MSU Extension 4-H Adulting 101

Welcome everyone to our 5th Adulting 101 this year. Build and protect your credit. We have two amazing presenters today, Jennifer Orquis and then Ezra Pompos both Extension educators and my colleagues. We also have Haley here who is our ASL interpreter. And my name is Kathy Jameson and I am the coordinator of the adulting 101. So I'm super excited that you decided to join us today. If you have not already, please type your name and where you're zooming in from. We love to see where everybody is coming from, and I am going to turn it over to I believe Ezra is going to go first. Yes. Thank you so much, Kathy. Let us get started here with Build and Protect your Credit. First off, I'm going to read our Justice For All statement. So MSU is an affirmative action, equal opportunity employer. Michigan State University Extension programs and materials are open to all without regard to race, color, national origin, sex, gender, gender identity, religion, age, height, weight, disability, political beliefs, sexual orientation, marital status, family status, or veteran status. Okay. Okay. MSU Extensions mission is to help people improve their lives through an educational process that applies knowledge to critical issues, needs and opportunities. On today's agenda, we're going to start by talking about what credit actually is. Then we'll go into the difference between credit cards and debit cards. We'll also talk about the advantages and disadvantages of both and understanding credit terms, as well as credit worthiness, and then different types of credit. Then we'll go ahead and talk about credit card statements, your credit report and score, and then some tips to build and establish your credit. All right. What actually is credit? Credit is the ability to borrow money, buying something now and paying for it later. It's the ability to obtain goods or services before payment based on the trust that the payment will be made in the future. You'll hear about good credit and bad credit, and it's really how we use credit that's what's good and bad. So if you're able to pay off your credit on time, if you're able to make those payments, that is good credit. We'll talk about that more as we go along. All right. What is a credit card? We're probably pretty familiar with this. Just a little plastic card that you can use to access a line of credit. A person can borrow up to an established credit limit and the credit limit is a maximum dollar amount that can be borrowed. So when you open a line of credit, you'll be able to know what that maximum amount is so that you know how much you can use in the given month. So starting out with credit can be tough because a lot of lenders want to know that you are responsible. They want you to have good credit before you can get credit. Sometimes when you're young and you're just starting out, it can be hard to start a line of credit. Some things that can help you asking someone to co-sign on the agreement and we'll elaborate a little bit about what co-signing is. You can use a checking account responsibly and have money in the bank. As opposed to using your credit, you can use checking. Establishing a relationship with a bank or a credit union. So once you have that account open, you'll be more likely to be approved, once you have that relationship with the bank, and then showing evidence of steady employment. So that is another way to prove that you will be able to pay that credit back and therefore, be credit worthy. I also want to you have to be 21 to open a credit card, unless you have proof of sufficient income or have a co-signer. Co- signing. That is when someone agrees to be a co-signer on your account and they are equally responsible for the money you borrow. This is a great thing to do if you have a trustworthy person. However, this also means that your credit is linked with the other person's credit, you want to make sure you trust each other to pay off the credit that you use so that you're not negatively affecting each other's credit. So when you get a credit card, to stay safe, you want to make sure you're not sharing that credit card number, credit card information with other people. Keep it safe. Keep it in your wallet on your person. Can you have being a question in the chat, can you have the cosigner removed at some point in time? Yes, you can. So I believe, you can have a cosigner removed just by talking with your lender. Okay. So I want to go back to that slide real quick. Just a couple more things I wanted to cover. So signing your credit card right away when you get it, that can help you keep your card safe. You'll have your signature on there. Um. And then turn on suspicious activity alerts. So lots of credit cards have apps or you can go on their website or they'll send you e mails, and you can turn on those alerts so that if your credit is used, you get an alert for that. So for me, I have my credit card set so that whenever I use it, I get an alert. So if I get an alert and I know that I didn't use my credit card, I know something's wrong, and I need to check it out. So in the chat, I want you guys to share with me what is one advantage of using a credit card? (no sound) Let me see. Improve credit score, building credit, rewards. Yeah, online shopping, building a credit history, being able to spend a hefty amount, sure, as long as you can pay it off, able to borrow money when low, Large purchases without having the cash. Yeah. Credit cards are pretty much necessary in today's world. If you want to buy credit credit in general is necessary. If you want to buy a car, if you want to buy a home, those are things we use credit for because we don't often have enough money for those things. Yeah. Great answers, awesome. Let's talk about the differences of credit cards and debit cards. With credit. Sometimes there are fees. Now, not every credit card has fees. This is something to look for when choosing a credit card. If you pay late, there will be fees. But you do pay later. At the end of the month, your balance will be due and that's when you pay your credit. Also, some of you guys mentioned in chat, there are rewards. And I want to point out Jennifer mentioned in chat. bankrate.com That's a great place to compare credit cards. Debit cards are different because that is money that comes from an account. So that's money that you already have. You pay for it now, and when you put that credit card in the card reader, you're going to put in your pin. Those are the differences between credit and debit. I see a raised hand. If you have a question, I'm going to have you put it in the chat. ...... Yeah. I see someone says in the chat, sometimes the cards with the best rewards do have fees, so you have to weigh out what you will use enough to make worth it? Yeah. All right. We might have spoiled some of the answers here, but let's go real quick through these. Which card requires requires you to have enough money before you pay for something. Everyone, you guys can put it in the chat. Yeah. There we go. Debit. All right. What about the card that generally offers purchase protection when you buy faulty goods. All right. We think credit. Which card allows you to pay for emergencies when you don't have enough money? Yeah, I'm seeing more credit. And then which card typically charges fees if you spend more money than what is in your account? Debit. Yes. Great. So it sounds like we have a good idea of what the difference between these two types of cards are. So let's go over these disadvantages and advantages of credit cards. So they're super convenient and useful for emergencies. So if you don't have that money, like some of us said about the advantages, um, that's an advantage you can use the money that you don't have. They're often required to hold reservations. You're able to purchase those big ticket items and spread out those payments that you can pay off over time. You also have protection against fraud, and the opportunity to establish a positive credit history, which, like we mentioned is pretty necessary to purchase those big ticket items. It also makes online shopping safer because of that protection against fraud. There's the possibility of receiving bonuses as well. Do keep in mind when you're using a credit card though. Interest can be really costly when you have a balance that's revolved. That is if you carry a balance from month to month, the interest can get really high. And just is also typically compounded daily and added to your balance. So as you move as you go past that period of that payment being due, your interest will compound. So that's interest on interest. You also may have additional penalty fees if you fail to make a payment on time. It's really tempting to overspend, If you know you have all that free money. If not used responsibly, it will have a negative impact on your credit score, and that can affect your ability to purchase those big ticket items in the future. All right. So these are a little bit already matched up by color already, so I'll just go through these definitions. Fixed interest rate. That is when the interest rate stays the same for the life of a loan or an account. So if you have a card or if you have a installment loan, which is a loan for a car, a home, a student loan, where you're paying off over time, but you don't you don't spend more on the account. That's an installment. So the interest rate stays the same for fixed interest rate. Variable and adjustable interest rate. That is the opposite. The interest rate changes at a specified time, such as every month or year. Then we have annual percentage rate. That is the interest rate that lenders are required to share in writing and it's calculated in a consistent way. Grace period is the amount of time before interest starts accumulating on charged purchases. So we talked about that earning interest if you're carrying a balance. Usually, you will have a grace period of a few days a week or so, before that payment or yeah, after that payment is due before you start earning interest and before it gets reported to credit bureaus So Ezra, before you go on, there is a question in the Q&A. How often do interest rates change and can they change even if the borrow does not have any late payments? How often do interest rates change? Actually, Jennifer, I'm going to defer to you on that question. Okay. And that's a really good question, and it's going to come down to two different things. It's going to come down to the product and the original terms and conditions you agreed to, or it can also be contingent upon your credit report and credit score. So remember, when Ezra talked about a variable interest rate where the product allows the interest rate to go up and down. There may be numerous variables that are taken into account that impact whether that interest rate goes up and down. Okay. Fixed interest rate, it's going to stay the same, whether you pay that bill on time or not. But as Ezra mentioned, it can be something late later than what you agreed to in the original terms, you could hit with a late fee and with late credit card payments as Ezra mentioned. If you miss two credit card payments in a row, it can impose a penalty APR which can go up to 39% on future purchases for six months. So the takeaway here is not to complicate or muddy the waters, Whenever you open any type of credit, you are provided a disclosure from the creditor or the credit card issuer, always read that fully. Yes, it's fine print, but read it because that's going to specify the terms and conditions of that product. So that way you know exactly what to expect. Thanks guys. All right. Thank you, Jennifer. With credit, you know, in order to borrow money, you're going to need to show that you're able to responsibly pay back the money. So these five Cs of credit are what they look at to know whether you are whether they trust you to pay back that money. These are things that affect your credit score. So, credit score is one of the things on here. These are things that affect whether you can get credit or not. Capital. This represents your overall assets. This is your savings, if you're a homeowner, is your home as well. That's an asset. Then we have capacity over here. Lenders want to make sure you have more money coming in than going out. This is your capacity to pay back. They want to see a history of steady employment, and that will make them feel more confident about lending to you, because they know you're going to be able to pay back. Then we have character. That is where I was referring to your credit reports or your credit scores. Lenders will review that. They'll review that credit history to determine if you've been responsible and you have a history of paying back your loans and paying back that money on time. Keeping your debt low is helpful as well. That can affect your credit score and Jennifer, we'll talk more about that later. And then collateral. These are possessions that you can use for collateral. They make loans less risky. This is when you have a car loan or a home loan, the car can be repossessed if you're not able to make those payments, and a home can be taken in foreclosure if you're not able to make those payments. These are considered secured loans, whereas your credit card, that's considered unsecured because there's no collateral. Jennifer mentioned in the chat, just one late car payment can lead to repossession. Those payments on time are real important. All right. Then the last one on here is conditions. The conditions of the loan, such as its interest rate and amount of money put down towards the principal. So that's the amount of money you pay before starting the loan, and they influence the lender's desire to finance the borrower. So if you're able to put more money down, pay more money up front, you will likely be given more favorable loan terms. This one more thing. This can also refer to how the borrower intends to use the money. Um. And I see in the chat, I've set Sierra set their car loan payments to automatic payments so that they don't forget. That's great. Those auto payments are really helpful. So I mentioned this a bit earlier, revolving credit, that is a line of credit that's extended to you and you can use that up to a certain amount every month as long as you're paying it off. You also have installment credit. So that is your car loans, your student loans, your mortgage loans. Those things that is one big sum of money that you're paying off over time. Then you also have something called open credit. Those are things that you are using ongoing, like your cell phone, your utilities, your electricity and water, your cable, It's also important to look at your credit card statements. So these summarize the important information from the previous month. And can anybody tell me in chat why it might be important to look at your credit card statements? ..... All right. I'm seeing check for fraud. That's a good one. Make sure the purchases match what you bought , look for mistakes. Check interest and balance. Okay, great. These are all good reasons to look at your credit card statements. So it can also tell you the due date, the minimum balance, the amount owed, available credit, how much interest was charged, so can keep track of how much you're spending on borrowing the money. Then like we said, to make sure those transactions are yours. Also, if you've got a credit card with rewards, you can see your reward status there. Okay. All right. Now, I am going to pass it back over to Jennifer to tell you guys about credit reports. All right. Well, thank you so much Ezra. We've covered a lot about credit. I'm super excited because a lot of you today are very, very credit savvy I can tell you know a lot about this topic already. We're going to take a little bit of a deeper dive and hopefully we might be able to share some additional information that might be new to you today. Real quickly in the chat, I would love to know how many of you have actually had the opportunity to review your credit report. Have you applied for something where your lender or creditor pulled the credit report and shared it with you? Did you pursue it on your own. So how many of you have actually gotten an opportunity to take a peek at your credit report? And if you haven't , that's okay. We're going to talk about how to do that. Oh, wow. So rapid fire responses. So someone has here. All right. A lot of you have already, great, great. Has got the credit score out the report, okay? Yeah. So someone chooses a certain time of year, excellent! So, what we're going to talk a little bit about today and what the report is, why it's important. And then we're going to talk about how you can get those reports for free. I want to give you a little bit some tips on what to do when you get those and how to make sure that they're accurate and that they're not depicting inaccurate information, and also to prevent being the victim of identity theft. So we're going to take a deeper dive in all things credit. So what I'd like to start out by sharing is that yes, a credit report is a record of how you've managed your financial obligations. It really shows how you've paid those debts. how you agreed to the terms and conditions of those products that Ezra mentioned earlier. You know, when you open a credit card, typically they want you to pay at least the minimum monthly payment every month by a certain time. So when you take on that particular product, you're agreeing. Yes, I adhere to those rules and regulations. What happens if you don't? What if you all of a sudden come up short and you can't make your minimum monthly payment on time? Maybe you mail it a week late. It's still a payment, right? However, when you mail that and it's late, your creditor can report you as a late payment or slow payer. So even though they eventually might get the money from you, they're already putting a negative report on your report, credit report saying, You know what? This person didn't pay on time. So one thing that people don't realize is that one late payment can take a while to fall off a credit report. Does anybody know how long one late payment takes to fall off credit? It's kind of hard, isn't it? It takes up to two years for one late payment to fall off a credit report. So when we talk about money management, one of the things we really want to make sure we're thinking about is watching our spending in comparison to our income, making sure that we have a system so we remind ourselves to pay our bills on time. We already had someone sharing the chat that they pay the car car payment so they don't forget. Making sure that we pay our bills on time is super important. I do want to put out a quick pitch that we do offer other free webinars, one is make the spending plan work for you. So if you haven't done that yet, you're not using the spending plan, definitely think about it. So when I talk about credit reports, I always like to say they're actually similar to report cards in school. They have our name, identifying information, oftentimes our address, a current employer, or a past employer, someone's having a hard time hearing. Uh. What you may want to try is logging out and logging back in. Is anybody else having that difficulty with hearing? Let me know. I haven't done anything different. I'm turning up my volume. Is anyone else having trouble hearing me? Okay. I can I can hear you fine. Yeah, so muffled. I'm not sure why. I'll try to speak a little bit louder. But thank you for letting me know. I may have to get a new microphone. I'm so sorry about that. So thank you for sharing. I'll definitely get something different. So I appreciate that. I'll try to speak a little bit more clearly, guys. Okay. I am a little more quiet sometimes. Okay. So it's going to have your name, address, sometimes your employer. It's also going to list all the different accounts that you have. Now, it may also list old accounts, accounts you've closed. Okay. What you need to keep in mind, though, is that even if closed accounts are on your credit report, even though they're there, that information is no longer taken into consideration in regards to how your credit score is calculated. We're going to talk more about credit scores. So in addition to the accounts we have, whether they're open or closed, it's going to show how we pay our bills, do we pay on time? I talked about that. Are you a late payer? It's also going to show how much debt do you have? Maybe you took out a student loan two years ago. It's going to show how much you initially borrowed and it's going to show how much you currently owe today. Also, too, it's going to have public record information. Have you run into a hardship, for example, had you gone through a bankruptcy or a car repossession or a foreclosure, Those types of situations will also be on your credit report. Okay. So Ezra talked a little bit about the importance of good credit, but let's take it a little bit further. Yes, good credit is super important to help us get a job. It can also help us access credit and get more positive terms for credit. If we have a strong, favorable credit score, we're going to get a better interest rate on our auto loan and mortgage loan. If we have a low credit score, it doesn't necessarily mean you can't ever access credit, but what it does mean is, you're going to pay a lot more for that credit than someone who has a higher credit score and positive credit record. Okay. Keep in mind credits also looked at when we want to rent an apartment, when we want to establish insurance in our name or utilities. And believe it or not, this might come as a surprise to someone. In some certain vocation or industry of employment, your credit score can impact whether or not you get a raise or if you're able to keep your job. I can give myself as an example. I'm employed by my employer, but they check my credit every year. Now, I have to give them permission to do that, but that's something that they check every year. So you understand that good credit doesn't just help us get our job. Sometimes it helps us keep our job. So you might be asking yourselves or wondering Gosh, what types of business is a credit score such a big deal, a credit report, such a big deal. Well, for example, if you worked at a bank or financial institution or you're handling other people's money every day. That might be a situation where your annual credit report and score might be a big deal with your employer. Another industry where they're very, very in tune to your credit report as an employee would be, for example, security. Do you work in some type of law enforcement or security? So again, credit is a big deal. So we want to take just a quick segue and we want to collect some important information from you. We do receive some federal funds to provide our programs, and we do have to undergo a civil right audit every five years. And the way that we can prove to those auditors that we're open to all is through demographics. Now, I want to say right from the get go- this is optional. But so, we certainly value and appreciate your information. And as I mentioned, it allows us to show our auditor every five years, that yes, our programs are, in fact, open to all. Kathy has quickly put in chat the links for those quick surveys, or just a couple of questions. So if you're so inclined, definitely consider doing that before we end our session today. Okay. Jennifer, I want to call out a question that I got. It says, Can you explain what happens when a minor who turns 18 has medical bills that they then become responsible for. And they're specifically saying medical bills they didn't know about. Okay. So that's a really good question. What I'm going to do is I'm going to quickly type in the chat pod because there is often more information to a scenario than I may have at my ready, but I want to try to entertain that question a little bit. So a couple of things. One of the things that I would encourage you to do is verify if that medical debt is yours. Unfortunately, sometimes children or young adults, individuals before the age of 18, sometimes their social security number is utilized by family members or friends to open utilities or maybe even apply for lines of credit. So first and foremost, verifying that the credit debt is yours would be a first step. If it's not, then you can dispute that inaccurate information. If it was, in fact, medical debt in your name and it was for you, One of the things you could do is communicate and dispute that with the credit bureau that those expenses were incurred when you were a minor and see if they are willing to investigate that debt, okay? The last recommendation I would make and I put in FTP do go in the chat that stands for Federal Trade Commission. There have been some new legislative changes in regards to how medical debt is handled. So I encourage you to visit that link. The other thing I was going to say is let's say you get your credit report, and let's say you reached out to the credit bureau, you dispute that debt and they say, you know what? It's in your name, you're responsible, based on our investigation. One last thing I would encourage you to do is reach out to your local legal aid and seek some legal guidance and if that truly is your debt and if you may be eligible for some legal representation and challenging that. Okay. someone going to add something else. All right. Good question. Tricky question. There may be different layers to that. So I think what I'm highly encouraging you is to do more investigation and get some good guidance on that. So real quick poll question. We're talking about credit reports. Do you think that they are all the same? Are credit reports all the same? True or falsee? we're going to talk about more than one type of credit report. Okay. So I've seen a couple courageous people say false, holy smokes. We've got some rapid fire responses here. Everybody seems on the same page. And yes, you are correct. The answer is false. They are not all the same. So there are three main credit reporting bureau or repositories. Those are the entities that hold all that information on every one of us in regards to our credit behavior. Now there are more than these, but these are the three main consumer bureaus, Equifax, Experian and Transunion. Now, I asked you earlier if you've got a copy of the credit report. A person could certainly reach out to each bureau to obtain their credit report. You could certainly do that. You can call the 888 or 800 number, you can write to them in person. However, there is an easier way to do that, and we're going to talk about that. But before we talk about the easy way to get your credit report, I have another quick question. Wanted to know what your thoughts are on this. Checking your credit report will lower your credit score. true or false? what are your thoughts on that? Again, wow, rapid fire. Okay. So we kinda of have a bit of a mix here. Most of you are saying false a couple of you are saying not so sure. So let's demystify the statement. Checking your credit report will never hurt your credit score. Okay? You are encouraged to check your credit report. Now, what I am going to talk about in a minute is the frequency upon which allowed to check your credit report because that's changed significantly in the last few years. So again, I really want people to hear me say that you are encouraged to check your credit report for the two reasons I mentioned earlier. 1. you want to make sure that the information listed is correct. If it's not, you want to dispute that because incorrect information will pull your credit score down. The second reason why it's so important to check your credit report is you also want to make sure that you're not a victim of identity theft. Because if someone has stolen your identity or stolen information about you and opened credit in your name. This can create a scenario where you are being approached to pay debt that wasn't yours. So checking that credit report is very important. Now, I know there are online apps that allow you to get access to portions of credit reports. We're not allowed to endorse products or services. I'm going to talk about some of those in a few minutes. But what we want to stress here is that the Federal Trade Commission and all of the different professional development training that Ezra and I have to pursue. Encourage consumers to go to annual credit report.com to get the credit reports. And I'm going to ask Ezra if they wouldn't mind putting that in the chat. Www.annualcreditreport.com. So why is this the best place to go in comparison to some of those online apps? Great question. The reason why you are encouraged to go to annual credit report.com is because you're going to get all three copies of your credit reports from all three bureaus. Okay. Some of those online apps or online platforms will only give you one or two copies of your credit reports. Now, remember that question we asked a minute ago. Are credit reports all the same? No, they're not. The credit report that you get from Experian, Equifax, and TransUnion will all look differently. They will have similar information. Your name, address, but they're not going to contain the same information. So let me quickly talk about that for a minute. Creditors have to pay a fee to report your payment information to a bureau. Now, some of the major large credit players like our credit card servicers are okay with paying fee to each creditor. Credit reporting bureau, sorry. to each Bureau. How ever, some of the smaller creditors, like maybe a retail store charge card situation. Maybe you've got a favorite store in the mall and you've got their retail store charge card. No, they may not want to pay that fee to every bureau to report your payment behavior. So if you're only checking one or two credit reports, you could be missing some critical information on that report you're not getting on some of those other online platforms that give you some exposure to your credit reports. So the takeaway here is always go to credit annual credit report.com to get your credit reports. No. Prior to the pandemic, you could only get one report per bureau per year from this platform. Since the pandemic, there has been such an incidence of identity theft and scam. You can now get them for free weekly. So there's nothing that is going to prohibit us from accessing that critically important information and getting that credit report. Now, before you go on, there was a question. They made a comment. I can't remember which one does this. I think Transunion that now requires you to upload your photo to authenticate your identity. Do you know when this changed? I if it is TransUnion, so I have not heard of that in all honesty. That's new information for me. I'm certainly not saying that that isn't true but I can tell you I have not heard that at all. So I'm a little bit leery about that. I'm going to definitely research that on my own. So thank you for bringing that to my attention. Kathy, is that something you've heard? I have not heard that at all. I have not. No. Here's what I'm wondering, okay? I'm speculating here. I'm speculating that there might be an online platform that gives you some access to a credit report? That might be required that. I truly doubt that annual credit report.com is requiring that. So I'm glad that you mentioned that. But again, always look at the source. Sometimes information we assume is from all spokes of the wheel and it's not it's not always the case. So again, back to the slide, which of the following describes the purpose of a credit report and how it's used. 1. is it a record of how you paid the debts 2. It's going to help you get a job housing or insurance. 3. Going to affect the amount of security deposit that you have to pay for housing and utilities and help you get a loan or D all of the above or 5. all of the above. And yes, you're absolutely correct. It is 5. I think the takeaway here is that credit report is really important. So making sure the information in it is correct is really a critical thing that we all have to keep in mind now. I have a little bit of bad news. I want to make sure to set the stage here. Say if you get your credit report and I hope you do. And you find something incorrect and you take the time to dispute it. Now, keep in mind, it's easy to dispute now because when you get your report, they provide you a dispute form. So it's right there. It's very easy to dispute inaccurate information. What I want you to understand is you can take the time to dispute inaccurate information and it can reappear the following year. Okay. So when I really talked about being sort of a champion for your credit report from the content that's in that report, it really does fall on each one of us to make sure we regularly monitor the information to make sure it's correct. So again, it's not a one and done. If you take the time to dispute the information, they can pop up again, but just keep that in mind. So earlier I talked about public record information that will also be in your credit report. Now notice that I mentioned earlier that it can take two years for a late payment to fall off a credit report. But what I wanted you to understand is some of the other situations that sometimes we run up against. Notice how much longer these things will stay on your credit report. If you go through Chapter 13 bankruptcy, it's going to stay on for seven years. And these are heavy hitters, these things can really pull down our credit scores. So just understand that negative information, depending upon what it is, can have a longer term impact on our credit report and ultimately our credit score. Okay. So now we're going to segue into credit scores. Another quick poll question, true or false. Credit scores are the same. Is that true or false? What do you think? We have a theme here. Most folks are saying no or false. Folks to question it. All right. All right. I knew this group is with savvy. You are absolutely correct. They are not the same. However, they're both legitimate. So let's talk about what they are and how they differ. A credit score is a number that predicts how much of a credit risk we're going to be. So really, credit score is for creditors or for lenders. Now they're helpful for us as consumers because it helps us know how we're doing in regards to managing our credit. However, understand that the information that leads to your credit score totally comes from those credit reports. Remember, I mentioned that wrong information is there is going to pull our score down. There are two main credit scoring model. One is called the FICO score, which has been in existence for a long time and it's the industry leader in regards to credit scoring platforms. I can tell you that many lenders will use the FICO scoring model when you're looking at mortgage loans, but maybe they'll use the vantage score in regards to auto loans. It's up to the lender upon which model they're going to use for which product. Now, what can get a little bit confusing for you and I as consumers is that both scores are legitimate. However, they calculate information differently. So let's say again, I'm not endorsing this product or service. Let's say you visit CreditKarma.com. That provides a credit score. It's a legitimate score. It's a Vantage score. A Vantage score in the industry is often known as an educational credit score. Now, you heard me say a moment ago, lenders can use that when they're looking at whether they're willing to open a line of credit or an auto loan or even a mortgage loan. But typically it's known as the educational credit score. If you were to contact a credit bureau and ask to buy your credit score. And if you didn't specify which one you wanted, they would typically send you the Vantage score. Now, if you want to buy your FICO score from annual credit report.com, you need to specify that. Now, let's step back for a minute. I'm not suggesting you need to buy your credit score. Sometimes people really want to know what it is. If you want more official credit score, the FICO score, you're going to have to purchase that. However, credit karma.com does provide your Vantage score for free. And if you visit the website on this slide, myFICO.com, if on the myFICO.com website, if you use the search box and search for the free FICO credit score estimator, you can get a free ballpark estimate of your FICO credit score. The reason why sometimes it's helpful to understand and get an idea of what both scores are. They're not always the same. Sometimes people will only look at one scoring model and be really excited because they think they're going to get the best annual percentage rate on the product, only to be a little bit disappointed that when they go to the lender, the lender might use a different scoring model. Thank you, Kathy putting it in the chat. The nice thing about this estimator platform, even though it's a ballpark estimate, you don't have to create a log in the past. All you do is answer ten questions, hit submit and you get a ballpark estimate of your FICO score. Okay. Now, many of you had already alluded to earlier, that you currently have credit card. Many credit card services are now kind enough to provide your FICO score on either your monthly statement or your quarterly credit card statement. That's a real legitimate FICO score. So that's a nice service that those creditors are now provided. So if you've never understood the difference, now you understand that Vantage score is listed in CreditKarma.com and often on your credit card statements, you're going to see your FICO. So what goes into compiling that FICO score particularly since it is known as the industry leader. Well, this pie chart does a really nice job of helping us understand what weighted values go into calculating the score. Notice the biggest piece of the pie, payment history. What this is talking about is, do I pay my bills on time? The next biggest piece of the pie, amount owed. Another way of talking about this is when Ezra talked about your credit cards, We're given a credit card to limit when we apply for a card, right? We fill an application, they run our credit. They evaluate the information, and they say, we're going to give you this card with this credit limit. If we max out our credit card, that means we spend up to our credit limit. That could pull our score down. Right wrong or indifferent. The messages we're struggling to manage that product. A takeaway is if you're trying to improve your credit score. The rule of thumb is to not charge more than 30% any given month on your card if you're trying to improve your credit score. Now, less is even better. Now, that's totally if you're trying to improve the credit. Now, I've been challenged down there. Let me tell you the other side of the coin. I've had people say, Now, wait a minute, Jennifer, I like my cashback rewards or I like my frequent flyer mile. I put everything on a credit card, but at the end of the month, I pay it off in full. I never carry a balance, I'm not being assessed interest or late fees. Is that wrong? Okay. Well, absolutely not. It doesn't come down to whether it's right or wrong. It comes down to what's best for you in your situation and your goals. So again, remember what I said a minute ago. If I'm trying to pull up my credit score, then I might want to make sure my balance is always less than 30% of my limit. But if I have a strong score, and if I'm not worried about spending a lot of that card because I know I'm going to pay my balance in full, there's nothing wrong with that. Okay. So let me give a quick example about staying under 30% of an approved credit limit on a credit card. Let's say you have a credit card and your maximum limit is $1,000. If you're trying to improve that credit so overall, what that means is you don't ever want to have more than a $300 limit (balance)on that card. $300 is 30% of $1,000 credit. So that's sort of a visual, if you will, on what that looks like if you're trying to stay the low 30% limit. Okay. Next, I want to talk about length of credit history. That's 15%. And that's good news. What this is saying is if you're new to credit, and not really penalized. Do allow about six months of consistent payment behavior on at least 3 active trade lines that needs three different types of credit on a credit report, and then you'll start to see credit behavior developed. That's if you're new to credit. Now, we do need to talk about the green piece of the five. This is a big deal. New credit. What this means is whenever you fill out an application to take on any type of credit, whether it's a revolving credit card or an installment loan Whether or not you're approved or not, it doesn't matter. But you give someone the permission to pull your credit, it's a hard hit and that will pull your score down. Next is types of credit, and that's what this is saying is 10%, is that ideally the best scenario to help pull up your credit is to have a mix of credit types. That means installment and revolving. But what I will say is that that depends on everyone's situation and sometimes not everybody is ready for an installment loan. Just understand that that's looking at the ideal mix of credit. This is a quick range of the FICO scoring model. So notice that if you had a credit score of 620 or lower, it could be better. But in regards to the FICO scoring model, if you had 750 or above, wow, that's excellent. So this is a good idea of how you would read your FICO score. Okay. So we've touched upon some of these already, but this is a good time for a quick review. What are some tips to improve your credit score? Correct, inaccurate information. The best way to do that, getting those credit reports on a regular basis from where? annual credit report.com, paying bills on time, If we're struggling with doing that. Maybe we need to look at, are we spending more than we're earning, or do we need to use a tool like a spending plan? Try to minimize our outstanding debt. Remember, we learned earlier if we max out those credit cards it will pull our score down. Only open new accounts if you really need them. Remember, we just talked about, every time you let someone pull your credit, whether you're approved or not, the hard hit that will pull score down. Try to manage the accounts you have currently responsibly. And I'm going to share this last recommendation with a little bit of caution. One strategy to improve a credit score is to reach out to a credit card servicer and ask them to increase your credit limit. This can sometimes decrease your credit utilization ratio, which could ultimately improve your score. Now, this may or may not come with strings attached. If you paid on time and you're you're a good account holder, they may do this without pulling your credit. So maybe that will work in your favor. But if you haven't paid on time and if you've had a high balance routinely, they may say we're only willing to honor this after you pull your credit. And if that's the case, then it's kind of a self defeating situation because if you pull your credit, that's going to pull your score down. The last word of caution here is that you do increase your credit limit. We have to know ourselves. Are you going to be attempted to spend more? And if so, then this strategy may not be for you in regards to trying to increase your credit score. Okay. So before you use credit, a couple of things to ask yourself, do I really need this item? Do I need it now? What are those extra costs? Is the item worth the extra cost? Can I make the monthly payment? So if I want to pay off my bill in full, can I do that? What might I have to give up in the future if I buy this now? And what is an emergency comes up? Am I going to be really financially strapped? Okay. Well, by opening a new account, they will check my credit, therefore bringing it down. Depends on what kind of account you're talking about. You're talking about a savings account, that's different than opening a credit account, like a credit card or an installment loan. Great question about how to establish credit. If you're new to credit, I believe we'll have a slide here in just a minute, so hold on. We're going to come to that in just a second, great question. What I want to quickly share though is that many times people who don't have credit are at a disadvantage because lenders are often reticent to lend you credit because there's nothing on your credit report to show them that you're going to be responsible. Okay. Some lenders will take into account what is called non traditional forms of credit. And that's if you can show them proof that you've made payments over time, even though it doesn't show on a credit report. Examples of that might be paying a rent payment, child support, maybe a car insurance premium, but maybe you're paying with money orders. There are some online platforms that we don't endorse, but some of these platforms such as Experian Boost, or Rental Kharma .com allow you to self report certain behaviors that don't show on a credit report. So those are some Some platforms that may allow you to try to help build some more credit history. But again, keep in mind, if you can show proof of payment, some lenders will take that into account if you're trying to open for example, a credit card. We've talked about common credit problems, late payments. The public information like bankruptcy, charge off, of those heavy hitters that stay in a credit report for a long time. Kimberly, this pertains to the question that you had, how you established credit? Banks and credit unions offer two products that can help people start with credit. One is called a secured credit card. The other is called a credit builder loan. In both scenarios, you actually front the money that you're borrowing against. So it's very low risk for the lender. The benefit to you as a consumer. Your monthly payments that you made on this product, they report to a credit bureau of their choice. So they help you create payment behavior which ultimately creates credit scores, but in a very safe way. It's safe because usually the maximum limit on these products are low anywhere from $500 to $1,000 and it's low risk for them. Since you're not borrowing money from them, you're borrowing from yourself that creates a very win win situation for financial institution as we end the consumer to try to establish credit. The last opportunity is what Ezra talked about earlier, and that's becoming an authorized user on someone's account. That's someone that you trust who has strong credit automatically. If they're willing to add you as an authorized user, you can immediately benefit from their positive credit score. So before you start, one of the questions was, what is the best credit to start with, would those be the ones that you just indicated on the previous slide? Best is a tricky word. What I would say is what you're eligible for. Many times people are not eligible for unsecured credit cards like Visa, Mastercard or Discover, if you have no credit. Sometimes the only way you can get a credit card is by going the secured credit card route. So I'm reticent to say best or worst, it really might come down to what you're eligible for. Thank you for the clarification. If you try to apply for Yeah. Yeah. If you try to apply for a major card and you have no credit history, you might be denied So we talked about pay bill on time, talked about pulling credit reports, and watch the credit utilization ratio. Here's a summary of those best practices to keep in mind. If you want a good credit history, try to have three active credit lines that you're utilizing and paying out time on a regular basis, a mix is ideal. And again, allow yourself at least six months before you start to see that credit history show on credit report , couple of things to think about when we're looking at managing debt as Ezra talked about, credit cards can be tempting. So it's easy sometimes to amass more debt than we realize, and then we're struggling to pay that down. I talked about tools such as spending plans. Ezra talked about making sure you read a fine print on your monthly statements. A couple of recommendations, stay current on your student loans. If there's federal loans and you default, they're going to find a way to make you pay those back And a great resource is PowerPay.org. That's a really cool tool from the Utah State University extension, one of our counterparts, and it gives you different strategies on how to play down the debt you have So if you want to get some suggestions on debt repayment, definitely visit PowerPay.org So I summation, I'm going to cover just a couple of slides from our actual Make a Spending Plan Work For You PowerPoint. Okay. One of the things I would really say is that you're not using a spending plan. I can give you a quick access to feeling more in control of your finances because it's going to help you look at on a day to day and monthly basis, the money coming in and the money going out. If you are using a spending plan, but you're struggling in the wondering, why isn't it working that well? And formula is to try to keep in mind that the money that you earn in a month time frame should equal what you spend on fixed expenses. Those are the things that stay the same from month to month like rent or car payment, your spending and hopefully a little bit towards saving. That should equal what you bring in every month. But what if that's not happen? What can you do? Can you increase income? Can you decrease your spending? and maybe a combination of both. If that seems overwhelming and you're struggling a little bit, take it one step at a time. Consider tracking you're spending for 30 days. That means either write down everything you've spent, I mean everything or save all those receipts and at the end of 30 days, add up everything you've spent. I'll give you a really pretty good idea of what you're spending looks like on average, plus, it'll help you understand where your money is going. Are you spending more money on needs versus wants? Are you eating out a lot, maybe more than you realize, and this information can help you identify where you can make cuts If you're not sold that checking your spending is worth it for you, here's a quick example of how small purchases can become big money over time. If you'd like to get a specialty coffee drink or energy drink five days a week and it's $5 a pop, that's $25 a week. End of the month, that's about $100. At the end of the year, about $1,200. If you did this consistently for ten years, $12,000. We're not picking on these uses but we do want you to understand that little money over time can become big money. Okay. So how can you trim your expenses? Use a spending plan, check your spending. Try to be a little bit more consumer stavvy, eat out less, bring your snacks or lunch, use a shopping list, comparison shop, try to find fun free activity. Okay. A couple of things I wanted to quickly share as we talked a little bit about checking to make sure you weren't a victim of identity theft when you get your credit reports. If you see any type of activity in those reports that are not yours. You are highly encouraged to reach out to the Federal Trade Commission right away. On their website, there's two different ways to get there. The quickest is FTC.gov and just select identity theft. It will walk you through the steps you need to take to make an official identity theft report. There are two steps. One is a police report and the second is an identity theft affidavit that you can do online. Okay. So in summation, I want to thank you so much. I want to ask if there are any other questions. We are an HUD Approved Housing Counseling agency. We do like folks to know about Fair Housing Act that does ban discrimination on rental and mortgage lending or buying a home. Not only does this act to protect on the seven protected classes, but Michigan has added a couple extra - age and marital status. And in closing, we love your feedback on the class. We recognize we covered a lot, but we're super grateful of your participation. We were very super appreciated. And in closing, just wanted to ask if there are any last minute questions and if not, thank you so much again for attending. If you didn't type your name and community in the chat I definitely do that. And again, we appreciate your feedback, on the survey. Okay. Kathy has recorded this. We won't be giving the power point, but we will provide some short term access to the recording. So you can definitely see this again if that would be helpful. Great question. I'm glad that you enjoyed it. I'm glad that were helpful. Really, again, we appreciated your participation, and we wish you all the best in your management and building and protecting your credit. Ezsa or Kathy, were there any last minute comments or statements that you wanted to make? We did have a couple of questions in the Q&A. So if we receive the credit reports free weekly, is there a reason why it is still called annual credit report? Good question. The only thing I can say to that, Bobby is that that's been sort of a stand alone title. My guess is they didn't want to change that in light of the longstanding history and recognition. That's a great observation. My guess is it's kind of a branding thing. They wanted to make sure that they were still known as the entity that is reputable to decrease any type of fear that maybe it's a spam. That's a good observation. Good question. I do see the next one, neurodivergent friendly budget management app site. I guess endorsements just for starting points. I guess in all honesty, I would encourage you to do some homework or some research. Certainly, there are Google apps, smartphone apps. Some financial institutions have apps. It really is going to be a personal preference. I think that my answer to that would be what types of features are you wanting? So again, we have to be careful. We can't endorse products or services. But I think you're wise to thing about what are you really looking for? I did mention earlier that bankrate.com is a great place to try to do some comparison shopping and financial products and services and may not cover everything. But my recommendation would be do some searches and find out what you're looking for. But I would read the fine print. And my recommendation would be make sure you understand how they handle your personal information. What Ezra did you want to comment? Yeah. So for those budget management Aps or sites, um, I personally prefer to use Excel and that might be a good option for you just like Excel spreadsheets or Google sheets because it's really you can personalize it. So there are Excel spreadsheets or Google sheets that already exist that you can use or you can build your own. That's something I would look into as well. Okay. Thank you very much,Ezra, I appreciate that. I'm just kind of spinning through some of the questions. What if I don't have to pay rent, the only bill I have to pay is my phone bill, and I pay it off one month at a time, would that be enough to build credit? Again, what we talked a little bit about earlier. Even if a person uses a credit card once or twice a year, that can still build credit history. So I'm not necessarily too concerned about the frequency. I think what I'm a little bit reticent about though remember we talked about best practices is to have at least two or three active trade lines. My biggest concern is that if that's the only thing that you have, That may not necessarily be robust enough as Ezra talked about wanting to buy a big big ticket item down the road. If you are trying to improve or increase your credit profile, you may want to think about pursuing a secured credit card, it's always personal preference. I think what I would quantify my response with that is, what is your ultimate goal, right? Do you want to buy a car? Do you want to buy a home? Are you wanting to be a renter down the road? And if some of those things are important to you, making sure that you're understanding, do I have a robust enough credit profile to be a candidate for those things? If I don't, what can I do in the interim to have a better chance of achieving those goals? Good question. I think the response is going to be depends on what your goals are. Lastly, can a credit card from America be used in another country? a great question, great question. Oftentimes, yes, your credit cards can be used internationally. But I can share though is that it's really wise for you to notify your credit card servicer ahead of time before you travel, letting them know the dates that you're going to be traveling and where and they'll put a note in your account profile. Reason why that's super important is if you don't take the time to do that, whether it's a debit card or a credit card. And if you go travel, they may put a hold on your account because they may think that you've been a victim of identity theft, and now you can't access any funds. So it really is important to make sure that you notify them in the event of international travel. Excellent question. I haven't seen that one in years. So I'm super glad, did you ask that! You know that brings me to First of all, I wanted to thank you both Jinnifer Ezra and then Halley. Our next session is going to be all about travel, and it's traveling on a budget. So that's going to be June 6 at 6:30. So we hope you can join us for that session. And thank you all for attending today. I'm going to put a link in the chat, which is a great resource for everyone. It is mimoneyhealth.org. And there's a ton of classes and resources that both Jinnifer and Ezra manage and do on a regular basis throughout the year. Thank you everyone for joining us, and we hope you have a wonderful day. Thank you, everybody.