CreditShop Financial Educa"on Program

CreditShopFinancialEduca3on
Program
July 2015
Materialsarefree.Englishonly.
WhatisaPersonalInstallmentLoan?
Apersonalinstallmentloanisaone3meloanwherethe
principalloanamountplusinterestarerepaidinequal
paymentsonarecurringbasis.
Aslongasallrequiredpaymentsarereceivedbythedue
datethroughoutthedura<onoftheloanagreement,the
loanwillbepaidinfulluponreceiptofthelastscheduled
loanpayment.
ForCreditShoploans,thetotalloanamount
(principal+interest+fees)isdividedby36months.The
sameamountisduemonthlythroughoutthedura<onof
theloan.
Materialsarefree.Englishonly.
WhatAreInterestRates?
Personalinstallmentloansincludeaninterestrate.
‘Interest’istheamountofmoneyyoupayalenderto
borrowmoney.‘Interestrates’areoIendefinedasthe
percentageofprincipalpaidforayearasitrelatestothe
loanamount.
ForCreditShoploans,youhavetheop<ontopayoffyour
personalinstallmentloanearlyatany3mewithoutany
prepaymentpenal3es,reducingthetotalamountof
interestyouwillpay.
Materialsarefree.Englishonly.
WhatIsAnAnnualPercentageRate(APR)?
TheAnnualPercentageRate,commonlyreferredtoas
APR,includesthetotalfinancechargesfortheloan,
computedonanannualbasis.
Inaddi<ontointerest,insomestatessuchasFloridaand
Texas,thereisaloanorigina<onfeewhichisincludedin
theAPR.Pleasecheckthedetailsoftheloanagreementto
determineifthereisafeeforyourloan.
SincetheAPRconsidersallofthefinancecharges
associatedwithaloanitisagoodmeasurementofthe
truecostofborrowingmoney. Materialsarefree.Englishonly.
InstallmentLoan-Addi3onalFees
Otherfees,commonlycalled‘avoidablefees’thatmaybe
addedtoyourloaninclude:
-LateFee:Ifyourloanpaymentisnotreceivedbeforeor
onthescheduledduedate.
-ReturnedCheckFee:Ifacheckisreturnedfromyour
banknonsufficientfunds/NSF
Materialsarefree.Englishonly.
WhyCreditMaHers?
Havinggoodcreditisimportant.Generally,itallowsyou
toobtainothercreditandsecurebeXerinterestrates.
OIen,thebeXercredityouhavethelowertheamountof
interestyouwillpay.Over<me,ratedifferencesbetween
goodand‘nosogood’creditcanaddupandcostalot
more!
Inaddi<on,cellphonecompanies,landlords—even
poten<alemployersmayalsocheckyourcreditto
determineyourcreditworthiness.
Materialsarefree.Englishonly.
HowdoIBuildaCreditHistory?
Visaprovidesthefollowingwaystobuildacredithistory,
including:
- Establishasteadyworkrecord
-Payallbillspromptly.
-Openacheckingaccountanddon’tbouncechecks
-Openasavingsaccountandmakeregulardeposits
-Applyforalocalstorecreditcardandmakeregularmonthly
payments
-Applyforasmallloanusingyoursavingsaccountas
collateral
-Getaco-signeronaloanandpaybacktheloanasagreed
Source:Contentabovefrom"Spotlight."Prac&calMoneySkills.N.p.,n.d.Web.28July
2015;www.prac<calmoneyskills.com
Materialsarefree.Englishonly.
WhatIsACreditScore?
Acreditscoreisacomplexmathema<calmodelthatevaluates
manytypesofinforma<oninacreditfile.Acreditscoreis
usedbyalendertohelpdeterminewhetherapersonqualifies
forapar<cularcreditcard,loan,orservice.
Mostcreditscoreses<matetheriskacompanyincursby
lendingapersonmoneyorprovidingthemwithaservice––
specifically,thelikelihoodthatthepersonwillmakepayments
on<meinthenexttwotothreeyears.
Generally,thehigherthescore,thelessrisktheperson
represents.
Source:www.Clarifi.org
Materialsarefree.Englishonly.
CreditScore-TheBasics
Yourcreditscore(orFICO®score)isanumberthatlenders
usetodetermineyourcreditworthiness,basedonthe
informa<oninyourcreditreport.It'simportanttonotethat
yourcreditreportandscorearetwodifferentthings.
Youalsohavethreedifferentscoresfromeachofthethree
creditrepor<ngbureaus—TransUnion,Equifaxand
Experian.Scorescanvarybetweenthethreebureausand
lendersmayrefertooneorallofyourscoreswhenyouask
themforcredit.
Source:www.Clarifi.org
Materialsarefree.Englishonly.
WhatIsInACreditScore?
Fivefactorsareusedwhendeterminingyourcreditscore:
Source:hXp://www.myfico.com/images/CreditEduca<on/ce_FICO-Score-chart.jpg
Materialsarefree.Englishonly.
WhatIsInACreditScore?
Fivefactorsareusedwhendeterminingyourcreditscore:
1.Yourpaymenthistory-approximately35%ofaFICOscore
Areyoumakingyourpaymentson<me?Havinglatepayments,
bankruptciesandothernega<veitemsonyourcreditreportcan
bringdownyourscore.Ontheflipside,payingyourbillson<me
willhelpyourscore.
2.Howmuchyouowe-approximately30%ofaFICOscore
YourFICOscorelooksathowmuchyouoweonyouraccounts,the
numberofaccountsyouhavewithbalancesandtheamountof
availablecredityouhave.
Source:www.Clarifi.org
Materialsarefree.Englishonly.
WhatIsInACreditScorecon3nued….
3.Lengthofcredithistory-approximately15%ofaFICOscore
AlengthiercredithistoryisbeXerforyourscore,butit'ss<ll
possibletohaveagoodscoreifyourcredithistoryisshorter.
4.Newcredit-approximately10%ofaFICOscore
Ironically,openingnewlinesofcreditcanactuallyhurtyourscore,
butnotbymuch(usuallylessthan5points).Thisisbecausethe
"inquiries"lendersdowhencheckingyourcreditcanbecounted
againstyou.Ifyou'rerateshoppingforanewloan,dosowithina
certainperiodof<me,suchas30days,toavoidpuqnganydingsin
yourscore.However,FICOscorescantellthedifferencebetween
youratesearchingformul<pleslinesofnewcreditorjustonetype
ofnewcredit.
Source:www.Clarifi.org
Materialsarefree.Englishonly.
WhatIsInACreditScorecon3nued…
5.Otherfactors-approximately10%ofaFICOscore
Therearesomeothersmallerthingsthatcanimpactyourscore.
Oneofthemisthedifferenttypesofcredityouhave.
Havingamixofcreditcardsandotherloans,includingamortgage,
studentorautoloancanbegoodforyourscore.
Source:www.Clarifi.org
Materialsarefree.Englishonly.
HowDoIObtainMyCreditReport?
Recentchangesinlawnowrequireeachofthena<onwidecredit
repor<ngcompanies,includingEquifax,Experian,andTransUnion,to
provideyouwithafreecopyofyourcreditreport,atyourrequest,
onceevery12months.
Thethreena<onwidecreditrepor<ngcompanieshavesetupone
website,toll-freetelephonenumber,andmailingaddressthrough
whichyoucanorderyourfreeannualreport.
Toorder,visitAnnualcreditreport.com,call1-877-322-8228,or
completetheAnnualCreditReportRequestFormandmailto:
AnnualCreditReportRequestService
P.O.Box105281
Atlanta,GA30348-5281
*CreditBureauScoresarenotfreethroughAnnualcreditreport.combutcanbepurchased.
Materialsarefree.Englishonly.
HowDoIReadACreditReport?
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
0Approvednotused;toonewtorate
1Paidasagreed
230+dayspastdue
360+dayspastdue
490+dayspastdue
5Paysorpaid120+dayspasttheduedate;orcollec<on
account
6Makingregularpaymentsunderwageearnerplanorsimilar
arrangement
7Repossession
8Chargedofftobaddebt
Allabovecontentonthispagefrom"Spotlight."Prac&calMoneySkills.N.p.,n.d.Web.28July2015
Materialsarefree.Englishonly.
HowDoRemoveInaccuraciesFromMyCreditReport?
Thepurposeofacreditreportistopresentanaccuratepictureof
yourcredithistorytoanyonewithapermissiblepurposetoview
yourreport.Ifthereisnega<veinforma<ononyourreport,butitis
true,itneedstostay.
Ifthedataisinaccurate,thenyouneedtofileadisputetogetit
removed.ThefollowinglinktotheFederalTradeCommission(FTC)
providesinforma<ononhowtofileacreditbureaudispute:
hHp://www.consumer.ac.gov/ar3cles/0151-dispu3ng-errorscredit-reports.
Stayclearofanyoutitthatclaimstheycan“fix”yourcreditreport.
Only<meandagoodpayhistorycandothat.
Materialsarefree.Englishonly.
IMPORTANTCONSUMER
INFORMATION
This brochure contains some common terms and defini<ons,
which are intended to help you beXer understand your credit
transac<on.Creditcostsmoney,soitisimportantthatyoufully
understand the terms of your credit transac<on. If you come
across terms you do not understand, look up the terms, or ask
ourpersonneltoexplainthetermstoyou.Askques<ons.Make
certain the ques<ons that you ask are answered. Make certain
youunderstandthetermsandcostsofyourloan.
Materialsarefree.Englishonly.
CommonTerms&Defini<ons
• 
EqualCreditOpportunityAct(ECOA)
• 
Contract
Afederalregula<onwhichrequireslenderstopromotetheavailabilityofcredittoallcreditworthyapplicants
withoutregardtorace,color,religion,na<onalorigin,sex,maritalstatus,orage(providedtheapplicanthasthe
capacitytocontract);towhetherallorpartoftheapplicant’sincomederivesfromapublicassistanceprogram;
ortowhethertheapplicanthasingoodfaithexercisedanyrightundertheConsumerCreditProtec<onAct.The
regula<onprohibitscreditorprac<cesthatdiscriminateonthebasisofanyofthesefactors.
AwriXenbindingdocument,describingtermsofanagreementbetweentwoormorepersons.(Keepall
paperwork.Later,ifthereareanyques<ons,youwillhaveyouragreementinwri<ng.)
• 
AnnualPercentageRate(APR)
Thecostofyourcreditasayearlyrate.Thismeasuresthecostofcreditexpressedasayearlyinterestrate.Itis
intendedtoprovideasinglevalueforaconsumertocomparethecostofcreditbetweenonelenderand
another.
• 
FinanceCharge
Thedollaramountthecreditwillcostyou.Financechargesincludeinterest,andmayalsoincludetransac<on
feesandservicefees.
• 
Principal
Theamountofmoneyowedonadebt,onwhichinterestiscalculated.
• 
Interest
Thecostofborrowingmoney,generallyapercentageoftheamountowed.
• 
Balance
Thetotalamountofmoneyowedtoalender.
Materialsarefree.Englishonly.
CommonTerms&Defini<ons
• 
Default
Failuretopayadebtasagreedtoonacontract.Whenaloanisindefault,thelendermaydemandfullpayment
oftheremainingdebt.
• 
Collateral
Securitypledgedbyaborrowertoprotecttheinterestsofthelender;incaseofdefault,thelendermaytake
ownershipofthesecurity,ifany,pledgedbytheborrower.
• 
CreditBureau
Aprivatecompanythatkeepsarecordofyourcredithistoryfordistribu<onuponrequestbyauthorizedpar<es.
Whenyouapplyforcredit,alendermayrequestacreditreporttoreviewwhenconsideringyourapplica<on.
• 
CreditHistory
Arecordcontaininginforma<onaboutyou,includingyourpaymenthistoryonpreviousdebts.
• 
CreditReport
Areportofthecredithistoryandotherinforma<onaboutyouthatiskeptbycreditbureaus,whichmayinclude:
yourname,address,socialsecuritynumber,paymenthistory(goodandbad),currentandpreviousdebts,
employers,income,etc.Accurateinforma<ononacreditreportmaynotbelegallyremoved.Incorrect
informa<onmayberemovedbydispu<ngtheinforma<ontothecreditbureauinvolved.
Materialsarefree.Englishonly.
Thisbusinessisregulatedbythe
NewMexicoRegula<onsandLicensingDepartment,FinancialIns<tu<onsDivision
P.O.Box25101,2550CerrillosRoad,
SantaFe,NM87505,
Telephonenumber(505)476-4885
Materialsarefree.Englishonly.