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“Better than a Bank”
Bell Ringer Get out a full sheet of paper
On the back of that white paper:1.Who in this room would you be willing to
loan $50 to?2.What are some questions you would ask
them before loaning the money?
“Better than a Bank”
BR Get out a full
sheet of paper
Why is this lady sad?
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Jackie ValdezFinancial Education Specialist
Marketing Department
Credit: Buy Now Pay Later
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Overview of CreditTo use credit wisely you need to
understandthese key credit terms.
_____________is the original amount of money borrowed.
_____________ is what you get when someone is willing to loan you money.
_____________ is the amount you pay to use a financial institution’s money.
CREDIT
INTEREST
PRINCIPLE
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Types of Credit
Credit cards Installment loans Student loans Mortgages
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
The Benefits of Using Credit
Access to cash in an emergency Ability to use it now and pay
later Safety and convenience Builds a good credit report score
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Sample Loan Application PINK – Primary Applicant
Number of years at address
Length of Employment WHITE – Assets
Type of Bank or CreditUnion Accounts
Vehicles or Real Estateowned
BLUE – Liabilities Mortgage or Rent Loans, credit cards
“Better than a Bank”
The Five C’s of Credit
Capacity – your ability to pay Character – your good name Collateral – using an item to secure
the loan, such as your car. Capital- amount of assets you own Conditions- what are the economic
conditions
www.tucsonfcu.com Tucson Federal Credit Union
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Credit Reports
Your credit report = Your credit history
Lenders review credit reports Delinquent payments Your credit scorecard History for 7-10 years Fair Isaac Company (FICO scoring)
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
What is Credit Scoring?
A credit score reflects your personal financial history and
ability to pay debts. It is represented as a number
between 300-850.
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
How Often to Check Your Credit Report and Score
At least once a year Actually free: annualcreditreport.com Three major credit reporting
agencies:Equifax, www.equifax.com,
800-685-1111Experian, www.experian.com,
888-397-3742TransUnion, www.transunion.com,
800-916-8800
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
John Q. Public
Age 27 Member with TFCU since 1998 Opened savings & checking
account at age 18 Goes to work everyday Currently pays his bills on time Interested in a home loan
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
How to Build a Good Credit Score
On time payments. Keep balances low.
Use less than 30% of your credit limit
Apply for new credit only as needed
Maintain a long history with 1-2 lenders
Close unneeded accounts Start with a secured loan
“Better than a Bank”
www.myfico.com
www.tucsonfcu.com Tucson Federal Credit Union
$300,000 mortgage
30 years
FICO Score Interest Rate Monthly Payment
760-850 6.168% $1,831
700-759 6.391% $1,875
660-699 6.677% $1,931
620-659 7.492% $2,096
580-619 8.383% $2,282
500-579 9.269% $2,472
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Secured Loan Example
Apply for $500 loan Use savings as
collateral Make on-time payments Builds credit history
$0
$100
$200
$300
$400
$500
$600
Savings 11%
Savings Principle Interest
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Getting Your “First” Credit Card
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
A Credit Card is Serious Business
Legally obligated To repay the loan & interest on
time Your personal financial
responsibilities Failure uphold the agreement =
legal actionagainst you for recovery
Bankruptcy should be your lastoption – Seek legal advice first
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
You Buy Some “Stuff”
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
$1,000 $1,000
$345
$865
$0
$500
$1,000
$1,500
$2,000
11% 18%
Interest
Principal
The Cost of Credit
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Monthly Paymentsat 11% APR
$1,000 $1,000
$345$142
$0$200$400$600$800
$1,000$1,200$1,400$1,600
$20 Pmts $40 Pmts
Interest
Principal
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Things to Keep in Mind
One card is probably enough
Keep a low credit limit
Pay-off balance each month
Make on-time payments
Try to use the card for emergencies
Never let others use your card
Record credit card use
Create a budget
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Ten Questions to Ask Before You Sign
1. Do I really need thisright now?
2. Can I qualify for credit?
3. What is the Interest rate?
4. Are there additional fees?
5. How much is themonthly payment?
6. Can I afford the monthly payments?
7. What will happen if I do not make on-time payments?
8. What will be the extra cost of using credit?
9. What will I have to give up to pay for it?
10. Is using credit worth it?
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
“Better than a Bank”
The Five C’s of Credit
Capacity – your ability to pay Character – your good name Collateral – using an item to secure
the loan, such as your car. Capital- amount of assets you own Conditions- what are the economic
conditions
www.tucsonfcu.com Tucson Federal Credit Union
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Overview of CreditTo use credit wisely you need to
understandthese key credit terms.
_____________is the original amount of money borrowed.
_____________ is what you get when someone is willing to loan you money.
_____________ is the amount you pay to use a financial institution’s money.
CREDIT
INTEREST
PRINCIPLE
“Better than a Bank”www.tucsonfcu.com Tucson Federal Credit Union
Questions