The Generations FCU Presentation on Credit

CreditBe afinancialgenius

Advantages of credit

Get it now

No cash…No problem.

Keeps records

Easy

Consolidates

Disadvantages of credit

Interest & fees

Financial difficulties

Impulse buying

The four “C’s” of credit

1. Character2. Capital3. Collateral4. Capacity

• Single Payment• Installment• Revolving

Types & sources of credit

• Borrow only what you can repay

• Pay on time

• Keep creditors in the loop

• Report lost or stolen credit cards

• Don’t share personal information

Using creditresponsibly

• Steady work

• Pay existing bills

• Grow savings

• Clean checking account

• Credit card or small loan

Building credit

20 - 10Rule of:

Example:

$24,000 / year

$24,000 X 20% = $4,800

Exception: Mortgage/Rent payment should not be counted in the 20%

Rule: Never borrow more than 20% of Net Income.

Example:

$2,000 / month after taxes

$2,000 X 10% = $200

Exception: Mortgage/Rent payment should not be counted in the 10%

Rule: Monthly payments shouldn’t exceed 10% of

monthly Net Income.

StartingEarly

StartingLater

A Lifetimeof Investing

Age Invested Age Invested Age Invested 16 $1,000 16 $1,000 17 $1,000 17 $1,000 18 $1,000 18 $1,000 19 $1,000 19 $1,000 20 $1,000 20 $1,000 21 $1,000 21 $1,000 22 $1,000 22 $1,000 23 $1,000 23 $1,000 24 $1,000 24 $1,000 25 $1,000 25 $1,000

26 $1,000 26 $1,000 27 $1,000 27 $1,000 28 $1,000 28 $1,000 29 $1,000 29 $1,000 30 $1,000 30 $1,000 31 $1,000 31 $1,000 32 $1,000 32 $1,000 33 $1,000 33 $1,000 34 $1,000 34 $1,000 35 $1,000 35 $1,000 36 $1,000 36 $1,000 37 $1,000 37 $1,000 38 $1,000 38 $1,000 39 $1,000 39 $1,000 40 $1,000 40 $1,000 41 $1,000 41 $1,000 42 $1,000 42 $1,000 43 $1,000 43 $1,000 44 $1,000 44 $1,000 45 $1,000 45 $1,000 46 $1,000 46 $1,000 47 $1,000 47 $1,000 48 $1,000 48 $1,000 49 $1,000 49 $1,000 50 $1,000 50 $1,000

*estimate assumes 5% interest w/$1,000 contributed yearly before interest is applied.

total investment$10,000

total interest earned$39,240

at age 50$50,240

total investment$25,000

total interest earned$27,500

at age 50$53,500

total investment$35,000

total interest earned$64,350

at age 50$100,350

Payment History

35%

Amount Owed30%

Length of Credit His-

tory15%

New Credit10%

Types of Credit Used10%

A+ABCDF

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780 – 850 720 – 779660 – 719 560 – 659 500 – 559 300 – 499

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