Credit Reports: Our Students and What They Need to Know.

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Credit Reports Our Students and What They Need
to Know.

• Presented by
• Renee Gullotto, EdFund and
• Sun Ow, Great Lakes Higher Education

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What well learn today

• Whats on a credit report
• What is a credit score based on
• How to clean up credit
• Identity Theft
• Credit Card Law Changes and Public Law 111-24
• How to entice your students to attend a credit
  workshop

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Understanding Credit

• What is a credit report?
• Checking your credit report
• Whats in a credit score?
• Credit risk
• Benefits of good credit

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What is a Credit Report?

• History of your ability to manage credit
• Similar to a transcript
• Lenders report your
• Payment history
• Amount borrowed
• Credit limits
• Delinquencies

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Whats in Your Credit Report?

• Summary of key information
• Personal information
• Credit history
• Public records
• Inquiries

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Checking Your Credit Report

• 79 of credit reports have errors1
• Check report annually
• Name
• Address
• Birth date
• Social Security number
• Accuracy of accounts

1National Association of State Public Interest
Research Groups, 2004 Survey
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Credit Report Information

• Information that is included
• Identifying info your name (nickname), current
  previous addresses, phone , ss , date of birth,
  current previous employers
• Specific info about each credit account date
  opened, credit limit/loan amount, monthly payment
  payment pattern
• Public records federal district bankruptcy,
  state county tax liens, monetary judgments
• Credit inquiries names of people/companies
  requesting your credit history
• Statements of dispute added only after official
  consumer dispute is filed, investigated, and
  agreement between consumer credit grantor
  cannot be reached

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Credit Reporting Agencies

• 3 Major Credit Reporting Agencies
• Equifax 800-685-1111 www.equifax.com
• Experian 888-397-3742
  www.experian.com
• TransUnion 800-888-4213
  www.transunion.com
• Call, write, or access your report online
• Fees range from free (if youve been denied
  credit within last 60 days or live in certain
  states)
• Monitor report regularly for accuracy
• www.annualcreditreport.com

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Credit Report Purpose

• Provides a history of your credit use to current
  and prospective lenders
• Allows lenders to assess risk of extending
  credit or lending money to you
• Used for all forms of credit, including private
  student loans, apartment rental, etc.

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Credit Report Information

• Information that is excluded
• Race
• Religious preference
• Personal lifestyle
• Political preference
• Medical history
• Friends
• Criminal record
• Any other unrelated information

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What is a Credit Score?

• Summary of credit report info represented as
  single number, based on mathematical calculation
• Predicts future payment performance (risk to
  lender)
• FICO (Fair, Isaac Co.) most common score type
  
• FICOs range from 300 to 850 the higher the
  better
• No single cut-off score used by all lenders
• Scores are fluid - recalculated each inquiry
• Not physically stored on credit report, but may
  be requested with report
• Resource www.myfico.com

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What is a Credit Score?

• Summary of credit report info represented as
  single number, based on mathematical calculation
• Predicts future payment performance (risk to
  lender)
• FICO (Fair, Isaac Co.) most common score type
  
• FICOs range from 300 to 850 the higher the
  better
• No single cut-off score used by all lenders
• Scores are fluid - recalculated each inquiry
• Not physically stored on credit report, but may
  be requested with report
• Resource www.myfico.com

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The purpose of a Credit Score

• Probability of paying new loan
• Grades of loans
• A the most creditworthy borrower
• B the average borrower
• Subprime highest risk borrower
• More information
• www.myfico.com

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What Determines Your Score?
Source www.Myfico.com
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Credit Score Distribution
Source www.Myfico.com
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Score Indicator of Risk
Credit Score
Source www.Myfico.com
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Buying a Car
Source www.Myfico.com
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Buying a House
Source www.Myfico.com
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Securing Good Credit

• Pay bills on time
• Pay before due date
• Automatic payments
• Pay down outstanding balances
• Check credit report periodically
• Protect your identity

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Low Credit Risk

• Stable class schedules
• Steady employment
• Consistent payments
• On-time loan payments
• Responsible student loan management

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High Credit Risk

• Late payments
• High balances
• Unpaid accounts
• Excessive number of open accounts
• Many recently opened accounts

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Charging 100 a Week
End of Period Balance Minimum Payment
1st month 400 12
1 year 4,713 146
5 years 2,232 69
10 years 877 21
19 years 7 7
Payments based on 3 percent minimum payment. Interest rate is 18 percent. No additional charges made in years 2-19 Payments based on 3 percent minimum payment. Interest rate is 18 percent. No additional charges made in years 2-19 Payments based on 3 percent minimum payment. Interest rate is 18 percent. No additional charges made in years 2-19
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The Benefits of Good Credit

• Establish and build good credit history
• More apartment/house choices
• Open a checking account
• Better job opportunities
• Fast loan decisions
• Increased purchasing power
• Little or no money down on cars
• Lower interest rate
• Save money

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Credit Repair

• You cannot repair poor credit
• derogatory credit remains on your report for up
  to 10 years
• avoid paying for credit repair services that
  guarantee to fix poor credit
• You can correct inaccurate information
• dispute incorrect credit information
• update personal information
• You can improve credit behavior
• pay off credit cards in full monthly
• make payments on time
• dont have too many open lines of credit

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Feeling the Crunch?

• Contact creditors
• Create a spending plan
• Limit credit card use
• Opt out of pre-approved offers
• 888.5OPTOUT (888.567.8688)
• Ask for a free credit report
• 877.322.8228
• www.annualcreditreport.com

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Getting your Free Credit Report

• www.annualcreditreport.com
• 877.322.8228
• One free report from
• Equifax
• TransUnion
• Experian
• All three at once or one every four months

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How to Report Fraud

• File a police report.
• Contact your creditors or bank immediately to
  close accounts. Keep a record of all calls.
• Each Credit Bureau offers a service that will
  notify you whenever a new credit card is opened
  in your name.
• Contact Federal Trade Commission
• [phone]

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Preventing Credit Fraud

• Sign new credit cards immediately
• Store credit cards in secure place
• Limit of cards you carry
• Do not write PIN on your cards
• Do not print SSN on checks
• Shred any mail with your account before
  throwing away
• Notify card issuers immediately if billing
  statement is incorrect or if you dont receive
  your statement
• Monitor your credit report regularly

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Other tips

• Use USPS mailbox not home mailbox to send
  letters
• Stop mail when on vacation
• Request special delivery for check orders
• Keep your purse or wallet in a secure place
• Carry limited cards and checkbook with you
• Place a fraud alert if you suspect something

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Keys to Using Credit Successfully

• Identify your spending habits
• Understand the fine print
• Manage credit wisely
• Have only one card
• Pay balance in full each month
• Ask for help at the first sign of trouble

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The Credit Card Accountability Responsibility and
Disclosure Act of 2009

• Signed into law on May 22, 2009
• Amends the Truth in Lending Act and Covers
• Protection of Credit Card Holders
• Limits on Fees and Interest Charges
• Application of Credit Card payments
• Rules Regarding Monthly Statements
• Consideration of Ability to Repay
• Late Payment Deadlines and Penalties
• Protection of Young Consumers
• Credit Cards and College Students
• Prepaid Cards, Gift Certificates and Gift Cards

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Protection of Credit Card Holders

• Written notice of increase in APR, fees and
  finance charges 45 days prior to change.
• Notice of Right to Cancel in clear concise
  manner.
• Closure/cancellation of account by consumer shall
  not constitute a default and will not trigger an
  obligation to pay in account in full.
• Limits on Interest Rate, Fee and Finance charge
  increases on outstanding balances.
• Interest Rate Reduction- specific rules that must
  be considered before creditor reduces rates.
• TILA Sections 127, 171

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Protection of Credit Card Holders

• Annual rate, fee or finance charge may not be
  increased for the first year
• Promotional annual rate may not be increased for
  at least 6 mos. from the beginning date the promo
  rate takes effect.
• TILA Sec.172

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Limits on Fees and Interest Charges

• Opt-in is required for Over-The-Limit Tranactions
  if fees are imposed.
• Consumer must be informed of the fee amount.
• Customer has to elect that their credit line be
  extended to cover in excess of credit limit.
• Customer must be notified of the right to revoke
  their election.
• Amount of fees must be reasonable- late fees,
  over the limit fees and penalty fees/charges
• TILA Sec. 127

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Application of Credit Card Payments

• Payments in excess of the minimum payment are to
  be applied to the card balance with the highest
  interest.
• If card issuer makes a change that causes a delay
  in crediting a payment over a 60 day period, no
  late fee or finance charge may be applied.
• TILA Sec. 164

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Rules Regarding Statements

• Payment date must be the same each month
• If the payment due date is a day the creditor
  does not receive or accept payments, the creditor
  may not treat a payment received on the next
  business day late for any purposes.
• TILA 127

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Consideration of Ability to Repay

• A card issuer must consider the consumers ability
  to make required payments under the terms of the
  account prior to
• Opening an account
• Increasing the credit limit on an account.
• TILA Sec 150

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Payoff Timing Disclosures

• The billing statement must have the following
  information in a prominent location
• A statement that making only the minimum will
  increase the interest you pay.
• The number of months to pay the entire balance
• Total cost to consumer, including interest and
  principal payments.
• Monthly payment amount required to eliminate the
  balance within 36 mos.
• A toll free number to obtain credit counseling.
• TILA Sec 127 (b)(11)

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Requirements on Late Payment Deadlines and
Penalties

• Late payment deadline is required to be disclosed
  in conspicuous location and must include
• The date payment is due
• The date the late fee is charged
• Amount of late fee.
• The statement If one or more late payments on a
  credit card account may result in an increase in
  interest rate.
• TILA 127 (b)(12)

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Requirements on Late Payment Deadlines and
Penalties

• Brick and Mortar If the creditor maintains
  branches or offices that accepts payments, the
  date the payment is made must be used for
  determining whether a late fee or penalty may be
  imposed.
• TILA 127(b)(12)

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Extensions of Credit to Underage Consumers

• Credit cards may not be issued to, accounts
  opened by or on behalf of a consumer under the
  age of 21 unless a written application that meets
  application requirements is obtained.
• Application Requirements for consumers under 21
  shall require
• A co-signer indicating joint liability until the
  consumer turns 21.
• The consumer to submit financial information
  showing a means to repay obligation.
• TILA 127(C)

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Issuance of Credit Cards to Certain College
Students

• No credit increase may be made to accounts that
  have a co-signer due to the consumer being under
  the age of 21 unless
• The co-signer approves the increase in writing
• Assumes joint liability for the increase
• TILA Sec 127(p)

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Privacy Protection for College Students

• An institution of higher education must publicly
  disclose any contract for the purpose of
  marketing a credit card.
• Card issuer or creditors may not offer tangible
  items as an inducement to students to apply for
  credit card offers if the offer
• Is on campus
• Near the campus or
• At an event sponsored or related to campus
• TILA 140

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Privacy Protection for College Students

• Congress believes colleges should consider
  adopting the following policies
• Card issuers that market credit cards on campus
  should notify the institution of the location the
  marketing will take place.
• The number of locations that marketing of credit
  cards takes place should be limited.
• Credit card and debt education/counseling
  sessions should be offered as a regular part of
  any orientation program for new students.
• TILA 140

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General Use Prepaid Cards, Gift Certificates and
Store Gift Cards

• It is unlawful to sell or issue a gift
  certificate, store gift card, or general use
  prepaid card that has an expiration date unless
• Expiration date is at least 5 years from the date
  the certificate was issued.
• Card funds were last loaded to a store gift card
  or general-use prepaid card and
• Terms of expiration are clearly stated.
• Credit Card Act Overview and information
  obtained on EDFUND.org

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How to Get the Students To Attend Credit
Workshops- Ideas
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Thanks for coming!