Building a Better Financial Future CreditSmart Training for New Instructors SESSION #2 Building, Maintaining and Restoring Your Credit

Transcription

1 Building a Better Financial Future CreditSmart Training for New Instructors SESSION #2 Building, Maintaining and Restoring Your Credit MARCH 15, 2017 Freddie Mac

2 CreditSmart Freddie Mac strongly supports the benefit of credit education and building sound financial literacy skills among consumers. Well-informed and well-prepared homebuyers are on the best path to enjoying successful and sustainable homeownership. As part of this ongoing commitment, Freddie Mac developed CreditSmart Español, a multilingual financial education curriculum and consumer outreach initiative designed to help consumers build and maintain better credit, make sound financial decisions, and understand the steps to sustainable homeownership. Freddie Mac 2

3 Your Producer - Maheen Qureshi Specializes in public-private partnerships, with 13 years of experience in housing outreach, financial inclusion, and environmental finance. Most recently, she co-led the start-up of NatureVest, an initiative of The Nature Conservancy that is building the field of conservation impact investing in the sustainable development space. Previously, Maheen worked at Freddie Mac for nine years, managing national financial education and foreclosure prevention initiatives. Maheen also developed the women s financial education initiative under CreditSmart and is passionate about economic empowerment of women and underserved communities. Maheen is multi-lingual and has lived in Pakistan, Myanmar, the Philippines, Indonesia and the U.S. She served on the Board of SAALT, a national advocacy organization, for four years and participates in various mission-oriented leadership activities. Freddie Mac 3

4 Certificate of Completion Eligibility Register and attend all sessions under your registration link, not that of your colleague. You must login via your laptop or desktop. GoToWebinar is not able to track your participation if you re login via your cell phone. Must take and pass a 10 question post-webinar test with a score of 80% or higher. Respond to chat and poll questions, we encourage your participation. Freddie Mac 4

5 Your Presenter - Cora R. Fulmore Manager/Owner of the Mortgage & Credit Center, LLC Creator of The Counselor s Corner, Inc. an online training center for housing professionals, with more than 4,000 members Co-organizer of the first Florida Housing Counselor Network, statewide More than 35 years of experience in mortgage & credit counseling and training National Consultant for many organizations, current faculty member of NeighborWorks since 1994; provide training in the area of: ü Certification for ED s and Program Managers ü Housing Counseling Certification ü Foreclosure Prevention ü Credit Counseling CreditSmart trainer since 2001 Disclaimer: I ve made every effort to provide updated information for this presentation. However, today presentation is not a substitute for you staying abreast of industry changes and updates. Freddie Mac 5

6 GoToWebinar Platform Toll Number: Access Code: Webinar ID: A survey will pop up at the end of today s webinar - please complete Your pop-up blocker must be disabled to view and complete the survey We appreciate your feedback! Freddie Mac 6

7 4-Part Series + Bonus Class SESSION #1 SESSION #2 SESSION #3 SESSION #4 BONUS CLASS CS Introduction and Money Management Basics 2:00 PM - 3:30 PM EDT Building, Maintaining and Restoring Your Credit 2:00 PM - 3:30 PM EDT Thinking like a lender and Avoiding credit traps 2:00 PM - 3:30 PM EDT Preparing for Homeownership and Avoiding Foreclosure 2:00 PM - 3:30 PM EDT Super Charging your Credit Counseling Program 2:00 PM 3:30 PM EDT MARCH 8, 2017 MARCH 15, 2017 MARCH 22, 2017 MARCH 29, 2017 APRIL 5, 2017 ALL CLASSES ARE ON WEDNESDAYS CERTIFICATE ISSUED ONCE YOU HAVE TAKEN AND PASSED 10 QUESTION EXAM AFTER THE FINAL SESSION *YOU MUST ATTEND ALL 4 SESSION* BONUS CLASS IS OPTIONAL Freddie Mac 7

8 Homework Assignment Review 1. Go to to check out CreditSmart Online Consumer Program, share with your colleagues Freddie Mac 8

9 Homework Assignment Review 1. Go to to check out CreditSmart Online Consumer Program, share with your colleagues 2. Go to to review the Financial Capability Study. ü FINRA Investor Education Foundation ü Council for Economic Education Freddie Mac 9

10 Homework Assignment Review 1. Go to to check out CreditSmart Online Consumer Program, share with your colleagues 2. Go to to review the Financial Capability Study. 3. What agency provides Consumer Education within your state. Is financial education part of their focus? 4. Create an activity that could be used for one of the modules presented today. The activity should engage the audience. The activity can be as simple as a 2 minute presentation. Freddie Mac 10

11 Review Homework Module 5 Establishing and Maintaining Good Credit Provides an overview of the credit report Module 6 Understanding Credit Scoring Describes credit scoring from a borrower's perspective and illustrates how consumer behavior affects credit scores Module 9 Restoring Your Credit Provides tips on how to restore impaired credit Freddie Mac 11

12 Learning Objective After completing this series, you will: - Have a better understand the Consumer Protection Laws - Learn the basic components of a credit report - Be introduced to pending and current laws that could impact the credit industry - Have a better understanding of credit scoring and it s impact - Learn what are the factors of the FICO scoring model Freddie Mac 12

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14 Invisible Credit Files CFPB reports 26 million consumers have credit invisible files 19 million consumers have unscored credit records Consumers in low-income neighborhoods are more likely to be credit invisible or to have an unscored record Black and Hispanic consumers are more likely to have limited credit records Freddie Mac 14

15 Consumer vs. Creditor Purchased Credit Scores CFPB Orders TransUnion and Equifax to Pay for Deceiving Consumers in Marketing Credit Scores and Credit Products January 3, 2017 Freddie Mac 15

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17 Tips for Establishing a Credit Presences Obtain a copy of your credit report Establish a relationship with a bank open a checking and savings account Don t apply for too much credit at once Don t fall for a credit repair scheme Do research the type of card that is right for you Consider a secured credit card Freddie Mac 17

18 There are many credit myths so let s take the Credit Quiz Freddie Mac 18

19 Discussion Question 1 1. Which Act gives all Americans the right to request a free copy of his or her credit report annually? a) Fair Credit Billing Act (FCBA) b) Fair Credit Reporting Act (FCRA) c) Fair and Accurate Credit Transactions Act (FACT Act) d) Fair Debt Collection Practices Act (FDCPA) Freddie Mac 19

20 Discussion Question 1 1. Which Act gives all Americans the right to request a free copy of his or her credit report annually? a) Fair Credit Billing Act (FCBA) b) Fair Credit Reporting Act (FCRA) c) Fair and Accurate Credit Transactions Act (FACT Act) d) Fair Debt Collection Practices Act Freddie Mac 20

21 Why? The Fair and Accurate Credit Transaction (FACT) Act of 2003 gives all Americans the right to request a free copy of his or her credit report annually from each of the three main credit-reporting bureaus via Web, phone, fax or mail. Those bureaus are TransUnion, Experian, and Equifax. Because creditors may report information to only one of the three main bureaus, each report may include different information. Be sure to check all three reports for outdated data or inaccuracies. Freddie Mac 21

22 Discussion Question 2 2. My credit score takes a hit every time it s checked? a. True b. False Freddie Mac 22

23 Discussion Question 2 2. My credit score takes a hit every time it s checked? a. True b. False Freddie Mac 23

24 Why? Credit Report pulls are classified as either hard or soft. Hard pulls have a negative impact on the score. These are pulls generated through an inquiry for a retail credit card or a lender application for loan approval. Soft pulls have no impact on the credit score. Soft pulls are from inquires that are initiated by the consumer. Checking your own credit score, has no impact on your credit score. Freddie Mac 24

25 Discussion Question 3 3. You can include a 100-word statement on your credit report. a) True b) False Freddie Mac 25

26 Discussion Question 3 3. You can include a 100-word statement on your credit report. a) True b) False Freddie Mac 26

27 Why? Why? Consumers have the right to include a brief statement on their credit report that will be viewable to anyone who accesses it. They can use the statement to indicate if they have been a victim of fraud or if they are in the process of correcting inaccurate data on their report. The statement usually remains on the report for two years unless the consumer request to have it removed sooner. Freddie Mac 27

28 So What s Contained In a Credit Report Freddie Mac 28

29 Not all formats are the same But all formats provides the same basic information. Freddie Mac 29

30 Check for Inaccuracies Credit reports are divided into 4 sections: ü Identification ü Credit history/trade-lines ü Public records ü Inquiries Have your client thoroughly review each section of the report for inaccuracies. Freddie Mac 30

31 Payment/Credit History Freddie Mac 31

32 Section 605(a)(4) Freddie Mac 32

33 Obsolescence Period Freddie Mac 33

34 Calculating the 7-year period Freddie Mac 34

35 Reason Codes Freddie Mac 35

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41 Highest Lowest Freddie Mac 41

42 Credit Scores are fluid. As information changes the score changes Freddie Mac 42

43 Where Credit Scores Overlap If you think there s just one credit score, think again. FICO credit score is the most widely used by lenders. All of the various systems for the most part use a three-digit number. Although each is calculated differently, they have a tendency to overlap. Freddie Mac 43

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45 Discussion Question 4 4. What has the highest impact on your credit score. a. The type of credit in use b. The number of credit cards in my file c. My payment history d. The number of calls I receive from a credit grantor Freddie Mac 45

46 Discussion Question 4 4. What has the highest impact on your credit score. a. The type of credit in use b. The number of credit cards in my file c. My payment history d. The number of calls I receive from a credit grantor Freddie Mac 46

47 Discussion Question 4 4. What has the highest impact on your credit score. a. The type of credit in use b. The number of credit cards in my file c. My payment history - represents 35% of the score d. The number of calls I receive from a credit grantor Freddie Mac 47

48 Discussion Question 5 5. Will paying off my credit cards and closing out the account improve my credit score? a. Yes b. No Freddie Mac 48

49 Discussion Question 5 5. Will paying off my credit cards and closing out the account improve my credit score? a. Yes b. No Freddie Mac 49

50 Why? When you close a credit card with a balance, your total available credit and credit limit are reported as $0. If you still have a balance on that account with no credit limit, it looks like you ve maxed out. A maxed out credit card, or one that appears to be maxed out, can have a very negative impact on your credit score since your level of credit card debt, including your credit to credit ratio, is 30% of your credit score. Freddie Mac 50

51 Discussion Question 6 6. How often can my credit score change in a month? a. At the end of the month on the 30th b. On the 15 th of the month c. As often as information changes in the file d. None of the above Freddie Mac 51

52 Discussion Question 6 6. How often can my credit score change in a month? a. At the end of the month on the 30th b. On the 15 th of the month c. As often as information changes in the file d. None of the above Freddie Mac 52

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57 The Credit Score Competition Act Freddie Mac 57

58 Trended & Alternative Data Freddie Mac 58

59 Source: myfico.com Cost: $59.00 for three reports Freddie Mac 59

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66 What s not included in the CreditScore decision. Age Gender National Origin Source of Income Religion Marital Status Income Level Zip Code Race Freddie Mac 66

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68 Module 1: Your Credit & Why It Is Important Module 2: Managing Your Money Module 3: Goal Setting Module 4: Banking Services, An Important Step Module 5: Establishing & Maintaining Credit Module 6: Understanding Credit Scoring Module 7: Thinking Like a Lender Module 8: Avoiding Credit Traps Module 9: Restoring Your Credit Module 10: Planning for Your Future Module 11: Becoming a Homeowner Module 12: Preserving Homeownership: Protecting Your Home Investment Freddie Mac 68

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72 What s wrong with this picture? Freddie Mac 72

73 605. Relating to information contained in consumer reports [15 U.S.C. 1681c] Freddie Mac 73

74 Public Records There are three types of public records that can appear in your credit report: ü bankruptcy Chapter 7 or Chapter 13 ü civil judgments ü tax liens RESOURCE: Freddie Mac 74

75 Sample Dispute Letter Freddie Mac 75

76 Sample Dispute Letter, Cont d. Freddie Mac 76

77 Sample Dispute Letter, Cont d. Freddie Mac 77

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84 Education Techniques Maintain an informal atmosphere Act as a facilitator - not the expert Relate the material to real life situations Post the AGENDA and refer to it Incorporate a variety of training materials and techniques Freddie Mac 84

85 Education Techniques Build on earlier statements Encourage sharing & discovery Give participants time to evaluate their learning Maintain a setting of trust Be yourself and have FUN Freddie Mac 85

86 Bright Ideas Use show-and-tell items or props to make examples more real and relatable What show-and-tell props did I use? Provide tools to assist in applying new knowledge What tools did I use to reinforce points made? Test progress and check for understanding What did I use to test your understanding? Share a story of hope or inspiration What story did I share to give hope and/or inspiration? Freddie Mac 86

87 Homework Assignment Pull a copy of your credit report for review. Save all pre-approved offers between now and the final class. What is the median credit score in your state. How many Federal Consumer Protection laws are there? Review CreditSmart Modules 4,7, and 8 Freddie Mac 87

88 Final Business Freddie Mac 88

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