Unlocking The Confusion of Credit

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Unlocking The Confusion of Credit!
Provided by The Credit Education
Bureau 585-256-6080
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Keys to understanding credit

• Why having good credit matters.
• What is APR?
• How to use your credit wisely.
• The rules of the road What happens when
• How to protect yourself.
• How credit card companies work.

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The First Key Knowing Why Good Credit Matters
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Good Credit is the best way to prove to lenders
youre trustworthy.

• Having good credit is like having a 4.0 GPA.
• Everybody trusts you.
• Having bad credit is like having a few Fs.
• Everyone cant help but wonder.

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Lenders Will Look at Three Things

• How much you earn versus how much it costs you to
  live.
• What loans you already have or had.
• If you pay your bills on time.

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How do Lenders Figure it Out?

• They contact the credit bureaus.
• Agencies who compile your credit history
  information.
• The bureaus then supply a credit report.
• A transcript of your personal payment history.

Credit report

• The credit report has a credit rating.
• A system developed to determine how credit worthy
  you are based on your history.

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• A Credit Report
• 4 Basic Elements
• Personal identification
• Public records
• Payment history
• Inquiries
• Reporting Periods
• 2 years - Inquiries
• 7 years - Negative information
• 10 years - Bankruptcy (CH. 7)

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The Good News

• You Can Get a Copy!
• Call one of the three major credit bureaus
• Experian 800-422-4879
• Trans Union 800-916-8800
• Equifax 800-685-1111
• Each copy is 8.50.

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The Second Key Knowing About APR
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Figuring Out the Combination

• APR Annual Percentage Rate.
• APR calculates The total annual cost of a loan.
• APR consists of
• The principal
• The interest rate
• The finance charges

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Heres How APR Will Affect You

• 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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How Credit Cards WorkThe Imaginary Card

• Big Bank USA Mastercharge credit card.
• 500 limit.
• 20 APR.
• What would you like to buy?

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How Long Will it Take to Pay Off?

• Minimum Payment 10 each month.
• 9 years to pay off.
• 584 in interest.

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How Long Will it Take to Pay Off?

• Twice the minimum payment 20 each month.
• 2 years and 8 months to pay off.
• 152 in interest.

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The Third Key Knowing How to Use Your Credit
Wisely
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Everything You Need to Know, But Didnt Know to
Ask.
Looking at the fine print!
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What kind of APR am I being charged?

• Variable rate
• Changes as the economy changes
• Fixed rate
• You are given a precise number that doesnt
  change without notification

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What are the rules about fees?

• Fees are usually charged if a customer violates
  their agreement terms
• Companies may charge for things like late
  payments, returned checks, or going over credit
  limits

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What is a grace period?

• Its the period of time between your purchase and
  when your payment is due
• Its also the period of time when no finance
  charges are added

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How is my minimum payment calculated?

• Its different for each issuer
• For the most part, it is 2 to 3 of your balance

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The Fourth Key Knowing What Happens When
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Youre late?

• Being as little as 30 days late can affect your
  credit
• In most cases you will be charged a late fee
• And it will be reported to the credit bureaus

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You cant even pay the minimum?

• They may suspend your charging privileges
• They may turn you over to their collection
  department
• They may report you to the credit bureaus
• Advice Call the credit card issuer

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You lose a credit card?
?

• The most they can hold you liable for is 50 of
  any unauthorized charges
• Call the credit card issuer

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You get charged for something you didnt buy?

• You must dispute the item
• Call or write your credit card company
• You can withhold payment on the disputed amount
• You will not be charged interest if the dispute
  is correct

Oops!
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The Fifth Key Knowing How To Protect Yourself.
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Being Credit Wise

• Understand the terms of your credit cards APR,
  fees, fine print, etc.
• Dont leave credit card receipts in the open
• Keep your issuers phone numbers in a file in
  case you lose your card
• Check your statement each month for erroneous
  charges

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Also

• Dont give your account number out over the phone
  to callers youre not familiar with
• If you get in over your head, call your creditors
  to make arrangements
• Tear up pre approved credit card solicitations
  before throwing them away

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The Sixth Key Knowing How Credit Card Companies
Work
The road to shopper awareness
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Understanding The Industry

• Networks
• Visa, Master Card, American Express, Discover
• Issuers
• Banks and financial institutions (They carry the
  loan)

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How Do They Make Money?

• By charging cardholders interest
• By charging cardholders an annual fee
• By charging penalty fees late payments, cash
  advances, etc
• They charge stores for each sale

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Final Summary

• Know that your credit history will affect your
  future.
• Know the pitfalls of credit cards- APR, fees,
  penalties, etc.
• Know how to protect your personal information.
• Understand how the industry works.