This document provides an overview of credit and credit cards. It discusses the basics of credit, the advantages and disadvantages of credit cards, credit card terminology, tips for responsible credit card use, and how to build and maintain good credit. Key topics covered include the different types of credit, factors that affect credit scores, how to read credit reports, and steps to take to dispute errors or rebuild poor credit.

1. By: Lane Cleeton

2.  Talk about what credit it is
 Advantages and Disadvantages to having
credit and credit cards
 Terminology
 Tips

3.  Credit in simple terms is having use of
something before you pay for it.
 Gives you flexibility, pay for expensive items
over time, and helps you plan
 Several different types of credit
◦ Loans
◦ Mortgages
◦ Credit cards

4.  You need credit for many reasons
1. To obtain best interest rates
2. Employers review prior to hiring
3. Insurance premiums
4. Rentals
5. Reflects on how responsible you are

5.  Ability to obtain payment history which is
part of your credit score
 Flexibility to rent a hotel room or an auto
 Access to funds in an emergency
 Convenience
◦ Carry less cash
◦ Interest free if paid in full when bill is due
◦ Accepted at most retailers
◦ Some credit cards have reward programs to redeem
for gifts or cash

6.  Can be costly if you carry a balance and have
finance charges
 Future income is for paying on balances
 Make impulse purchases easier
 May not sure item purchased, but still paying
for it
 Rewards can make you over spend

7.  There are cost associated with credit and
credit cards. Knowing what the terms mean
will save you money in the long run.
 Annual Percentage Rate (APR) – annual rate of
interest charged on an outstanding balance
 Annual Fee – fee charged yearly to have card
 Over limit Fee – charged when exceeding
credit limit
 Balance transfer fee – assessed for
transferring balance from one card to another

8.  Cash Advance Fee – fee for accessing cash
from a credit card
 Late Fee – not pay the bill on time
 Miscellaneous fee – fees can include a
replacement card, inactive account, and not
carrying a balance

9.  Ask for a due date you can remember
 Make on time payments (compensate for mail
time)
 Read the disclosures
 Don’t go over your credit limit
 Avoid minimum payment
 Universal default clause
◦ If you default on a bill, some credit card companies
will raise your interest rate
◦ Avoid minimum payment

10.  Owe Pay-off time total payments
 $1,800 22years $5,600
 $2,700 12 years $4,635
 As you can see if you only make the minimum
payment each period, you will pay more
interest and it will take a longer time to pay it
off.
 New regulations must show this information
on your bill.

11.  Convience, track spending, and earn rewards
 Charge what you can afford
 Pay on time
 Have a variety of tools like loans and credit
cards
 Apply for credit when need it
 Do not obtain high interest loans more
expense (payday loans)
 Repay debts timely

12.  Avoid the following types of loans:
◦ Payday loans – high interest of about 300-900%
◦ Title loans – car title loans interest high, hard to
repay due to expensive, and can lose your auto
◦ High-cost credit cards – cards that have high fees

13.  Trouble can happen with credit cards if
misused.
 Do not use cards as extra cash
 Signs to watch for
◦ Only able to make min. payments
◦ Near or at your credit limit
◦ Using cash advances
◦ Creditors are calling
◦ Lying to family about spending habits
◦ Credit card balances exceed 20% of your income

14.  When establishing credit it can take up to 6-
12 months for the payment history to reflect
a pattern.
◦ Pay bills on time
◦ Open a checking account – keep in good standings
◦ Obtain credit in your own name (small loan or credit
card) and use it by charging on the card.
◦ Live with in your means
◦ Track your spending
◦ Save money for an emergency fund then you do not
fall back on credit cards or loans

15.  When shopping for a credit card read and
understand the fine print.
 Watch for low introductory rates
 Do not wait for offers – shop on your own
 Watch for the universal default rate
(explained earlier)
 Obtain card with no annual fee

16.  To Prevent Fraud:
◦ Do not use easily known PIN & Passwords
◦ Shred Receipts
◦ Use “trusted websites” online
◦ Keep your card numbers & phone numbers in a file
to be able to access them if cards are stolen
◦ Do not respond to unknown emails
◦ Look over your statements
◦ Review your credit report 3 times a year

17.  You should call your card holder immediately
to alert them of your loss.
 Your liability would be zero (not responsible
for fraudulent charges)
 Some card companies will have protection on
the cards that notify if a transaction is not a
common one of yours.

18.  It is coded information which can be
confusing.
 Credit Report includes:
◦ Identifying information about you
◦ Employer information
◦ Payment history & creditors
◦ Bankruptcies, liens, judgments
◦ Inquiries on your credit

19.  FICO means Fair Isaac Corporation which is a
firm that developed a credit score system.
 Range is 300-850
 Higher the better
 Changes with activity on your report
 Ignores personal information and reflects
credit practices (race, occupation, religion,
and salary)

20.  To maintain a good score:
◦ Keep balances low on credit cards
◦ Don’t open a lot of new cards
◦ Longevity works in your favor
◦ Rate shop

21.  The following can hurt your score:
◦ Late bill payments – 30 days past due
◦ Using all credit available to you (using $400 of a
$500 limit credit card)
◦ Opening to many new accounts in a short time
◦ Not working with a trusted financial
 Many people look at credit such as lenders,
landlords, employers, insurance companies.

22. What affects your credit score
Payment History
Amounts Owed
Length of Credit
History
New Credit
Types of Credit Used

23.  Negative 7 years
 Bankruptcies 10 years
 Positive info for ever

24.  By law you get 3 free credit reports a year
meaning 1 from each bureau.
 Visit www.annualcreditreport.com
 The 3 bureaus are
Transunion, Experian, Equifax
 Your report is free and you would have to pay
for your credit score

25.  Mistakes can happen by:
◦ Clerical error
◦ Applied for credit under a different name
(Robert/Bob)
◦ Gave wrong social security number
◦ Payments inadvertently applied to the wrong
account

26.  To dispute something on your credit:
◦ Tell the credit bureau in writing identifying each
item, explain the dispute, and request your action
◦ Write to the creditor explaining the situation
 Include copies of statements not originals
 Dispute within 30 days
 Take copies of sent items

27.  If you have bad credit you can rebuild it by:
◦ Paying the creditors and not ignoring them
◦ Don’t use credit cards or get new debt
◦ Ask for advise from your financial
◦ Review your report
◦ Set up automatic payments
◦ Consolidate debt
◦ Reduce credit card solicitations
(www.optoutprescreen.com)

31.  http://www.myfico.com/