Managing Credit

Mansfield University TRiO

Melissa Wise

-First Citizens National Bank

Credit TOPICS

 Credit
 Credit Scores
 Using Credit Wisely
 Credit Cards
 Credit Programs
According to Citibank, “There are
presently 5 to 7 million Americans
who are financially
overextended.”
WHAT IS CREDIT?

 Credit is when goods,

services, or money is
received in exchange for
a promise to pay a
definite sum of money at
a future date.
 CREDIT
 ADVANTAGES  DISADVANTAGES
 Convenient  Paying interest
 Useful for emergencies  Additional fees are
 Often required to hold a common
reservation  Temptation to
 Ability
to purchase overspend
expensive items sooner  Cancause large
 Eliminates the need to amounts of debt
carry large amounts of  Identity theft
cash
CREDIT SCORES

 What is a credit score or FICO® score?

A prediction of how likely you are to pay your bills
A number between 300 and 850 derived from many
different factors
A number that drives the approval of credit
extensions and the interest rate you pay on those
extensions
CREDIT SCORE KEY FACTORS

 TheFICO® scoring model looks at more than 20

factors in five categories.
 How you pay your bills (35%)
 Amount of money you owe and the amount of
available credit (30%)
 Length of credit history (15%)
 Mix of credit (10%)
 New credit applications (10%)
RANGE OF CREDIT SCORES

 The following are some basic guidelines for

interpreting a credit score:
 620 and below – Poor credit
 621-690 – Fair credit
 691-720 – Good credit
 721-750 – Good to excellent credit
 751-800 – Excellent credit
 801 and above – Nearly perfect credit
FairIsaac reports that the American
public’s credit scores break out
along these lines:
CREDIT SCORE PERCENTAGE
499 and below 2 percent
500-549 5 percent
550-599 8 percent
600-649 12 percent
650-699 15 percent
700-749 18 percent
750-799 27 percent
800 and above 13 percent
THINKOF YOUR CREDIT REPORT AS A
SECOND RESUME!

A credit report contains information about where you

work, live, how you pay your bills, whether or not you
have filed bankruptcy and even if you have ever been
arrested or sued.

You can check your credit score for free up to three

times annually at http://www.annualcreditreport.com!!
USING CREDIT WISELY

For decades, society has promoted the idea of “BUY

NOW, PAY LATER.”

This is a good concept for some types of

purchases and a bad concept for many
other types of purchases.
USING CREDIT WISELY
 Good Credit Purchases
 Buying a house on credit is a smart move as home
values rise quickly and you can gain equity through
appreciation.
 Financing an education is a good investment in the
future. Your earning potential will eventually
outweigh the cost of tuition, and educational loans
are usually at a very low interest rate.
 Buying a car can also be a good credit purchase. It is
important to not get caught up in buying a car for
more than you can afford.
USING CREDIT WISELY

 Bad Credit Purchases

 Credit card debt and other consumer debt is the
worst type of debt. Interest rates and fees on
borrowing money this way will be the highest of all,
mostly because there is rarely a tangible item as
collateral.
 Financing a car for longer than the life of the vehicle
can also be an unwise credit decision.
CREDIT CARDS

 Credit cards are a great concept, but they end

up bringing financial ruin to many people who do
not use them properly.
TIPS WHEN USING CREDIT CARDS

 Never use credit cards as extra money. Always allocate

money from your current funds or monthly income in order to
immediately payoff whatever you finance.
 Read the fine print on the agreement to make sure you are
getting the best terms available.
 American consumers ages 20-29 carry an average of $5,781 in
revolving debt.
 This would take 11 years and 4 months to pay off assuming an
average interest rate of 13% and that minimum payments are
made.
Review…

 Please
review these few websites before
proceeding…
 Open and browse them for subject matter in
order to use them as resources for completing
some credit questions.
 Web Pages:
 http://www.federalreserve.gov/creditreports/

 Read this story and draw from the examples given: http
://www.themintgrad.org/learn/lifestyle-planning/real-flc-life-with-z
ero-debt
/
 Short synopsis of why debt is costly: http://
www.americasaves.org/for-savers/set-a-goal-what-to-save-for/debt-
and-credit/get-out-of-debt/what-is-debt-and-why-is-too-much-debt-c
Apply… ***Please answer these questions in 3-4 complete sentences citing
the PowerPoint slide or website where the information pertaining
to the question was found***

 What is credit and what are the

advantages/disadvantages of credit?
 What are credit scores and how are they
determined?
 How can you use credit and credit cards wisely?
 What is the average amount of revolving debt of
someone in their 20’s and why do you think this
is the case? Explain.
 What are the key factors of a good credit
management program?
Last but not Least…

 Takethe lifeValues Quiz in the link provided:

http://
www.smartaboutmoney.org/Tools-Resources/Life
Values-Quiz.aspx

 Yourresults will educate you on your thought

process when you spend your own money. Please
provide some feedback and explain if you though
the quiz was correct in describing your thought
process during spending. (3 sentences minimum)