenders are lowering credit limits
• 20 banks lower on prime borrowers
• 60 banks lower on subprime borrowers
• Lenders are tightening their requirements.
• Good Score - 750 or higher
• Lenders are closing inactive cards
• Less liability

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
24
Talking With Students
Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
25
Talking With Your Students

• Fill them in on the following
• They should charge only what they can afford to
  pay back.
• Credit cards shouldn't be a money substitute for
  items they can't afford.
• They need to pay their bills on time and not just
  the minimum amount.
• Credit companies specifically target college
  students.

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
26
Resources For Your Students

• DFIs Right on the Money Financial Know-How For
  College Students
• www.dfi.wa.gov/consumers/collegebookorder.htm
• FTC Credit Web Site
• www.ftc.gov/credit
• AICPA
• www.360financialliteracy.org/LifeStages/College/
  
• Bad Credit Hotel
• www.controlyourcredit.gov/

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.
27
DFI Were here for you!

• Contact Us
• www.dfi.wa.gov / 1.877.RING.DFI
• Lyn PetersDirector of Communicationslpeters_at_dfi.
  wa.gov360.902.8731
• Jeremy LusheneWeb Master-Communications
  Consultantjlushene_at_dfi.wa.gov360.902.0506

Washington State Department of Financial
InstitutionsRegulating financial services to
protect and educate the public and promote
economic vitality.