HDF 322 Lecture 14 Outline of Last Lecture I Taxes and Financial Planning Outline of Current Lecture II Consumer Credit III Credit Cards Types of Credit IV Credit Fraud V Debt Safety Ratio VI Credit Rating VII Video VIII Institute for Financial Education IX Denied Credit X 5 C s Current Lecture I Consumer Credit examples show that people do have differences when they use plastic credit cards not debit II Credit Cards Types of Credit These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute a Plastic cards you think about where people charge groceries something that is more of a convenience and you pay it off after monthly statement comes in full sometimes you can carry it in wallet most of us have credit cards 80 and most have more than 1 if you are convenience user you pay it off every billing cycle so you really don t pay interest probably more 40 convenience user and 60 ARE credit users they have debt pay some of it off but not all of it off credit card companies make money off the credit users not convenience users debit card is better for cash Co Branding when you take card and make it look like burnt orange long horn if you use that card the school got a little rebate on it this is where company association cobrands and they said they used to make 10 of their budget through that so cobranding made 300 000 b III Credit Fraud this is credit fraud AGAIN these are simple things from text we need to give plastic cards a little management to keep them secure and we know someone is looking over shoulder so hide so that they cant see it caution when giving number online and over phone make sure there is security having records set so that if you lose your credit cards you know who to contact IV Debt Safety Ratio using debt payment sto income monthly payments divided by monthly net income generally they use take home pay its still 20 often you will do this for credit calculation and if you are in low teens you are ok but when you get to 18 19 upper teens that s a yellow light saying be careful don t get more debt and 20 is RED light just use consumer debt V Credit Rating there is wrong information in about 20 and some of that 40 have errors but 20 are real errors that you would be denied credit they don t take corrections very seriously and its up to us to figure out whats really going on VI Video a mistakes can increase loans or prevent you from getting job loan security clearance 40 million have errors 20 millions have serious mistakes that can be impossible to get out of 1 of 5 in Americans have error in credit report and 1 10 might suffer error rate where it will lower credit score its high error rate Companies who do credit reports law says that if you think theres a mistake and you go to them they have obligation to do reasonable explanation and they are not doing that at all Problem is not that they make mistakes its that they WONT FIX MISTAKES saying stuff is delinquent when not or open when closed 8 MILLION PEOPLE FILE DISPUTES calls don t help and are in India in each case unlikely that someone with authority to resolve dispute will do it credit report people who got mixed up with drug dealer and it took 5 years to get fixed VII Institute for Financial Education you have no control over the number inquiries and those numbers can be used against you but for 10 dollars freeze credit report and no one can see it a then you have to lift fee and then it goes back on so there s always a cost involvedbut we now can do this we have files that get hacked into and information that gets out if someone hacks into business and gets numbers they are required to notify all people involved so they can be aware that they have issues they can always freeze credit report and personally watch it so there s not someone taking over their accounts VIII Denied Credit they have to offer you free copy of credit report and ask why you are allowed to write 100 word rebuttle that will be placed it credit file and that will be sent out to anyone looking at your credit file a IX 5 C s important to know bc look at different aspects are you capable of having income to pay debt what capital assets do you have what are conditions of employment of where you get money what is your character do you pay things back what is your history have you filed for bankruptcy collateral they want to have car want to see something that you pay something off regularly every yearwant to see a debt you pay off every 3 4 years need good credit score may want to use a credit score and when you pay it off that s a good record and shows history of consistent payments over time and that s really important