To Your
Credit
Presenter Monica Aguirre Family & Community Health Agents
maaguirre@pvamu.edu 210-631-0400
What Is Credit?
• Which response would a financial
professional use to define credit?
1. Money given to you that you do not have to
pay back
2. Money you borrow to pay for things but must
also pay back
3. Recognition for a job well done
4. That long scrolling text at the end of a movie
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Credit Defined
• Credit is:
• The ability to borrow money
• Sometimes called a loan
• A promise you make to pay back money you
borrowed with interest
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Importance of Credit
• Why do you think credit is important?
• It is useful in times of emergencies
• It is convenient when you do not have cash
• It allows you to pay for large purchases over
time
• It can help you obtain employment, housing,
and insurance
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What Is a Credit Report?
• It tells lenders:
• Who you are
• How much debt you have
• Whether you have made payments on time
• Whether there is negative information about
you in public records
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Credit Reporting Agencies
Equifax
Experian
TransUnion
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Credit Report Information
• Identifying information
• Credit history
• Inquiries
• Public record information
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Public Record Information
• Information may include:
• Judgments
• Unpaid tax liens
• Collections
• Bankruptcies
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Personal Bankruptcy
• Chapter 13
• Debtor keeps all of his or her property and
makes regular payments on the debts
• Chapter 7
• Debtor must give up certain property to the
creditor
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Impact of Bankruptcy
• It should be your last resort!
• Bankruptcy:
• Remains on your credit report for 7–10 years
• Makes it hard for you to get future credit
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Credit Reports Do NOT Contain
What Information?
• Checking and savings account balances
• Income
• Medical history
• Purchases made with cash or check
• Business account information
• Race, gender, religion, or national origin
• Driving record
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Credit Report Uses
• Credit reports are used:
• To obtain loans and other credit
• To get certain kinds of jobs
• For housing (rental applications and
mortgages)
• To obtain insurance
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Reasons a Loan Application May Be
Denied
• No credit history
• Credit problems or poor
credit history
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Credit Score
• A number that helps lenders determine your
credit risk
• Two types:
• The Fair Isaac Corporation (FICO) Score
• VantageScore
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FICO Score
• Primary method used to assess credit
• Score range: 300 to 850
• The score is based on:
• Past payment history: 35%
• Outstanding debt: 30%
• How long you have had credit: 15%
• New applications for credit: 10%
• Types of credit: 10%
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VantageScore
• Newer credit scoring system
• Score range: 501 to 990
• Also groups scores by letter categories
• A = 901-990
• B = 801-900
• C = 701-800
• D = 601-700
• F = 501-600
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Good and Bad Credit Scores
• The higher your credit score, the more
likely you are to:
• Get a better interest rate
• Pay less for borrowing money
• Review your credit report regularly to
ensure accuracy of your information.
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Inquiries
• Voluntary inquiries
• Involuntary inquiries
• Excessive inquiries
• Inquiries when rate shopping
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Other Factors Influencing Lenders
• What other factors might influence a
lender’s decision to make a loan besides
your credit report and credit score?
• Income
• Length of residence
• Employment
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Opting Out
• It is your right!
• Call: 1-888-5-OPTOUT (567-8688)
• Visit: www.optoutprescreen.com
• Call: The phone numbers that may be listed in
your credit card privacy notices
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Request Your Credit Score
• Receive a copy of your credit score from:
• Credit reporting agencies
• Companies that want to sell you your credit
score as part of a package of products
• Receive a free credit report:
• Once every 12 months
• When you apply for a consumer loan secured
by your personal dwelling
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Free Annual Credit Report
Visit: www.annualcreditreport.com
Call: 877-322-8228
Mail:
Annual Credit Report Request Service
P. O. Box 105281
Atlanta, GA 30348-5281
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Checking for Errors
• It is your responsibility to:
• Contact the credit reporting agency
• Write a letter disputing the error
• Credit reporting agencies must conduct
an investigation within 30 days of
receiving your letter.
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Building Your Credit History
• Apply for a small bank loan
• Apply for credit at a local store
• Make large down payments and negotiate
credit payments
• Ask a friend or relative to cosign a loan
for you
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Building Your Credit History
• Pay your bills on time
• Ask lenders to review utility and other
bills to grant you credit
• Keep your debt levels low
• Make regular deposits into your savings
account
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Repairing Your Own Credit
• Get a copy of your credit report
• Contact the credit reporting
agency and creditors to report
errors
• Consider opting out of
unsolicited offers for credit to
avoid getting into more debt
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Credit Counseling Agencies
• Interview several companies before
signing a contract
• Be sure they are reputable
• Ask questions about services, fees, and a
repayment plan
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Credit Repair Scams
• No one can remove accurate information
from your credit report.
• It can take years to repair bad credit
legitimately.
• No one can create a new identity for you.
• Legitimate companies provide a service
before requesting payment.
• You can order your credit report yourself.
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