Session Overview. Building and Rebuilding Your Credit - Instructor Notes. Thank you for teaching the Building Your Credit Class :D

Transcription

1 Sessin Overview Building and Rebuilding Yur Credit - Instructr Ntes Thank yu fr teaching the Building Yur Credit Class :D The instructr ntes cntain suggestins fr yu n hw t teach this class. We have included a sample lessn plan that lists the relevant sectins f this curriculum with instructins fr yu, handuts and materials needed, as well as prpsed time-frames fr each part f the lessn. It is mst imprtant t us, hwever, that yu are cmfrtable teaching accrding t yur wn style. S, if yu have ideas as t hw yu wuld like t change certain aspects f the lessn, please g ahead. If yur sessin fcuses mre n questins frm participants and yu adapt yur plan accrdingly, that is GREAT! Our materials are always wrk-in-prgress; if yu have suggestins and ideas fr imprvement, please share yur feedback with the Lifelng Learning Crdinatr Ideally, ur classes will nt just disseminate knwledge, but will lead t changes in participants behavir that will result in better mney management habits n their part. T this end, mst examples suggested thrughut this curriculum fcus n mney participants LOSE if they chse the less preferable ptin. Behaviral ecnmics experiments have shwn that lss aversin is a strnger mtivatr than ptential gains. In shrt peple HATE TO LOSE mney! We hpe that by phrasing ur examples in terms f ptential lsses, we will encurage participants t avid less preferable behavirs. T ensure a cmfrtable learning atmsphere fr yur participants, try t arrive early at the lcatin t set up and prepare fr yur class. Greet participants as they arrive and intrduce yurself. At the beginning f the sessin, intrduce yurself and ask participants t briefly intrduce themselves t their neighbrs (r the whle grup, depending n the class size). Prvide an verview f the sessin befre yu start teaching. Please ensure that participants cmplete bth the PRE-CLASS as well as the POST-CLASS evaluatins. In additin, we have develped an instructr feedback frm and ask that yu take a few minutes after the class t prvide us with feedback n yur teaching experience. This will help us cntinually imprve the experience fr bth participants and vlunteers. If yu have any questins while yu prepare fr yur class r need additinal materials, feel free t cntact the Lifelng Learning Crdinatr at Thank yu again fr yur time and effrts enjy yur class! DISCLAIMER: Many f the materials we use were adapted frm ther surces. Fr this sessin we are particularly indebted t the FDIC Mney Smart curriculum. A cmplete list f surces fr materials and further reference is attached at the end f the instructr guide.

2 Building and Rebuilding Yur Credit Lessn Plan Tpic Activity Ntes Materials Time Intrductin Briefly intrduce yurself and start "reach activity" 5 Reach Learning Gals Handut - Pre-Class Assessment 10 Reach If yu were a banker refer t sectin "Reach Activity - IF Yu Were A Banker" Handut - IF Yu Were a Banker 10 Teach / Try Teach / Try Teach / Try What is a Credit Reprt & Hw t Read It Hw Yur Credit Reprt Is Used & Credit Scres Building & Repairing Yur Credit refer t sectin "Intrductin - What is a Credit Reprt" refer t sectin "Hw Yur Credit Reprt Is Used" refer t sectin "Building and Repairing Yur Credit" Handut - Hw t Get a Free Credit Reprt Once a Year / Handut - Sample Credit Reprt / Handut - Sample Dispute Letter Handut - The 4 C's f Lending / Handut - Understanding Credit Scres / Handut - Credit Scring Myths / Handut - IF Yu Were a Banker Handut - Hw T Build Yur Credit Histry / Handut - Hw T Repair Yur Credit Histry / Handut - Fr Further Infrmatin / Handut - FTC Deter, Detect, Defend BROCHURE Apply Wrap Up Sessin refer t sectin "Sessin Wrap-Up" Handut - Pst-Class Assessment 10 Ttal S:\Lifelng Learning\LLL Prgrams\Financial Literacy\2008 Credit\Lessn Plan Credit Management.xls

3 Intrductin What Is A Credit Reprt? Objective Building Yur Credit - Instructr Ntes Participants will be able t rder their wn credit reprt Participants will be able t read their credit reprt and find all relevant infrmatin Participants will be able t start the initiate the prcess f crrecting errrs n their credit reprt Instructr Ntes Ask participants wh has rdered their credit reprt befre Fr thse wh have and brught their reprt with them, encurage them t use it thrughut the sessin t find infrmatin if they wuld like Let participants knw that fr the purpse f practicing during the sessin yu will prvide everybdy with a generic credit reprt, s nbdy will have t share their persnal infrmatin Distribute handut Hw t Get A Free Credit Reprt Once a Year and briefly review the infrmatin n hw t rder a credit reprt Ask participants t share their experience rdering a free reprt Stress by rdering nly frm ONE bureau at a time, participants culd rder 3 reprts each year, ne every 4 mnths, and cntinuusly mnitr their credit fr free TEACH What is A Credit Reprt Ask participants what they knw abut infrmatin cntained in a credit reprt nte respnses n the bard Define: a credit reprt is a recrd f hw yu have paid yur debts in the past. It tells lenders: Wh yu are Hw much debt yu have Whether yu have made payments n time Whether there is negative infrmatin abut yu in public recrds Ask participants if they knw the names f the cmpanies that issue credit reprts Equifax Experian TransUnin Ask participants hw they think these cmpanies receive infrmatin Usually frm a variety f creditrs n a mnthly basis (i.e. banks file reprts fr each lan they have etc.) Frm public recrds bankruptcy filings, curt-rdered judgments, tax liens etc. frm curthuse recrds TEACH infrmatin cntained in the credit reprt

4 Intrductin What Is A Credit Reprt? Building Yur Credit - Instructr Ntes Stress: credit reprts frm each f the 3 bureaus will lk smewhat different, but they all cntain the same general infrmatin Identifying infrmatin abut wh yu are: Name, scial security number, current and previus addresses, telephne number, birth date, current and previus emplyers, if married, spuse s name Credit Histry Accunt recrd with different creditrs, hw much credit has been extended and hw yu have repaid it A list f inquiries frm creditrs and ther authrized parties Lists thse rganizatins that have accessed / read yur credit reprt Public Recrd Infrmatin (briefly explain each in mre detail!) Judgments curt rder placing a lien n yur prperty as security fr a debt yu we; under certain cnditins the creditr can take yur prperty as payment fr the debt (like curt-rdered cllateral); if yu sld yur prperty, the lien hlder can claim the mney t repay yur debt first Tax Liens are liens filed by the taxing authrity if yu d nt pay yur taxes; they wrk just like ther judgments Cllectin accunt past-due accunts that have been referred t a specialist t cllect part r all f the debt Bankruptcy legal prceeding that can release a persn frm repaying debts STRESS: bankruptcy will stay n yur recrd fr 10 years and will make it very difficult t get credit afterwards! TEACH Infrmatin NOT included in a credit reprt ask participants what infrmatin they can think f nw that is NOT included in their credit reprt (nte answers n the bard) checking and savings accunt balances incme medical histry purchases made with cash r check business accunt infrmatin race, gender, religin, r natinal rigin driving recrd stress: since ONLY yur credit histry and persnal infrmatin (fr identificatin) is reprted, yu can nly build yur credit histry by using credit respnsibly Hw t Read Yur Credit Reprt Repeat that credit reprts frm the different cmpanies may lk smewhat different

5 Intrductin What Is A Credit Reprt? Building Yur Credit - Instructr Ntes Stress: nt all lenders reprt t all 3 credit bureaus, s sme f the infrmatin may be different, t Use handut Sample Credit Reprt; allw sme time fr participants t familiarize themselves with the handut Ask participants the fllwing questins t make sure they can find relevant infrmatin n the reprt help where needed (!) Jhn Cnsumer has an accunt that has been sent t a cllectin agency. Where n his credit reprt wuld yu find this infrmatin? (Answer: ptentially negative items) Wh is the riginal creditr fr the accunt that went t cllectins? (Answer: Televise Cable Cmm.) In August 2000, an accunt was clsed at Jhn s request. What was the high balance n this accunt? (Answer: $3,228) Where did yu find this infrmatin? (Answer: Accunts in gd standing) Wh des Jhn wrk fr? Where did yu find this infrmatin? (Answer: ABCDE Engineering Crp. / Persnal infrmatin sectin) Address any questins participants have abut the credit reprt, sectin, r infrmatin cntained Hw t Crrect Errrs n yur credit reprt Stress: nbdy is perfect and there can always be mistakes n yur credit reprt Examples fr cmmn mistakes: Misspelled name r an accunt frm a persn with the same name Identity fraud accunts smebdy else pened an accunt in yur name (stress identity theft is a big prblem and refer questins t later in the sessin!) Accunts that have been clsed fr lnger than 7 years TEACH: if yu find an errr n yur reprt, it will nly get crrected if yu cntact the credit reprting agency if yu ntify them in writing, they have t investigate the cncern within 30 days (!) Use handut Sample Dispute Letter Stress cntact the reprting agency in writing and keep a cpy f the letter this way, yu can prf that yu sent them a letter Suggest that with the letter participants send a cpy f their credit reprts where they circled the mistakes (!) Walk participants thrugh the sample letter and explain that there are space hlders fr the real infrmatin they wuld have t fill in Transitin nw that we knw what a credit reprt lks like, let s see hw it is used by creditrs

6 Hw Yur Credit Reprt Is Used Objective Building Yur Credit Skills Training- Instructr Ntes Participants will be able t describe the 4 C s f Lending Participants will be able t explain hw a credit reprt is used by a lender Participants will be able t describe basic factrs that influence their credit scre Instructr Ntes Hw the Credit Reprt is Used Ask participants t reflect back t the initial activity IF yu Were a Banker and explain that the credit reprt really is the imprtant tl that tells the banker abut the custmer and hw well they have handled debt in the past TEACH The 4 C s f Lending Use handut The 4 Cs f Lending Explain that it is an easy slgan t remember what creditrs lk at befre making a decisin abut whm they will give mney t Creditrs might ask questins n the lan applicatin, r while talking t yu abut yu befre making a credit decisin Ask participants which f the 4 Cs a credit reprt mstly prvides infrmatin n (character) TEACH Reasns a Lan Applicatin may be denied: Use the example f Bb and Rachael respectively Bb - If yu dn t have credit histry a lender might deny yur lan applicatin because it is unknwn whether yu will make lan payments -> Stress: sme lenders will allw ALTERNATIVE methds f prving that yu are reliable: yu culd ffer prf that yu always pay yur utility bills, rent, and phne bills n time and/r that yu make regular depsits int a savings accunt all f these things prf that yu handle mney well and are respnsible Rachael lenders might deny yur lan applicatin if yu had credit prblems in the past since it indicates greater risk that yu might nt repay the lan; especially with negative infrmatin in the public recrds, such as bankruptcy r tax liens Stress we will take a lk at hw t repair yur credit later in this sessin! Yin if yu are paying yur lans n time and have gd credit, lenders will be mre likely t apprve yur lan applicatin and give yu a better deal Credit Scres TEACH: a credit scre is a number that helps lenders determine hw much credit risk yu will be and lenders increasingly use this number t make lan decisins; the number is calculated based n infrmatin in yur credit reprt and cmparing that infrmatin t thusands f ther peple s infrmatin

7 Hw Yur Credit Reprt Is Used Building Yur Credit Skills Training- Instructr Ntes Use handut Understanding Credit Scres t guide participants thrugh the cmpnents that influence a credit scre Stress making late payments r n payments n lans yu have will have lwer yur scre; but s will carrying a high balance n yur credit card and nt having a lng credit histry TEACH rule f thumb fr credit card balance NO MORE THAN 30% f the credit limit Illustrate with credit card example n the bard (3 credit cards, $2K, $3K, and $4K limits = ttal f $9K limit; carry a balance n ne f them f $1,500 and anther $1,500 is k) Answer questins participants might have Ask participants t lk at the table at the bttm f the handut Stress lenders use different scre ranges t decide wh gets a lan and at which interest rate, but generally the better yur scre, the better yur interest rate Shw hw much MONEY a bad scre culd cst n a hme purchase Stress the best way t imprve yur scre is t always pay yur bills n time Use handut 7 Credit Scring Myths t address cmmn miscnceptins peple have abut credit scres Refer back t credit card rule f thumb t illustrate the clsing ld accunts will increase my scre myth clsing the $4K card will result in using 60% f $5K limit! Address any questins participants might have Use handut- IF Yu Were a Banker and refer students t the exercise at the bttm t check their understanding Read thrugh the scenaris and ask fr vlunteers t answer the questins Scenari I N, Maria already received her free cpy fr the year and cannt receive a secnd free cpy; she culd, hwever, pay t receive anther cpy, usually abut $10 Scenari II N, credit infrmatin is maintained n an individual basis (see credit scring myths) Scenari III N, the credit scre ignres inquiries made abut hme mrtgages in a 30 day windw. Shpping fr the best deal n a hme r car lan des nt hurt yur scre. Transitin let s take a lk at sme things yu can d t build yur credit histry r repair it if yu had credit prblems in the past

8 Building & Repairing Credit Objective Building Yur Credit Skills Training- Instructr Ntes Participants will be able t describe actins they can take t build and/r repair their credit histry Participants will be able t describe actins they can take t prtect themselves frm identity theft Participants will be able t pt-ut f credit card ffers Instructr Ntes Stress: ne f the mst imprtant steps participants can take t build and/r repair their credit histry is t learn mre abut hw credit scres wrk and hw t check their wn credit histry > cming t the class was an imprtant step Building Credit Histry if yu didn t have credit befre: Ask participants t reflect back n Bb, frm the initial IF yu Were a Banker exercise he had been wrking fr several years and never applied fr a lan r credit card, s n credit histry Ask participants hw Bb might be able t shw t a lender that he is respnsible with mney? Cllect answers n the bard Use handut Hw T Build Yur Credit Histry t summarize strategies and actins participants with n prir credit histry culd emply Stress: the backside f the handut has tips fr paying all yur bills n time (!) Repairing Yur Credit Histry if yu had credit prblems befre Ask participants t reflect back n Rachael, frm the initial IF yu Were a Banker exercise she had been late making payments n her car and then stpped making payments Ask participants t brainstrm ideas n hw Rachael might be able t repair her credit histry Use handut Hw T Repair Yur Credit Histry t illustrate the tw appraches (d it yurself vs. using a credit cunseling agency) Stress: Wrking directly with a creditr is usually a gd ptin cntact them t explain yur situatin and try t wrk ut a payment plan with them (be persistent, if ne persn desn t want t help yu, hand up and call again ) Avid being scammed! Try t avid bankruptcy it stays n yur credit reprt fr 10 years and will make it very difficult and expensive t get credit later! Refer participants t handut Fr Further Infrmatin fr fllw-up infrmatin and steps t pt-ut f credit card ffers

9 Building & Repairing Credit Building Yur Credit Skills Training- Instructr Ntes Prtecting Yur Credit Stress we lked at many things yu can d t build and repair yur credit histry and we saw it is a lt f hard wrk! One thing that can really hurt yur credit histry is identity theft! Ask participants what they think identity theft means cllect answers n the bard Occurs when thieves steal persnal infrmatin such as SS#, birth date, r credit card numbers and use it t pen up new credit r bank accunts This hurts YOUR credit histry and credit scre, because bad checks and late payments will get reprted n yur credit reprt! Refer participants t FTC Brchure Deter Detect Defend Stress: Keep yur persnal infrmatin safe (DETER) Carefully Check Yur Credit Reprt and Financial Statements (DETECT) we learned hw tday! Review steps t take if ID Theft is suspected read DEFEND sectin with participants (!)

10 Sessin Wrap Up Objective: Building Yur Credit - Instructr Ntes participants review what they learned during the sessin participants prvide feedback n the sessin Instructins Address any remaining questins Summarize fr participants what yu have cvered during the sessin Stress: we have cvered a lt f infrmatin during the sessins! Encurage participants t refer back t their handuts fr mre infrmatin. Ask participants t cmplete the handut Evaluatin Thank participants fr their time and effrts

11 Bibligraphy Many partner rganizatins have generusly agreed t share the curriculum materials they use fr review and inspiratin. We wuld like t acknwledge the fllwing rganizatins fr prviding us with valuable input that helped imprve ur curriculum: The American Center fr Credit Cunseling Educatin fr prviding cmplimentary cpies f their varius curse materials: Check Wi$se, Credit When Credit is Due, and Mney in Mtin FDIC fr develping a great curriculum that is available t anybdy free f charge at Neighbrhd Huse fr sharing their Mney Matter$ curriculum Prt Jbs fr sharing their Financial Tls fr the Trades curriculum Prject Mney fr allwing us t adapt their Reach fr Yur Dreams: Start Saving Nw curriculum (find mre infrmatin at Slid Grund fr sharing their Take Cntrl f Yur Mney curriculum Washingtn Mutual fr sharing their entire financial literacy curriculum series Washingtn Sciety f CPAs fr sharing their curriculum materials as well as their educatinal games Furthermre, a lt f great infrmatin is available nline. Here is a list f surces that we fund mst helpful in develping ur curriculum: (American Institute f CPAs) (University f Illinis - Cnsumer and Family Ecnmics Extensin Prgram - All My Mney) (Freddie Mac) (Fannie Mae) (INCharge Educatin Fundatin) (US Financial Literacy and Educatin Cmmissin) (VISA)