A complete presentation from SpringCoin on Understanding and Improving Your Credit Score. How to establish or re-establish credit properly to save money and pay down debt.

1. Presented By: Carrie Smith

2.  Creator of www.carefulcents.com
for SpringCoin‟s blog
 Contributor
(www.springcoin.com/blog)
 Blogger for Huffington Post

3.  Understanding & improving your credit
score
 Using credit cards responsibly
 Debt Relief Options

4.  What is a credit score?
• Ranges from 300-850
• Most common type of score: FICO
• (3) Major Credit Reporting Agencies:
 Equifax
 Transunion
 Experian

5. 5 Factors that Determine Your Credit Score
Payment History (35%)
Amounts Owed (30%)
Length of Credit History
(15%)
New Credit (10%)
Credit Mix (10%)

6.  What‟s your track record?
• Do you have a proven track record of paying your bills on time?
 What factors into your payment history?
• Public Records/Collections
• Bankruptcy
• Liens
• Judgments
 Missed Payments
• How late were they? (30, 60, 90+ days late)
• A 30 day late payment that just happened a month ago will have more weight than
a 90 day late payment that happened two years ago.

7.  Ruleof thumb is to utilize <30% of your
available credit
• Example: A credit card with a $10,000 credit limit
shouldn‟t exceed a balance of more then $3,000
 Carrying a balance doesn‟t mean you‟re a
high risk borrower

8.  Credit history = number of months or years
your account(s) have been active
 The longer the credit history you have, the
greater your score
 Never close accounts with a long credit
history
 Are you utilizing your accounts that have a
long credit history?

9.  Are you accumulating more debt?
 Opening new accounts could be a sign of
financial hardships
 Opening several credit accounts in a short
period of time represents greater credit risk
 Applying for credit will show up as an
inquiry on your credit report  Lower
credit score

10.  What‟sin your credit score, do you have a
healthy mix?
• Credit cards, installments, mortgage, auto loans
 Do not apply for accounts just because
you don‟t have it included, credit mix is not
a key factor
 Credit mix is more important if you lack
sufficient information to base a score

11.  There is no quick fix to improve your credit score
 Do not contact a credit repair agency
 Get a copy of your credit report to check for inaccuracies.
• AnnualCreditReport.com  One free credit report for
each bureau once a year
 Clean up past due accounts
 Set up payment reminders, timely payments are the
biggest factor in determining your score

12.  Apply for a secured credit card
• Easy approval
• Cash as collateral in case of default
• Make sure bank is reporting to all three major credit
bureaus
• Utilize this account while paying off balance every
month, do not exceed more than 30% of your credit
limit
• Will not get a rejection on your credit report (this will
hurt your credit)
• Rejections are easily spotted if there is an inquiry and
no corresponding accounts opened
• If possible, try to open 2-3 secured credit cards

13.  Payment History = Single most important
factor, establish trust with creditors
 Don‟t utilize more than 30% of your available credit
limit
 Never close accounts with a long credit history
 Get a free copy of your credit report at
www.annualcreditreport.com
 Avoid credit repair agencies
 Secured credit cards are the best way to improve
your credit score

14.  Creditcards are necessary in today‟s
society
• Rental Cars
 Security Deposit
• Hotels
 Incidentals
• Fraud Protection
 Better protection over debit cards

15.  Interest Rate
 Annual Fees
 Available Credit Limit
 Cash back/Rewards

16.  Typically carry a high interest rate
• Monthly payments get credited towards general
purchases first
 Look over monthly statements
• Subscription Services
• Transaction Errors, interest rates

17.  Don‟t carry a balance over 30% of your
credit limit
 If you can‟t pay off the balance in
full, always try to pay more than the
minimum payment
 Don‟t mistaken your available credit as
“free money”
 Limit the number of credit cards you have

18. DO‟S DON‟TS
 Analyze needs vs wants before  Don‟t use credit card for
making a purchase everyday purchases
 Notify creditors if you are going  Don‟t use credit card to buy
to be late, they may possibly things you can‟t afford
waive late fees
 Always pay on time, late fees  Don‟t view available credit as
can be in excessive of $35+ „free cash‟, buy now pay later
 Stay within 30% of your credit  Don‟t take out cash advances
limit  Don‟t make only minimum
 Do try and pay off your entire payments
balance every month  Don‟t sign up for department
 Do check your balance store credit cards just because
frequently to make sure you you get a 1-time discount
are not overextended

19.  Watch out for introductory/teaser rates
 Monitor monthly statements
 Always pay off balance in full or more than
minimum payment
 Don‟t carry a balance over 30% of
available credit
 Avoid cash advances
 Separate needs vs wants

20.  Thereare 5 major types of debt relief
options today
• Debt Snowball/Debt Stacking
• Consumer Credit Counseling/Debt Management
Plans
• Debt Settlement
• Debt Consolidation
• Bankruptcy

21. DEBT SNOWBALL DEBT STACKING
 Paying off lowest balance  Paying off highest interest
credit card first rate credit card first
 Make minimum payments  Make minimum payments
on all accounts accept for on all accounts accept for
the lowest balance credit the highest interest rate
card credit card
 Once lowest balance  Once highest interest rate
account is paid off, “roll credit card is paid off, “roll
over” your payments to the over” your payments to the
next lowest balance account next highest interest rate
account

22.  This method is good for:
• Consumers who can afford to pay more than the
monthly minimum payments
• Have a steady source of income and continue to
pay more than minimum payments
• Need to have discipline to roll over payments to
next account

23. Creditor Balance Min Payment Interest Rate
Chase $5,000 $180 18.99%
Citi $3,000 $120 8.99%
Wells Fargo $7,000 $240 24.99%
Total $15,000 $540
Creditor Total Interest Paid Creditor Total Interest Paid
Chase $1364.63 Chase $1581.75
Citi $216.57 Citi $334.32
Wells Fargo $3290.67 Wells Fargo $2649.34
Total $4871.96 Total $4565.41

24.  What is a Debt Management Plan (DMP)
• A DMP is administered by a credit counselor
• Credit counselors will take 1 monthly payment and
disburse it to your creditors
• Interest Rate Reductions & Waiver of late fees
• Past due amounts put into back of loan
• Plans can last up to 60 months

25. BENEFITS DRAWBACKS
 Interest Rate Reductions  Accounts will be closed
(varies by creditor, 0-15%)  Notation on credit report
 Ease of one monthly stating you‟re enrolled in
payments consumer credit counseling
 Out of debt <60 months (this does not affect your
 Waiver of late fees & credit score)
penalties  Credit score decrease
 Past due amounts put into (overall debt to income ratio
arrears will increase)

26.  Consumers who are carrying high interest
rate credit cards
 Unable to afford more than the minimum
payments
 Suffered financial hardship, fell behind on
monthly payments
 About to fall behind due to financial
hardship

27.  What is debt settlement?
• Debt settlement is the negotiation of your severely
past due accounts to pay off your accounts for less
than what is owed
• Example: $10,000 in credit card debt, 6 months
behind, negotiate a settlement for $4500, payment is
considered as “settled in full”
• Only unsecured debts are eligible (no mortgage/auto
loans)
• Only accounts that are severely past due will be
considered for debt settlement, or accounts that are
already in collections

28. BENEFITS DRAWBACKS
 Has the most amount of  Increased collection calls
savings  Tax implications (any debt
 Some creditors can forgiven over $600 reported
potentially settle as low as to IRS)
20%  Creditors have the right to
 Ideal for accounts that are sue you (judgment)
already in collection status  Negative impact on credit
score
 Reported on credit report as
“settled in full”

29.  Consumers whose accounts are already in
collection status
 Judgment Proof (no assets, income is
protected from wage garnishment)
 Have funds readily available for settlement
 Accounts that are severely past due (4-6+
months)

30.  Different types of debt consolidation
• Consolidation through mortgage refinance
 Often requires high credit score
 Need sufficient equity in home to qualify
 Balance Transfer
• Consolidate multiple accounts into one credit
card/loan
• Requires high credit score
• Watch for introductory teaser rates

31.  No impact on credit score
 Easier to manage payments
 More transparency of your overall debt
 Potentially get out of debt faster

32. CHAPTER 7 CHAPTER 11
 Often referred as liquidation  Often referred as
of debts restructuring of debts
 Commonly used if you have  Used if you have significant
little assets or no money left assets that you want to keep
 Commonly used to protect
over after living expenses home against foreclosure
 Most unsecured debts can  Consumer pays trustee
be eliminated every month, lasts 3-5 years
 Process moves quick  Trustee distributes your
 Must pass “means test” monthly payments to your
creditors
 Ends collection calls

33.  Debt Snowball vs Debt Stacking requires you to pay more than
minimum payments
• Debt Snowball = Pay off lowest balance
• Debt Stacking = Pay off highest interest rate
 Debt Management Plans will help you lower interest rates and get on
a payment plan that lasts no more than 60 months
• Creditors will close accounts
• Interest rates vary among creditors
 Debt settlement has most savings, but is not right for everyone
• Credit score implication
• Possible Tax liabilities
• Creditors may sue for non payment

34.  Debt Consolidation
• Requires excellent credit score
• No impact on credit score
 Bankruptcy
• Will remain on credit report for 7-10 years
• Chapter 7: liquidation of assets
• Chapter 11: restructuring of debts, pay trustee

35.  Email: support@springcoin.com
 Phone: 866-771-3511