CreditShop Financial Educa3on Program July 2015

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1 CreditShop Financial Educa3on Program July 2015

2 What is a Personal Installment Loan? A personal installment loan is a one 3me loan where the principal loan amount plus interest are repaid in equal payments on a recurring basis. As long as all required payments are received by the due date throughout the dura<on of the loan agreement, the loan will be paid in full upon receipt of the last scheduled loan payment. For CreditShop loans, the total loan amount (principal+interest+fees) is divided by 36 months. The same amount is due monthly throughout the dura<on of the loan.

3 What Are Interest Rates? Personal installment loans include an interest rate. Interest is the amount of money you pay a lender to borrow money. Interest rates are oien defined as the percentage of principal paid for a year as it relates to the loan amount. For CreditShop loans, you have the op<on to pay off your personal installment loan early at any 3me without any prepayment penal3es, reducing the total amount of interest you will pay.

4 What Is An Annual Percentage Rate (APR)? The Annual Percentage Rate, commonly referred to as APR, includes the total finance charges for the loan, computed on an annual basis. In addi<on to interest, in some states such as Florida and Texas, there is a loan origina<on fee which is included in the APR. Please check the details of the loan agreement to determine if there is a fee for your loan. Since the APR considers all of the finance charges associated with a loan it is a good measurement of the true cost of borrowing money.

5 Installment Loan - Addi3onal Fees Other fees, commonly called avoidable fees that may be added to your loan include: - Late Fee: If your loan payment is not received before or on the scheduled due date. - Returned Check Fee: If a check is returned from your bank non sufficient funds/nsf

6 Why Credit MaHers? Having good credit is important. Generally, it allows you to obtain other credit and secure bexer interest rates. OIen, the bexer credit you have the lower the amount of interest you will pay. Over <me, rate differences between good and no so good credit can add up and cost a lot more! In addi<on, cell phone companies, landlords even poten<al employers may also check your credit to determine your credit worthiness. Materials are free. English only.

7 How do I Build a Credit History? Visa provides the following ways to build a credit history, including: - Establish a steady work record - Pay all bills promptly. - Open a checking account and don t bounce checks - Open a savings account and make regular deposits - Apply for a local store credit card and make regular monthly payments - Apply for a small loan using your savings account as collateral - Get a co-signer on a loan and pay back the loan as agreed Source: Content above from "Spotlight." Prac&cal Money Skills. N.p., n.d. Web. 28 July 2015;

8 What Is A Credit Score? A credit score is a complex mathema<cal model that evaluates many types of informa<on in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a par<cular credit card, loan, or service. Most credit scores es<mate the risk a company incurs by lending a person money or providing them with a service specifically, the likelihood that the person will make payments on <me in the next two to three years. Generally, the higher the score, the less risk the person represents. Source:

9 Credit Score- The Basics Your credit score (or FICO score) is a number that lenders use to determine your credit worthiness, based on the informa<on in your credit report. It's important to note that your credit report and score are two different things. You also have three different scores from each of the three credit repor<ng bureaus TransUnion, Equifax and Experian. Scores can vary between the three bureaus and lenders may refer to one or all of your scores when you ask them for credit. Source:

10 What Is In A Credit Score? Five factors are used when determining your credit score: Source: hxp://

11 What Is In A Credit Score? Five factors are used when determining your credit score: 1. Your payment history - approximately 35% of a FICO score Are you making your payments on <me? Having late payments, bankruptcies and other nega<ve items on your credit report can bring down your score. On the flip side, paying your bills on <me will help your score. 2. How much you owe - approximately 30% of a FICO score Your FICO score looks at how much you owe on your accounts, the number of accounts you have with balances and the amount of available credit you have. Source:

12 What Is In A Credit Score con3nued. 3. Length of credit history - approximately 15% of a FICO score A lengthier credit history is bexer for your score, but it's s<ll possible to have a good score if your credit history is shorter. 4. New credit - approximately 10% of a FICO score Ironically, opening new lines of credit can actually hurt your score, but not by much (usually less than 5 points). This is because the "inquiries" lenders do when checking your credit can be counted against you. If you're rate shopping for a new loan, do so within a certain period of <me, such as 30 days, to avoid puqng any dings in your score. However, FICO scores can tell the difference between you rate searching for mul<ples lines of new credit or just one type of new credit. Source:

13 What Is In A Credit Score con3nued 5. Other factors - approximately 10% of a FICO score There are some other smaller things that can impact your score. One of them is the different types of credit you have. Having a mix of credit cards and other loans, including a mortgage, student or auto loan can be good for your score. Source:

14 How Do I Obtain My Credit Report? Recent changes in law now require each of the na<onwide credit repor<ng companies, including Equifax, Experian, and TransUnion, to provide you with a free copy of your credit report, at your request, once every 12 months. The three na<onwide credit repor<ng companies have set up one website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit Annualcreditreport.com, call , or complete the Annual Credit Report Request Form and mail to: Annual Credit Report Request Service P.O. Box Atlanta, GA *Credit Bureau Scores are not free through Annualcreditreport.com but can be purchased.

15 How Do I Read A Credit Report? status type of account code O Open (entire balance due each month) R Revolving (payment amount variable) I Installment (fixed number of payments) status timeliness of payment 0 Approved not used; too new to rate 1 Paid as agreed days past due days past due days past due 5 Pays or paid 120+ days past the due date; or collec<on account 6 Making regular payments under wage earner plan or similar arrangement 7 Repossession 8 Charged off to bad debt All above content on this page from "Spotlight." Prac&cal Money Skills. N.p., n.d. Web. 28 July 2015

16 How Do Remove Inaccuracies From My Credit Report? The purpose of a credit report is to present an accurate picture of your credit history to anyone with a permissible purpose to view your report. If there is nega<ve informa<on on your report, but it is true, it needs to stay. If the data is inaccurate, then you need to file a dispute to get it removed. The following link to the Federal Trade Commission (FTC) provides informa<on on how to file a credit bureau dispute: hhp:// Stay clear of any outit that claims they can fix your credit report. Only <me and a good pay history can do that.

17 IMPORTANT CONSUMER INFORMATION This brochure contains some common terms and defini<ons, which are intended to help you bexer understand your credit transac<on. Credit costs money, so it is important that you fully understand the terms of your credit transac<on. If you come across terms you do not understand, look up the terms, or ask our personnel to explain the terms to you. Ask ques<ons. Make certain the ques<ons that you ask are answered. Make certain you understand the terms and costs of your loan.

18 Common Terms & Defini<ons Equal Credit Opportunity Act (ECOA) A federal regula<on which requires lenders to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, na<onal origin, sex, marital status, or age (provided the applicant has the capacity to contract); to whether all or part of the applicant s income derives from a public assistance program; or to whether the applicant has in good faith exercised any right under the Consumer Credit Protec<on Act. The regula<on prohibits creditor prac<ces that discriminate on the basis of any of these factors. Contract A wrixen binding document, describing terms of an agreement between two or more persons. (Keep all paperwork. Later, if there are any ques<ons, you will have your agreement in wri<ng.) Annual Percentage Rate (APR) The cost of your credit as a yearly rate. This measures the cost of credit expressed as a yearly interest rate. It is intended to provide a single value for a consumer to compare the cost of credit between one lender and another. Finance Charge The dollar amount the credit will cost you. Finance charges include interest, and may also include transac<on fees and service fees. Principal The amount of money owed on a debt, on which interest is calculated. Interest The cost of borrowing money, generally a percentage of the amount owed. Balance The total amount of money owed to a lender.

19 Common Terms & Defini<ons Default Failure to pay a debt as agreed to on a contract. When a loan is in default, the lender may demand full payment of the remaining debt. Collateral Security pledged by a borrower to protect the interests of the lender; in case of default, the lender may take ownership of the security, if any, pledged by the borrower. Credit Bureau A private company that keeps a record of your credit history for distribu<on upon request by authorized par<es. When you apply for credit, a lender may request a credit report to review when considering your applica<on. Credit History A record containing informa<on about you, including your payment history on previous debts. Credit Report A report of the credit history and other informa<on about you that is kept by credit bureaus, which may include: your name, address, social security number, payment history (good and bad), current and previous debts, employers, income, etc. Accurate informa<on on a credit report may not be legally removed. Incorrect informa<on may be removed by dispu<ng the informa<on to the credit bureau involved.

20 This business is regulated by the New Mexico Regula<ons and Licensing Department, Financial Ins<tu<ons Division P.O. Box 25101, 2550 Cerrillos Road, Santa Fe, NM 87505, Telephone number(505)

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