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DAYS 39-40 – How to Have Good CreditElena Gonzálezelena@mcisd.You've probably heard about "good credit" or "bad credit", and you might have a vague idea of what it means. In this lesson we'll learn the details of what it means to have good credit, how it benefits you, how to achieve it, and how to keep track of it.Basically, having "good credit" means that you've shown that you're responsible with your money, so banking institutions (BIs), businesses, landlords, and others (these are called creditors, because they give you lines of credit) will be much more likely to give you favorable deals on things. For example, with good credit you will:be more easily approved for loans/credit, and for higher amounts on thempay lower interest on the loans and credit cardsbe more easily approved to rent or lease apartments, cars, etc.pay lower rent/fees for some of those thingseither pay lower security deposits for things like housing, utilities (like water, electricity, etc.), and cell phones OR not have to pay them at allpay less for home and car insurancenot have to worry if an employer looks at your credit history (as some do)So how do you get good credit? Again, you show that you're responsible with your money. To be more specific, you do things like:Pay all of your bills ON TIME. This is HUGE. Even if you always pay the bills, if you're frequently late, it still goes against your credit rating.Use credit and loans. Remember, a credit card isn't the same as a debit card from your BI! This might seem like weird advice because of the risks, but if you don't use credit and loans, it's harder to prove that you know how to manage them.Use only ONE credit card, and keep that account steady and healthy for a very long time. Part of building good credit is keeping up your good habits for a long time. If you switch around or have multiple accounts, this is hard to prove.Keep your credit card balance LOW. This means paying off the balance every month so it doesn't pile up on you.Take out only ONE loan at a time (OR one of each type, like an education loan, a car loan, and a mortgage [house loan]) and pay it off before you borrow any more money. If you borrow more and more before you pay things off, you send the message that you can't earn enough to support yourself. That's not good.How do you know if you have good credit? To be honest, right now you probably don't have ANY credit, and if you do, it's probably not great. That's not because you've done badly though! It's because you're young. Remember: Good credit isn't just about being responsible with your money; it's about proving that you're responsible with your money. You haven't yet had a chance to do that. But the time for it is coming soon, so it's super important to pay attention to it starting NOW.The quality of your credit is determined by your credit report, a history of ALL your accounts, loans, etc., and the payments you've made on them. It's compiled by three credit bureaus: Experian, TransUnion, and Equifax. From that information, they also calculate your credit rating, also known as your FICO score. Each company uses the full report, but they have slightly different ways of calculating the final rating so you might get a different number from each one. They'll all be in the same ballpark though, and won't be different enough to change how creditors consider you.You can get one copy of your credit report per 12-month period (not necessarily in the same calendar year) for free from each of the three bureaus. You can get another one later in the same period, but you have to pay for it, usually around $12-16 each. However, you're entitled to another free one IF:You've been rejected for credit, insurance, or employment because of your credit history. (It doesn't count if it was for a different reason.) Requests for this reason must be made within 60 days of being notified of the rejection.You're a victim of identity theft or fraud. Requests for this reason require also placing a fraud alert on the credit report and there are certain serious complications associated with this, but it's extremely valuable if you're trying to safeguard your identity and accounts after a case of fraud.You're receiving public welfare assistanceYou're unemployed but plan to apply for employment within the next 60 daysIn general, your credit score is calculated from:your payment history ? paying bills on time and avoiding things like bankruptcy, repossessions, and foreclosuresyour debt burden ? involves several components, but basically the amount and type of credit/loans you have vs how well you're paying them downthe length of your credit history ? how long you've maintained your good financial habitsthe types of credit used ? shows you know how to manage a variety of different things at the same timerecent searches for credit ? again, constantly applying for new loans/credit sends a bad message about your ability to manage your moneyA credit rating is generally between 300 and 850. The higher it is, the better. It's hard to say precisely what numbers mean "good" or "bad" because there are lots of other factors to consider, but VERY GENERALLY about 800-850 is excellent, 725-799 is good, 650–724 is fair, 500–649 is bad, and below 550 is very bad.DAYS 41-43 – How to Have Good Credit PracticeElena Gonzálezelena@mcisd.List the three benefits of good credit that you feel are most important to YOU personally._________________________________________________________________________________________________________________________________________________________________________________________________________________________________Explain how to make payments in a way that maintains good credit. Be specific! _________________________________________________________________________________________List 3 ways to manage credit cards for good credit. (Two are in the same bullet point.)_________________________________________________________________________________________________________________________________________________________________________________________________________________________________Explain how to manage loans in order to maintain good credit. Be specific! ________________ __________________________________________________________________________________________________________________________________________________________List the five factors that are considered to calculate your credit score._______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Fill in the following general ranges for credit scores.excellent _______________________good __________________________fair ____________________________bad ___________________________very bad ________________________BONUS:What term related to credit comes from the name of the company originally called Fair, Isaac, and Co.? (Read the notes carefully and think creatively!) _______________________ ................
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