Financial Wellness Curriculum

Good Credit: Get It

More information available at YouCanDealWithIt.com

Credit Objectives

What is credit?

Needs vs. Wants

Good debt vs. Bad debt

The dangers of credit cards

Understanding your credit report and credit score

Eliminating credit card debt

Debt Repayment Calculator

Identity theft

Free credit report

What is Credit?

Key terms: Annual Percentage Rate (APR)

Fixed

Variable

Introductory rate

Default rate

Grace period

Minimum monthly payment

Annual fees

Finance charge

Needs vs. Wants

Needs are the basic things that are required for your safety and health, including food to keep you alive, clothing to keep you warm, and a shelter to protect you.

Wants, on the other hand, are items you desire but are not critical to life.

Needs Wants

Food Groceries, eating in the cafeteria

Eating Out

Clothes Basics Designer

Transportation Used car, bus, subway New sports car

Shelter Dorm room Apartment, House

Good Debt vs. Bad Debt

Sometimes it makes sense to borrow -- but a lot of times it doesn't.

Good Debt – Items that will grow in value such as a home, education or investments.

Bad Debt - Includes debt you’ve taken on for things you don’t need and can’t afford by using credit cards or store charge cards.

The Dangers of Credit Cards

Are you only making the minimum monthly payment?

If so you will end up paying almost double for your purchase.

AmountBorrowed

Interest Rate

Repayment Term Interest Paid True Cost

$1,000 18% 153 months / 12 years $1,115.41 $2,115.41

$2,500 18% 244 months / 20 years $3,365.51 $5,865.51

$5,000 18% 313 months / 26 years $7,115.42 $12,115.42

1. Credit cards won’t hurt my credit report if I don’t carry a balance.

2. I don’t have to pay any interest during my grace period.

3. A credit card company can’t increase the interest rate if my payments to them are always on time.

4. Your credit report and score is something you don’t need to worry about until you buy a house or car.

5. Credit and debit cards are the same.

6. Good credit can help you get a better interest rate on loans, car insurance and even a job.

Test Your Credit Card IQ

Understanding your Credit ReportPOTENTIALLY NEGATIVE ITEMS

Credit Items:

123 Visa Status: Past due 60 days Date Opened Type Credit Limit/Original Amount10/2/2005 Revolving $1,000.00Reported Since Terms High Balance2/20/2006 NA $852.27Date of Status Monthly Payment Recent balance 5/1/2006 $0.00 $745.39Last Reported Responsibility Recent payment7/1/2006 Individual $0.00

ABC Bank Status: Past due 30 days Date Opened Type Credit Limit/Original Amount11/20/2003 Installment $9,350.00Reported Since Terms High Balance2/20/2006 60 months $9,350.00Date of Status Monthly Payment Recent balance 5/1/2006 $225.00 $6,234.08Last Reported Responsibility Recent payment7/1/2006 Individual $225.00

Understanding your Credit ReportACCOUNTS IN GOOD STANDING

ADS Retail Status: open/never late Date Opened Type Credit Limit/Original Amount10/1/2003 Revolving NA Reported Since Terms High Balance10/1/2003 NA Unknown Date of Status Monthly Payment Recent balance 10/1/2003 $0.00 Unknown Last Reported Responsibility Recent payment11/1/2003 Individual $100.00

DJL Dept Store Status: closed/never late Date Opened Type Credit Limit/Original Amount9/1/2002 Revolving $500.00Reported Since Terms High Balance3/1/2003 NA $85.00Date of Status Monthly Payment Recent balance 5/1/2003 $15.00 $0.00 as of 5/1/2003Last Reported Responsibility Recent payment5/1/2003 Individual $35.00

Understanding your Credit Report

REQUESTS FOR YOUR CREDIT HISTORY

Requests viewed by others TLC Reality Co Date of Request 900 Front St 5/14/2006Any town, PA 1111

AAA Department Store P O Box 700 Date of Request Some town, PA 12222 3/26/2006

Requests Viewed by youOne Bank 999 Walnut St Date of Request Some town, PA 12222 38802

National Bank 123 River Rd Date of Request Main town, PA 11333 11/3/2005

Understanding your Credit Report

PERSONAL INFORMATION

Names Employers: John J Smith ABC Architects John SmithJ J Smith AddressJon Smith 123 Green St

Some town, PA 11111

Date of Birth 7/4/1976 104 Water St

Anywhere, NJ 33333Spouse's Name Jane

Fixing Errors on Your Credit Report

1. Write to the consumer reporting company and explain what information is inaccurate.

2. Credit bureaus will review the documentation and if further investigation is required, they will provide a copy to the source that furnished the disputed information to them.

3. The source will then review the information and report back to the credit reporting company.

Understanding Your Credit Score

35%

10%

10%

15%

30%

Payment History

Amount Owed

Length of CreditHistory

New Credit

Types of CreditUsed

The Effects of Your Credit Score

• Eligibility for future credit • Insurance • Employment • Housing • Interest rates on future loans

Credit Score 500-589 590-624 625-659 660-689 690-719 720-850

36-month new auto loan 18.597 16.206 12.225 9.498 7.386 6.674

48-month new auto loan 18.598 16.206 12.226 9.500 7.390 6.678

300 850

Improving Your Credit Score

• Make your payments on time.

• Establish a long term account with a reputable credit card company.

• Don’t take on more debt than you can handle.

• Don’t get caught up in credit repair scams.

Eliminate Credit Card Debt

1. Track your spending

2. Stop using your credit cards

3. Stop new credit offers• Call: 1-888-5-optout

4. Consolidate your debt

5. Use automatic bill pay

6. Create a budget• Budget a specific amount to pay on your credit cards

until ALL are paid in full.

Eliminate Credit Card Debt

Monthly Payment Term Interest Paid True Cost

Minimum payment $35.00 179 months $3,793.07 $6,293.07

Budgeted amount $60.00 59 months $1,053.42 $3,553.42

What you save by sending the budgeted amount

120 months $2,739.65

Account balance: $2,500Interest rate: 15%

Account balance: $5,000Interest Rate: 15%

Monthly Payment Term Interest Paid True Cost

Minimum payment $65.00 262 months $12,047.77 $17,047.77

Budgeted amount $95.00 86 months $3,202.88 $8,202.88

What you save by sending the budgeted amount

176 months $8,844.89

Debt Repayment Calculator

Identity Theft

Don’t give out your Social Security Number unless you are absolutely certain of who you are giving it to, why they need it and what they will do with it.

Never give out personal information on the phone to someone who initiated the call. If you are uncertain hang up and call the company’s headquarters.

Examine your financial statements to ensure all charges made are yours.

Review and monitor your credit reports regularly.

Shred and destroy unneeded documents that contain personal and financial information.

Identity Theft

Immediately report lost or stolen credit cards.

Do not carry your social security card or birth certificate.

Keep your ATM and Debit Card receipts, do not leave these behind.

Bring in your mail daily.

Keep important documents in a safe and secure place.

Reporting Identity Theft

1. Contact the fraud departments of any one of the three consumer reporting companies to place a fraud alert on your credit report.

2. Close the accounts that you know or believe have been tampered with or opened fraudulently.

3. File a report with your local police and in the community where the identity theft took place.

4. File your complaint with the FTC.

Free Credit Reports

Request your free credit report one of these two ways:

• Go to: annualcreditreport.com• Call 1-877-322-8228

This is the only authorized source for consumers to access their annual credit report online for free.

Be sure to order from the agency listed above. If you go directly to the credit reporting agencies, you may be charged.

Credit Objectives Recap

• What is credit?

• Needs vs. Wants

• Good debt vs. Bad debt

• The dangers of credit cards

• Understanding your credit report and credit score

• Eliminating credit card debt

• Debt Repayment Calculator

• Identity theft

• Free credit report

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