Welcome Credit Scores & Debt Management
Agenda Budget Management Debt Management Credit Scores Debt Management Plans
The Economic Environment Housing market Rising credit card interest rates Increasing debts Rising monthly payments Unemployment
Take Action! Construct a budget Prioritize expenses Fix the real problem Understand your options Understand the consequences
Budget Management Knowing what comes in (income) Knowing what goes out (expenses) Create a budget and stick to it RCU has budgeting tools to help
Expense Management Mortgage/Rent Gas/Electric Water/Garbage/Phone Cable/Satellite Car Payment Insurance Gasoline
More Expense Management Groceries Dining out Vacation Charity Music/DVDs Gifts
Inventory Income Sources Salary Savings Investments Significant other like rentals
Prioritize Expenses Determine what s most important Housing Transportation Insurance Utilities Secured debt Unsecured debt Miscellaneous
Prevent Recurring Problems What caused this situation? How could you have prepared for it? What would you do differently? Saving Budgeting Live within your means
Review Expenses Which are necessary? Which can be reduced, postponed, substituted or foregone? Temporarily eliminate some costs Track spending
Potential Tax Savings Have your Property Taxes Reassessed Example: Your house is now assessed at $500,000 Your current taxes = $6,400/year Comps in your neighborhood = $450,000 Your new taxes would = $5,600/year $800 a year in your pocket!
Spend Less Money Refinance your car(s) Get a new insurance quote Reduce channels on TV Restrict lattes, burgers, and other things Reduce cell phone service
Try It for One Year To save money in tough time, try reducing your expenses in these areas for 1 year. Cable TV Starbucks Eating out in restaurants Utilities, such as electricity And many, many more
Asset Liquidation Weigh benefits and consequences May carry penalties May have tax consequences Loss of future appreciation
Make More Money Rent out a room Sell some of your belongings Get a second/temporary job Go back to the two income family Sell toys (even if at a loss)
Review Your Debt Credit cards Loans Alimony/Child support Judgments Liens
Potential Solutions Pay off plan Refinancing Loan consolidation
Refinancing Potential benefits Lower interest rate Pay-off other debts Reduce Payment Potential risks Certain loans contain penalty clauses (early payment)
Loan Consolidation Taking out one loan to pay off others Benefits of consolidation Secure a lower interest rate Secure a fixed interest rate Convenience of one loan payment Potential risks May only treat the symptoms of debt and not the root problem
Talk to Your Creditors Call first Follow up in writing Explain situation Define repayment plan Keep copies of all letters
Consequences of Inaction Increased fees Credit damage Loss of service Collection activity Repossession, eviction, foreclosure Lack of options
Your Credit Report Late payments and legal action impact credit Damaged credit can improve over time Use 100 word statement to explain
Factors of Credit Scoring Payment History Outstanding Credit Balance Credit History Type of Credit Inquiries 35% impact 30% impact 15% impact 10% impact 10% impact
Know Your Score 720 and over 700-719 680-699 660-679 640-659 620-639 600-619 Below 600 Wonderful! You are at the top. The best rates and terms are available to you. Excellent score. You are a very desirable borrower. Good credit. You should be in strong shape. OK credit. Don t look for program or loan exceptions. Borderline. OK if everything else is strong. Weak. The rest of your file must be perfect. Difficult. Needs some work, or a special program. Trouble! Try to fix up your credit!
Increasing Your Credit Report Bring past due accounts current Reduce all outstanding balances If joint credit, keep separate cards Pay off past due and charged off accounts Request corrections from creditors and bureaus
Credit Bureau Information Equifax Information Svc. LLC PO BOX 740341 Atlanta, GA 30374 800-685-1111 or www.equifax.com Experian PO BOX 2002 Allen, TX 75013 888-397-3742 or www.experian.com TransUnion, LLC PO BOX 1000 Chester, PA 19022 866-887-2673 or www.transunion.com
General Information BALANCE is a financial education and counseling service available as a benefit of credit union membership Money management counseling Debt repayment options Credit report review
Credit Counseling Is your debt beyond your means? Do you have more bills per month than money? When debt becomes overwhelming Talk with you creditors You may consult with a certified credit counselor
Credit Counseling What can a credit counselor do? Review your finances and help you set up a budget Review your credit situation Look at the possibility of a Debt Management Plan (DMP)
Credit Counseling How does DMP work? May reduce interest rates and fees Helps you begin making consistent, on-time payments Payments made to the counseling agency Credit Score/Credit History begins to improve
Credit Counseling Review Is there a fee for their services? What are they? What services does the agency offer? Budget/credit counseling Debt repayment Credit report review
Contact Information BALANCE Financial Fitness Program 595 Market St, 16 th Fl San Francisco, CA 94105 888-456-2227 (toll free) www.balancepro.net BALANCE partners with credit unions nationwide to reduce losses, develop stronger member relationships, support education, housing and other special credit union initiatives.
Questions
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