Managing Credit
Mansfield University TRiO
Melissa Wise
-First Citizens National Bank
Credit TOPICS

Credit

Credit Scores

Using Credit Wisely

Credit Cards

Credit Programs
 According
to Citibank, “There are
presently 5 to 7 million Americans
who are financially
overextended.”
WHAT IS CREDIT?

Credit is when goods,
services, or money is
received in exchange for
a promise to pay a
definite sum of money at
a future date.
CREDIT

ADVANTAGES

DISADVANTAGES
 Convenient
 Paying
 Useful
 Additional
for emergencies
 Often
required to hold a
reservation
 Ability
to purchase
expensive items sooner
 Eliminates
the need to
carry large amounts of
cash
interest
fees are
common
 Temptation
to
overspend
 Can
cause large
amounts of debt
 Identity
theft
CREDIT SCORES

What is a credit score or FICO® score?
A
prediction of how likely you are to pay your bills
A
number between 300 and 850 derived from many
different factors
A
number that drives the approval of credit
extensions and the interest rate you pay on those
extensions
CREDIT SCORE KEY FACTORS
 The
FICO® scoring model looks at more than
20 factors in five categories.
 How
you pay your bills (35%)
 Amount of money you owe and the amount of
available credit (30%)
 Length of credit history (15%)
 Mix of credit (10%)
 New credit applications (10%)
RANGE OF CREDIT SCORES

The following are some basic guidelines for
interpreting a credit score:
 620
and below – Poor credit
 621-690 – Fair credit
 691-720 – Good credit
 721-750 – Good to excellent credit
 751-800 – Excellent credit
 801 and above – Nearly perfect credit
 Fair
Isaac reports that the American
public’s credit scores break out along
these lines:
CREDIT SCORE
PERCENTAGE
499 and below
500-549
550-599
600-649
650-699
700-749
750-799
800 and above
2 percent
5 percent
8 percent
12 percent
15 percent
18 percent
27 percent
13 percent
 THINK
OF YOUR CREDIT REPORT AS A
SECOND RESUME!
A credit report contains information about where you
work, live, how you pay your bills, whether or not you
have filed bankruptcy and even if you have ever been
arrested or sued.
You can check your credit score for free up to three
times annually at http://www.annualcreditreport.com!!
USING CREDIT WISELY
For decades, society has promoted the idea of “BUY
NOW, PAY LATER.”
This is a good concept for some types of
purchases and a bad concept for many
other types of purchases.
USING CREDIT WISELY

Good Credit Purchases
 Buying
a house on credit is a smart move as home
values rise quickly and you can gain equity through
appreciation.
 Financing
an education is a good investment in the
future. Your earning potential will eventually
outweigh the cost of tuition, and educational loans
are usually at a very low interest rate.
 Buying a car can also be a good credit purchase. It
is important to not get caught up in buying a car for
more than you can afford.
USING CREDIT WISELY

Bad Credit Purchases
 Credit
card debt and other consumer debt is the
worst type of debt. Interest rates and fees on
borrowing money this way will be the highest of all,
mostly because there is rarely a tangible item as
collateral.
 Financing
a car for longer than the life of the vehicle
can also be an unwise credit decision.
CREDIT CARDS

Credit cards are a great concept, but they end
up bringing financial ruin to many people who do
not use them properly.
TIPS WHEN USING CREDIT CARDS




Never use credit cards as extra money. Always allocate
money from your current funds or monthly income in
order to immediately payoff whatever you finance.
Read the fine print on the agreement to make sure you
are getting the best terms available.
American consumers ages 20-29 carry an average of
$5,781 in revolving debt.
This would take 11 years and 4 months to pay off assuming
an average interest rate of 13% and that minimum
payments are made.
Review…
Please review these few websites before
proceeding…
 Open and browse them for subject matter in
order to use them as resources for completing
some credit questions.
 Web Pages:


http://www.federalreserve.gov/creditreports/

Read this story and draw from the examples given:
http://www.themintgrad.org/learn/lifestyle-planning/real-flc-lifewith-zero-debt/

Short synopsis of why debt is costly:
http://www.americasaves.org/for-savers/set-a-goal-what-to-savefor/debt-and-credit/get-out-of-debt/what-is-debt-and-why-is-toomuch-debt-costly
Apply…
***Please answer these questions in 3-4 complete sentences citing
the PowerPoint slide or website where the information pertaining
to the question was found***
What is credit and what are the
advantages/disadvantages of credit?
 What are credit scores and how are they
determined?
 How can you use credit and credit cards
wisely?
 What is the average amount of revolving debt
of someone in their 20’s and why do you think
this is the case? Explain.
 What are the key factors of a good credit
management program?

Last but not Least…

Take the lifeValues Quiz in the link provided:
http://www.smartaboutmoney.org/ToolsResources/LifeValues-Quiz.aspx

Your results will educate you on your thought
process when you spend your own money. Please
provide some feedback and explain if you though
the quiz was correct in describing your thought
process during spending. (3 sentences minimum)