The Importance of Good Credit - How It Can Impact Your Future. University of New Mexico Health Sciences Center 2013

Size: px

Start display at page:

Download "The Importance of Good Credit - How It Can Impact Your Future. University of New Mexico Health Sciences Center 2013"

Christopher Gaines
8 years ago
Views:

1 The Importance of Good Credit - How It Can Impact Your Future University of New Mexico Health Sciences Center 2013

2 QUOTES REGARDING MONEY & PLANNING Planning and controlling consumption are key factors underlying wealth accumulation.. Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction. Thomas Stanley & William Danko If you can t afford it, don t buy it!! Warren Buffett

. Operating a household without a budget is akin to operating a business without a

3 YOUR FINANCIAL PLAN YOU RETIREMENT ESTATE PLAN INCOME PROTECTION FINANCIAL PLANNING/ INVESTING HOME BUYING (POSSIBLE) IDENTITY THEFT CREDIT/DEBT SERVICE/STUDENT LOANS BUDGET, BUDGET, BUDGET

4 OBJECTIVES IDENTIFY elements of a credit REPORT to verify that the information is yours and that it is accurate ESTABLISH the difference between a credit REPORT & a credit SCORE RECOGNIZE what your credit SCORE may tell them about YOU so that you will be able to anticipate responses & consider modifying your behavior, with money, if necessary IDENTIFY the factors that influence a credit SCORE so you can make sure yours is in a good range

may tell them about YOU so that you will be able to anticipate responses & consider modifying your behavior,

5 ELEMENTS OF A CREDIT REPORT HISTORICAL SUMMARY OF FINANCIAL PAYMENT ACTIVITY: mortgages student loans rent payments credit cards car payments library fines utilities parking tickets revolving loans apartment rental agreements ANY CONTRACTUAL FINANCIAL ARRANGEMENT!! INCLUDING: current balances on all outstanding debts, i.e., credit cards, lines of credit, mortgages, student loans, etc. bankruptcies, liens, judgments, repossessions, collection items, etc. HARD inquiries about YOUR credit from various companies

ARRANGEMENT!! INCLUDING: current balances on all outstanding debts, i.e., credit cards, lines of credit, mortgages, student loans, etc.

6 WHAT IS A CREDIT (FICO) SCORE? FICO = Fair Isaac Corporation (uses predictive analytics) calculates a number based on your personal credit BEHAVIOR you re being GRADED on how well you manage money potential creditors use it to indicate the likelihood you will repay a loan source: myfico.com

number based on your personal credit BEHAVIOR you re being GRADED on how

7 MONITORING YOUR CREDIT REPORT FREE, annual credit report from EACH credit reporting agency Experian, Equifax, & TransUnion OR stagger your requests, quarterly, to keep an eye on your credit check for erroneous information similar names similar SS # s identify theft, etc. each offers a credit score (for a fee) finances get out of whack. everything else ON HOLD If you have children = monitor their credit reports, too!! 500,000+ children a year are victims of ID theft! 7 (source): Kiplinger.com August 12, 2010

com stagger your requests, quarterly, to keep an eye on your credit check for erroneous information similar names similar SS # s

8 WHAT DOES NOT COUNT AGAINST YOU IN A CREDIT SCORE? SOFT INQUIRIES = you checking your own report & queries for best rates, such as: shopping for best mortgage rates &/or home equity loans shopping for best car loan rates shopping for best private student loan rate Within a 30 day window!! promotional inquiries = preapproved offers inquiries from (potential) employers (for employment) administrative request by a lender to review with you more HARD INQUIRES makes you appear more risky to potential lenders and has proven to be an indicator of greater likelihood to declare bankruptcy

for best car loan rates shopping for best private student loan rate Within a 30 day window!

9 WHAT REMAINS ON A CREDIT REPORT & FOR HOW LONG BANKRUPTCY: Chapter 7 = 10 years (Straight Bankruptcy Liquidation) Chapter 11 = 10 years (Reorganization usually, just companies) Chapter 13 = 7 years (Payment Plan for People with Regular Income) FORECLOSURE(s): remains on your report = 7 years LOAN(s) in collection: remains on your report = 7 years REPOSSESSION(s): remains on your report = 7 years Creditor can RE-ACTIVATE time left on report at any time!!

Regular Income) FORECLOSURE(s): remains on your report = 7 years LOAN(s) in collection: remains on your report = 7

10 FACTORS INFLUENCING YOUR CREDIT SCORE New credit Types of credit used Payment history 10% 10% 35% 15% Length of credit history 30% source: 58% are in the range Amounts owed (debt-to-credit limit keep it <30% - CREDIT UTILIZATION)

11 MANAGING YOUR CREDIT make a budget/plan some things need to be put off until you have completed training know your budget and live within your means IF you receive more of a loan refund than you should, go to FAO, immediately to return funds spend only what you can afford to pay off, monthly!!! use credit wisely & check credit report annually/quarterly pay your bills on time don t write bad checks no more than 1 or 2 credit cards keep balances less than 30% of available credit at least, pay more than the minimum payment required limit credit balance transfers

12 IMPACT OF CREDIT. 30 YEAR FIXED MORTGAGE ($250,000) FICO score APR* Monthly payment * % $1, % $1,232 (660) % $1,258 ( ) % $1,290 ( ) % $1,356 ( ) % $1,441

045% $1,200 700-759 4.267% $1,232 (660) 680-699 4.444% $1,258 (620-659) 660-679 4.

13 IMPACT OF CREDIT. 36 MONTH AUTO LOAN ($25,000) FICO score APR* Monthly payment * % $ % $ % $ % $ % $ % $895

3.229% $730 690-719 4.579% $745 660-689 6.705% $769 620-659 10.

14 COST OF POOR/MEDIOCRE CREDIT GLEN. Credit Score: 750 Interest on Credit Cards: 9.90% Interest paid: $39,600 Interest on car loan(s): 5.00% Interest paid (lifetime): $21,166 Mortgage (1 st ): 5.50% Interest paid (10 years): $174,760 Mortgage (2 nd ): 5.50% Interest paid (30 years): $417,616 MARY. Credit Score: 650 Interest on Credit Cards: 19.90% Interest paid: $79,600 Interest on car loan(s): 8.00% Interest paid (lifetime): $34,653 Mortgage (1 st ): 7.375% Interest paid (10 years): $243,020 Mortgage (2 nd ): 7.375% Interest paid (30 years): $594,572 Glen s interest paid: $653,142 Mary s interest paid: $951,845 source: Your Credit Score by Liz Pulliam Weston Mary s PENALTY $298,703* *Does not include loss of investment return had she had good credit and invested the money she saved!!

90% Interest paid: $79,600 Interest on car loan(s): 8.00% Interest paid (lifetime): $34,653 Mortgage (1 st ): 7.375% Interest paid (10 years): $243,020 Mortgage (2 nd ): 7.

15 IMPACT OF CREDIT. it will affect whether or not you are qualified to receive a GradPlus loan. for parents borrowing for their children, it will affect whether or not they receive a ParentPlus loan. it will affect whether or not you receive an Alternative loan and the interest rate you receive. it will affect the cost of your insurance premiums. if affecting the cost of borrowing isn t bad enough.. it can/will affect employment opportunities!! it can/will affect licensure!!

it will affect whether or not you receive an Alternative loan and the interest rate you receive.

16 WHAT IMPACT DO BUDGETING/CREDIT HAVE ON ONE ANOTHER? if you don t budget, your credit will likely be affected and your finances (and your life) becomes difficult keep a close eye on your credit for potential identity theft there is no time that you will not need to keep an eye on your budget or your credit regardless of how wealthy you become/are

life) becomes difficult keep a close eye on your credit for potential identity theft

17 HELPFUL WEBSITES com naid/budgetworksheet.sh tml TOO MANY CREDIT CARD OFFERS? You can remove your name from the marketing lists of the three credit reporting bureaus: Call 888-5OPTOUT ( ) or go online to

18 BIBLIOGRAPHY Weston, Liz Pulliam. Your Credit Score, How To Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future. 2 nd Edition New Jersey: (Pearson Education, Inc.) FT Press. Manning, Robert D., Credit Card Nation, The Consequences of America s Addiction to Credit New York: Basic Books. Stanley, Thomas, Danko, William, The Millionaire Next Door New York: Pocket Books (division of Simon & Schuster, Inc.). Ramsey, Dave. The Total Money Makeover, A Proven Plan for Financial Fitness Tennessee: Thomas Nelson, Inc. Morris, Kenneth M., Siegel, Alan M., The Wall Street Journal Guide to Understanding Personal Finance New York: Lightbulb Press, Inc. and Dow Jones & Co. Warren, Elizabeth, Warren Tyagi, Amelia, All Your Worth, The Ultimate Lifetime Money Plan New York: Free Press. Strauss, Steven D., Jaffe, Azriela., The Complete Idiot s Guide to Beating Debt Indiana: Alpha Books. Morris, Kenneth, M., Siegel, Alan, M., and Morris, Virginia, B., The Wall Street Journal Guide to Planning Your Financial Future New York: Lightbulb Press, Inc. and Dow Jones & Co. Klosowski, Allen, CFP. Personal Financial Fitness, A Practical Guide to Improve The Health of Your Wealth Menlo Park: Crisp Publications. Quinn, Jane Bryant. Making the Most of Your Money New York: Simon & Schuster.

New York: Pocket Books (division of Simon & Schuster, Inc.). Ramsey, Dave. The Total Money Makeover, A Proven Plan for Financial Fitness. 2003. Tennessee: Thomas Nelson, Inc. Morris, Kenneth M.

19 THANK YOU Ana Vigil, CON, Financial Aid Officer Dianne M Perea, COP, Financial Aid Officer Janell Valdez, SOM Financial Aid Manager Karen Sampson, SOM Financial Aid Officer Prepared by: Mary B. W. Fenton, MA Director, Student Financial Aid Services for Health Sciences Center HSSB 169 University of New Mexico Albuquerque, New Mexico mbfenton@salud.unm.edu

ALL THINGS CREDIT: REPORTS, SCORES, CARDS, & THEIR IMPACT ON YOUR FINANCIAL WELL-BEING. University of New Mexico School of Medicine December 9, 2011

ALL THINGS CREDIT: REPORTS, SCORES, CARDS, & THEIR IMPACT ON YOUR FINANCIAL WELL-BEING University of New Mexico School of Medicine December 9, 2011 PARTICIPANTS IN STUDENT LOAN(S) School FAO Student Loan