On Take it to the Bank,
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you'll find ways
to get out of debt.
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Solve your credit card problems.
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How to make and
stick with the budget?
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Simple ways to save.
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Buying or selling a home
and many more financial matters
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on Take it to the Bank.
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Hi, my name is Cordell Thomas,
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and welcome to
"Take it to the Bank."
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Today, we have an
exciting segment for you,
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and I think this
program will give you
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a clear understanding
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of some of the
concerns you should have,
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and, or the thoughts
you should be thinking about
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basically about credit.
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Credit is really
important part of society,
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and I'm gonna
give you three words.
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Word number one, Character,
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number two, Capacity,
number three, Capital.
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Some of the
things that many banks
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as well as other organizations
that give out credit look at
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when they're planning to
give you access to credit.
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For example, Character, do
you pay your bills on time?
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Do you take care of your
bills on an ongoing basis,
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on a timely basis?
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Can you be
trusted to pay it back?
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Capital.
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Do you have a savings
or a checking account?
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Do you save, and
put money regularly
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into that savings account?
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And three,
Capacity. Do you have a job?
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Those are three basic issues
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that a credit
company is going to look at
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when they're
gonna offer you credit.
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I have a story for you.
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My wife and I were driving,
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and I think my
mother is always there,
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I don't actually remember,
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yes, she was
actually in the car with us.
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And we were driving
home from an excursion,
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and we happened to
stop by a car dealership.
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I needed a part for
my car, I had a vehicle,
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approximately a 12 year
old vehicle, and at times,
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you know, the car
starts having little concerns,
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you need to
replace certain things,
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and I went to buy the
part that was necessary.
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You know, of course a
man, in and of its concerns,
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you always get caught up
by the new car, I love cars,
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I worked for
automotive companies
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for about 11 years of my life.
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And as I looked at
the marketing context,
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I never realized I could
get caught into that thing.
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So as I drove into a lot,
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of course the sales
people caught an eye,
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saw this guy that
probably looked kind of green
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from the standpoint of sales.
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But the context was,
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they came out and
asked me about my car,
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was I willing to
think about trading it in
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and buying a new car.
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Now there's one
think I'd like you to know
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is when you go into any
type of retail establishment,
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you are the consumer,
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you're the person
that's making these decisions.
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You're the one that are
making the final decision
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about any type of purchase.
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You are not there to be sold to.
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And many times we
lose perspective of that
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when we go in.
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It's all of a sudden
we get caught up in--
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Well, let me get
back to the story.
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So we get into the dealership,
I go to the parts department,
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and I find out
exactly what I need.
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Of course, in addition
to the part that I need
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which I hadn't budgeted
for, remember the budget?
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I also got this football,
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you know, had the logo
of the dealership on it,
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and the logo of
the manufacture on it,
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and I thought it'd be great
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to take this little
football home with me,
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so I could play
around with my son.
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Oh, wait a second.
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My son was really about,
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only about two
years old at the time
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so it didn't really matter.
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But at that time I was there,
I was not looking at my budget,
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didn't even think
about it, just thought about,
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hey, need the part.
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Did I have a savings in mind?
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Did I plan for this acquisition?
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No, I hadn't.
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But I walked in,
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and got sucked
into the retail process.
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So, you have these guys
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that are trying to
sell you something.
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You have a car that's
there that they want to look at
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so I said, "Sure,
take a look at my car."
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Now you have to understand--
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when a dealer,
or a sales person,
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or a parts department, or
a service department person,
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whoever or this used car manager
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takes a look at your car,
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their intent is not to
say, "Oh, you got a good car.
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Go and drive,
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and take care of
it for a long time."
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Their intent is to
sell you a new car.
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Their intent is to make
money for their business
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and their establishment.
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That is the same
perspective you should have
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for your own business,
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your own
personal family business,
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and your budget.
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You are in it to
retain money for your company,
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your organization,
your personal lifestyle.
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So you have savings,
and you have investments,
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and you would have opportunities
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to utilize the talents
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that God and the
Holy Spirit gives to you.
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So essentially you
keep that in perspective,
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so I'm standing
in the dealership
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and of course, I've
already bought the part,
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I've already put
it back in the car.
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Now the car is gone,
the dealer has the car,
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and they're
assessing the value of the car.
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Now, while that's going on
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that they have this
subtle sales person coming in
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and saying, "Come on,
take a look at this car.
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Take a look at this new Passat.
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Passat has a different shape,
it has new amenities too in it.
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That smells new and
all these kind of things.
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I think, I can't
really afford a new car.
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Well, ding, ding, ding.
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One of the best things I
said during the whole day.
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But, they took me to
the used car department
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and there was this
wonderful looking Passat.
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Nothing new from my
car, except it was newer.
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And it had the new car smell
and it had the new car feel
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and boy, I looked
good in this new car.
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And I started
telling, hey, Honey.
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You know this
car is really nice.
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I started
beginning to sell my wife
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on this new product
that we really didn't need
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and we hadn't planned for,
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and it was just an
opportunity for a sales person
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to talk to me and so I'm--
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All of a sudden
I'm getting caught up
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in this process of a new car.
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And then, Honey, this
is a great opportunity.
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They're giving us a great deal.
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How much was it going
to be on a monthly basis?
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Understanding that the car I had
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was already paid for.
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I had no car payments to
make and the context really is
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that I got caught
up in this process
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that I really wanted this
car, I took it on a test drive,
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I went out and
did certain things
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while I was still
waiting on my car.
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They were just holding it back,
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because they wanted
this opportunity to sell us.
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And remember, my wife and I
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sitting in the
sales person's room,
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and he is hammering us on.
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Yeah, this is
why you need the car.
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And these guys are
really good professionals,
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because I got caught up
in the hype and I'm saying,
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wow, we can afford
this, we can do this.
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Let's get this car!
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Now, I have one
of the wisest wives
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in the world.
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She is so cool,
and she is very subtle,
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she let me feel my manliness,
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she didn't really
cut me down to size
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which she should have.
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But she basically
said, you know, Honey,
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that's such a good idea.
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Why don't we
take this concept home
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and think about it.
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Okay.
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When you got a wife like that,
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that's a greatest
thing in the world
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because the concept really
wasn't about taking it home
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and thinking about it.
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It was that three
day cooling off period
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that I needed.
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So we went home
and thought about it
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and didn't do anything,
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because I didn't
really need the car.
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After a couple of days
or even a couple of hours
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of thinking about an
additional $300 a month fee
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for a product that
I didn't really need.
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After four hours,
and I talk with my wife,
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a frank conversation of
course, that lifted the budget.
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It wasn't really planned for,
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you should think,
Cordell, a little bit more.
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I mean, I got it
reading between the lines
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that it came through to me
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that I didn't need to
get into this credit mess
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of making more payments
and pay more than I had to.
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And that was close to
six, seven years ago now.
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Seven years later,
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I have the same
car and it's paid-off,
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and the only thing I've
been putting into it is gas,
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and maintenance, and
those types of things
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and I saved a
whole lot of money,
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because of the
wisdom of that partner
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that I'm responsible to.
00:08:13.66\00:08:15.12
So, couple of issues here.
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As you look at
credit, as you look at money,
00:08:19.63\00:08:25.70
as you look at
financial literacy,
00:08:25.73\00:08:28.44
I ask you to do
the same type of thing
00:08:28.47\00:08:30.97
is getting someone
that you're responsible to,
00:08:31.01\00:08:33.44
talking about issues
when it's a major purchase.
00:08:33.48\00:08:36.38
I ask you to look at
00:08:36.41\00:08:42.28
what it is you are
trying to accomplish,
00:08:42.32\00:08:45.45
and ensure that you
talk to the individual
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about that person
you are responsible to.
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In this case it was my wife.
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And you'll find
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that there is something
that happens in your life
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that you realize
that I don't need this,
00:08:57.47\00:09:00.07
it's not important.
00:09:00.10\00:09:01.57
Take a couple of
hours, take a couple of days.
00:09:01.60\00:09:03.84
Take three days,
00:09:03.87\00:09:05.21
tell the sales
person, you know what?
00:09:05.24\00:09:06.64
This is great, I really need it,
00:09:06.68\00:09:08.64
I really want it,
00:09:08.68\00:09:10.01
but I need three
days to think it over.
00:09:10.05\00:09:12.11
And realistically what I
think will happen as you go home
00:09:12.15\00:09:15.58
and realize, I don't
need this $2,000 item.
00:09:15.62\00:09:18.45
I don't need it right now.
00:09:18.49\00:09:20.32
But then again, there's credit
00:09:20.36\00:09:23.63
and many people get
caught into issue of--
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Okay, I don't
have the down payment,
00:09:25.73\00:09:27.33
I haven't planned for it,
I haven't budgeted for it,
00:09:27.36\00:09:29.76
but I do have a credit
card that is has a balance on it
00:09:29.80\00:09:31.93
and I can put the deposit
00:09:31.97\00:09:33.30
or add the down
payment on the credit card
00:09:33.34\00:09:34.77
and then you begin the process
00:09:34.80\00:09:37.17
of not only
making the card payment,
00:09:37.21\00:09:39.61
but you're also making
a payment on the credit,
00:09:39.64\00:09:41.88
on the credit card and
you have to pay that back.
00:09:41.91\00:09:45.05
And that begins the
process of, it could be good,
00:09:45.08\00:09:47.62
it could be bad
if you plan for it.
00:09:47.65\00:09:49.38
But I also think
that if you're saving
00:09:49.42\00:09:52.09
and it's a part of
your priority process,
00:09:52.12\00:09:56.02
then you know that this
mid-term goal that you have
00:09:56.06\00:09:59.83
is having a $10,000
down payment for a vehicle.
00:09:59.86\00:10:03.53
And then
decreasing the amount of time
00:10:03.57\00:10:05.17
it takes to pay it off.
00:10:05.20\00:10:06.53
Simple things to
think about, about credit.
00:10:06.57\00:10:08.74
Credit, we need credit
00:10:08.77\00:10:10.11
for many
different things it seems.
00:10:10.14\00:10:11.67
It's a part of our lives.
It's a part of what we do.
00:10:11.71\00:10:14.34
It's a part of everything
that the media tells us,
00:10:14.38\00:10:18.55
and we now think
that I need a hotel room,
00:10:18.58\00:10:21.45
so I need a card
to hold a room with.
00:10:21.48\00:10:23.92
I need to book a flight
00:10:23.95\00:10:26.62
so I need the card
to pay for the flight.
00:10:26.65\00:10:29.72
I need a card to do
a variety of things.
00:10:29.76\00:10:32.13
And listen, credit is
not necessarily a bad thing
00:10:32.16\00:10:36.70
if you mange it well.
00:10:36.73\00:10:38.27
Understanding that
you develop your budget,
00:10:38.30\00:10:41.64
you have your
priorities in line.
00:10:41.67\00:10:43.17
You have your goals
00:10:43.20\00:10:44.64
and you understand how
much you're going to spend
00:10:44.67\00:10:46.68
and how much
you're going to save
00:10:46.71\00:10:48.04
and how much you're
going to put back to ministry.
00:10:48.08\00:10:50.11
And then you understand
that amount you can use
00:10:50.15\00:10:54.32
after a decision making process,
00:10:54.35\00:10:56.45
is this car necessary?
00:10:56.48\00:10:58.59
Is it a need? Is it a want?
00:10:58.62\00:11:01.02
Those types of things are
what we need to think about.
00:11:01.06\00:11:03.99
So we are going to
talk a little bit now
00:11:04.03\00:11:06.19
about credit.
00:11:06.23\00:11:07.63
We're going to talk
about being aware of
00:11:07.66\00:11:10.27
and
understanding what credit is.
00:11:10.30\00:11:13.13
And the
importance of understanding
00:11:13.17\00:11:16.50
how to use the credit
that you are blessed with.
00:11:16.54\00:11:20.14
Why do we get
credit? Why do we get credit?
00:11:20.18\00:11:24.21
Good question.
00:11:24.25\00:11:26.92
One of the rational for credit
is just to establish a history.
00:11:26.95\00:11:30.45
Our young people sometimes
00:11:30.49\00:11:32.09
may not be able to get
a credit card on their own
00:11:32.12\00:11:33.89
so as parents
we cosign with them
00:11:33.92\00:11:35.66
and they're able
to begin the process
00:11:35.69\00:11:37.83
of establishing a
history and getting credit.
00:11:37.86\00:11:42.93
The advantages of having
credit is that I can buy needed
00:11:42.96\00:11:47.04
or wanted services
00:11:47.07\00:11:48.64
or products with
anticipated future income.
00:11:48.67\00:11:52.17
Now, there is a
danger sign there.
00:11:52.21\00:11:53.54
We are assuming that we are
going to bring in a paycheck.
00:11:53.58\00:11:57.25
Therein is the
capacity, I have the capacity,
00:11:57.28\00:12:01.45
I have a job, so I can pay
back this credit, this loan.
00:12:01.48\00:12:07.89
When you take a look at credit.
00:12:07.92\00:12:11.99
Credit is using
somebody else's money
00:12:12.03\00:12:14.26
and in using
somebody else's money,
00:12:14.30\00:12:15.96
there is a fee for that
use based on an interest rate.
00:12:16.00\00:12:19.80
Now, there are
certain benefits to credit
00:12:19.83\00:12:21.90
because if you use a credit card
00:12:21.94\00:12:24.11
and you pay that
amount off within 30 days,
00:12:24.14\00:12:27.84
you are not going to
be charged any interest.
00:12:27.88\00:12:30.55
So if you use
credit the right way,
00:12:30.58\00:12:32.88
you are not going to
be paying anyone anything
00:12:32.91\00:12:34.35
except using the
money temporarily,
00:12:34.38\00:12:36.58
and because you
have savings account,
00:12:36.62\00:12:39.75
and you have
planned for this purchase,
00:12:39.79\00:12:42.59
you just take that
money out of your savings
00:12:42.62\00:12:44.56
and a write a check to
your credit card company
00:12:44.59\00:12:47.96
and pay it off at
the end of the month.
00:12:48.00\00:12:50.03
Essential to understand.
00:12:50.07\00:12:51.40
So it's to buy needed or
wanted services or products
00:12:51.43\00:12:55.40
with anticipated future
income, and that is capacity.
00:12:55.44\00:13:01.44
The nice thing about credit too
00:13:01.48\00:13:02.88
is you have a
record of your purchases.
00:13:02.91\00:13:05.41
There's a clear record
of how you use the credit
00:13:05.45\00:13:07.82
and it gives you a
clear record of that.
00:13:07.85\00:13:11.12
Third one is, it
helps if you would like to,
00:13:11.15\00:13:13.96
if you have credit, you
can use it to consolidate bills
00:13:13.99\00:13:17.23
which may be a good idea
if you are on a lot of debt,
00:13:17.26\00:13:20.33
overwhelming debt,
00:13:20.36\00:13:21.70
you can try to consolidate
that into one payment
00:13:21.73\00:13:24.70
and payback one organization.
00:13:24.73\00:13:26.30
Okay.
00:13:26.33\00:13:27.67
There are
disadvantages of credit
00:13:27.70\00:13:29.04
of what we mentioned.
00:13:29.07\00:13:30.41
There's three
I'd like to mention.
00:13:30.44\00:13:31.77
One disadvantage
is interest payments.
00:13:31.81\00:13:33.48
Interest payments,
00:13:33.51\00:13:34.84
the cost of using
someone else's money.
00:13:34.88\00:13:39.71
One of the dangers of credit
00:13:39.75\00:13:41.32
is overspending becomes an issue
00:13:41.35\00:13:44.62
and becomes very
easy, overspending.
00:13:44.65\00:13:47.06
Remember, one of the
warning signs of debt
00:13:47.09\00:13:50.36
is overspending.
00:13:50.39\00:13:52.13
And if you are overspending,
00:13:52.16\00:13:53.96
it means one, I
may not have a budget
00:13:54.00\00:13:56.87
or two, I have a budget
but I'm not watching it.
00:13:56.90\00:13:59.87
And then I ask you that
as you develop the process,
00:13:59.90\00:14:03.37
make sure you have someone
00:14:03.41\00:14:04.74
that you can
feel responsible to.
00:14:04.77\00:14:07.74
The third one is,
00:14:07.78\00:14:10.01
if you don't
manage the card wisely,
00:14:10.05\00:14:13.21
mismanagement of the card
00:14:13.25\00:14:15.22
from several
different standpoints.
00:14:15.25\00:14:17.65
Mismanagement could mean,
00:14:17.69\00:14:19.02
I don't watch where
I keep my pin number
00:14:19.05\00:14:22.09
and I carry my
pin number to the card
00:14:22.12\00:14:23.99
or my security code to
the card around with me.
00:14:24.03\00:14:27.00
My card get stolen.
00:14:27.03\00:14:28.76
I might use it inappropriately
00:14:28.80\00:14:30.13
in palaces that
may not be necessary.
00:14:30.17\00:14:32.07
It may be skimmed from me.
00:14:32.10\00:14:33.44
If someone might
steal my card number
00:14:33.47\00:14:35.07
and sell it to someone overseas
00:14:35.10\00:14:36.47
and it can be mismanaged
from that perspective.
00:14:36.50\00:14:39.14
Mismanagement is something
that happens all the time.
00:14:39.17\00:14:42.14
And I'd like to
actually bring Jessica on this
00:14:42.18\00:14:46.58
and ask her specific
question about fraud.
00:14:46.61\00:14:49.52
Fraud is an issue to credit
00:14:49.55\00:14:52.45
and the question
I have Jessica is,
00:14:52.49\00:14:54.49
what are the current areas of
and stats on credit card fraud?
00:14:54.52\00:14:59.63
Jessica tell us about it.
00:14:59.66\00:15:01.63
There are several areas of fraud
00:15:04.07\00:15:05.80
and credits makes
up about 25 percent
00:15:05.83\00:15:08.97
of the entire picture of fraud.
00:15:09.00\00:15:11.37
The other areas
are driver's license,
00:15:11.41\00:15:14.84
character and
criminal, social security number
00:15:14.88\00:15:17.81
and one of the
fastest growing areas
00:15:17.85\00:15:19.31
is medical fraud.
00:15:19.35\00:15:22.38
Thank you, Jessica.
00:15:22.42\00:15:24.09
There's a lot of things
going out there in the world.
00:15:24.12\00:15:26.82
Some of we're going to
touch on in other programs
00:15:26.86\00:15:29.32
but in this one specifically,
00:15:29.36\00:15:30.69
we want to tell you
that fraud is an issue,
00:15:30.73\00:15:33.29
it's a concern
as a part of credit.
00:15:33.33\00:15:35.76
Protect your
information, protect it
00:15:35.80\00:15:38.13
and make sure that if
there is anything comes up,
00:15:38.17\00:15:40.94
check your credit
reports on annual basis,
00:15:40.97\00:15:43.00
you do have a free access
00:15:43.04\00:15:44.37
to at each one of
the three credit bureaus,
00:15:44.41\00:15:46.37
and ensure that
everything in your files
00:15:46.41\00:15:48.84
are as accurate as possible.
00:15:48.88\00:15:50.58
Why do banks issue credit? Why?
00:15:50.61\00:15:53.55
Why does any type of corporation
00:15:53.58\00:15:55.48
do something?
00:15:55.52\00:15:56.85
Well, any corporation
is in it to make money
00:15:56.89\00:15:59.59
so it's the same with banks.
00:15:59.62\00:16:01.59
Why do they offer
credit? To make money.
00:16:01.62\00:16:04.69
How do they make money?
How do banks make money?
00:16:04.73\00:16:06.90
Several ways.
00:16:06.93\00:16:08.73
If you have a
checking account with them.
00:16:08.76\00:16:11.10
Sometimes they may
offer a checking account
00:16:11.13\00:16:12.97
with a minimum
balance requirement.
00:16:13.00\00:16:14.34
Maybe a savings account
00:16:14.37\00:16:15.70
with a minimum
balance requirement.
00:16:15.74\00:16:17.07
Whatever the case may be,
00:16:17.11\00:16:18.44
if you don't
maintain that minimum balance,
00:16:18.47\00:16:19.81
they can charge you a fee,
00:16:19.84\00:16:21.18
it can easily go up
to $200 per year in fees
00:16:21.21\00:16:24.28
for not
maintaining a specific balance.
00:16:24.31\00:16:26.15
Watch that.
00:16:26.18\00:16:27.52
And it's a
question you need to ask.
00:16:27.55\00:16:28.88
I would much rather
have a free checking account,
00:16:28.92\00:16:31.35
regardless of
what the balance is
00:16:31.39\00:16:33.05
or if you are pretty good saver,
00:16:33.09\00:16:34.56
and you worked on your budget,
then that speaks for itself
00:16:34.59\00:16:37.86
and you can make something,
00:16:37.89\00:16:40.50
create an account at the
bank that's comfortable to you.
00:16:40.53\00:16:45.27
They make money
if you bounce check.
00:16:45.30\00:16:47.40
It's essential, it's essential
that you work on a budget,
00:16:47.44\00:16:50.27
you know where your money is
00:16:50.31\00:16:51.64
that you take a look
at your bank statement
00:16:51.67\00:16:53.91
on an ongoing basis
00:16:53.94\00:16:55.44
and make sure you
reconcile your account.
00:16:55.48\00:16:57.65
Make sure you've accounted
for the outstanding checks
00:16:57.68\00:16:59.95
that are not on the statement
00:16:59.98\00:17:01.48
because it's so
easy to get out of that,
00:17:01.52\00:17:03.82
and banks now will
charge upwards of $35
00:17:03.85\00:17:07.19
for any bounced check.
00:17:07.22\00:17:08.56
And it's interesting
because they are thinking more
00:17:08.59\00:17:13.29
so especially
after the crisis in 2008
00:17:13.33\00:17:16.77
about how they
can make more money
00:17:16.80\00:17:18.97
and make up the
difference that they have had.
00:17:19.00\00:17:22.90
Thirty five dollars fees
for paying and making sure
00:17:22.94\00:17:26.14
that they've covered the
check that you've written.
00:17:26.17\00:17:28.91
So if you have
zero in your account
00:17:28.94\00:17:30.88
and you write a $35 check,
00:17:30.91\00:17:33.28
now you owe the bank
$70 to cover the check
00:17:33.31\00:17:37.69
and to cover the
insufficient funds fees.
00:17:37.72\00:17:40.46
Watch that, that can
accumulate very quickly.
00:17:40.49\00:17:43.26
But then of course
banks make money off of credit
00:17:43.29\00:17:46.83
that they give people,
00:17:46.86\00:17:48.20
and they pretty much are
aware that they give you credit,
00:17:48.23\00:17:50.77
you're going to use it,
00:17:50.80\00:17:52.13
and in most
instances what did we say,
00:17:52.17\00:17:54.47
credit card debt
per family is $14,750.
00:17:54.50\00:17:58.77
They are not paying off
the credit at each after
00:17:58.81\00:18:02.38
and within 30 days
00:18:02.41\00:18:04.05
after paying
off the full amount,
00:18:04.08\00:18:06.28
they are letting it linger on
00:18:06.31\00:18:08.42
and making even
the minimum payments
00:18:08.45\00:18:10.52
or making extended
payments in their account,
00:18:10.55\00:18:12.72
and that bank is making interest
00:18:12.75\00:18:14.96
on the funds that
they have loaned to you.
00:18:14.99\00:18:18.66
Watch that. They make
money in many different ways.
00:18:18.69\00:18:22.26
Your responsibilities
then is not to run up more debt
00:18:22.30\00:18:25.13
that you can
comfortably pay back.
00:18:25.17\00:18:27.14
Essential.
00:18:27.17\00:18:28.50
Number two, do not
exceed the credit limit
00:18:28.54\00:18:30.54
that established
by your creditor.
00:18:30.57\00:18:33.38
Don't--
00:18:33.41\00:18:34.74
And this is interesting.
00:18:34.78\00:18:36.11
You are not allowed
to resell merchandize
00:18:36.14\00:18:38.51
before you've
completely paid-off that debt
00:18:38.55\00:18:42.48
to the creditor.
00:18:42.52\00:18:43.85
If the creditor
has retained the title
00:18:43.89\00:18:45.45
or has lean against
it in this case for house
00:18:45.49\00:18:48.56
and or car or
whatever the case may be,
00:18:48.59\00:18:51.36
you need to make
sure you're approaching
00:18:51.39\00:18:53.53
how you use that
merchandize in the right way.
00:18:53.56\00:18:56.73
And then of course,
00:18:56.77\00:18:58.10
what we talked
about in credit card fraud
00:18:58.13\00:18:59.60
that occurs and
some of the stats
00:18:59.63\00:19:01.50
is to notify your
creditor immediately
00:19:01.54\00:19:04.54
if you know that your
card is lost and or stolen.
00:19:04.57\00:19:07.54
You do have
rights. You do have rights.
00:19:07.58\00:19:09.68
There have been state statutes
that have been put in place
00:19:09.71\00:19:13.28
that say basically,
we're restricting a creditor
00:19:13.31\00:19:17.62
on the amount of
interest that you can recharged.
00:19:17.65\00:19:21.19
So, yeah, if
you have bad credit,
00:19:21.22\00:19:22.86
and you've miss payments,
you don't shown the character
00:19:22.89\00:19:25.89
or you lost the capacity,
00:19:25.93\00:19:28.00
it mean an income
to payback a loan,
00:19:28.03\00:19:30.00
then you are probably paying
an elevated interest rate.
00:19:30.03\00:19:33.90
But those interest rates
are capped at a certain amount.
00:19:33.94\00:19:37.01
The average
interest rate for bad credit
00:19:37.04\00:19:39.54
is approximately
23.5 percent interest
00:19:39.57\00:19:42.81
that banks and or creditors
will charge an individual
00:19:42.84\00:19:46.05
who has bad credit.
00:19:46.08\00:19:47.42
Think about that
and consider that.
00:19:47.45\00:19:51.09
Research credit
bureaus, if you have a chance
00:19:51.12\00:19:53.19
and you don't have
a computer at home,
00:19:53.22\00:19:55.16
access a local library
00:19:55.19\00:19:56.86
and do search on
information on credit bureaus.
00:19:56.89\00:20:00.26
Take a look at the
three credit bureaus
00:20:00.30\00:20:01.66
that are out
there and take a look at
00:20:01.70\00:20:04.23
how they work and
what they're all about.
00:20:04.27\00:20:06.33
It's essential that you research
00:20:06.37\00:20:08.14
and get that context in place.
00:20:08.17\00:20:09.70
It's important as it
applies to your credit,
00:20:09.74\00:20:12.87
because they're the
one's tracking your credit
00:20:12.91\00:20:15.08
and giving you a
specific credit score
00:20:15.11\00:20:16.88
based on your what?
00:20:16.91\00:20:18.81
The three C's of character,
your capacity and your capital,
00:20:18.85\00:20:23.28
and they would
track that all the time.
00:20:23.32\00:20:25.15
And if you miss a payment
00:20:25.19\00:20:26.65
or you're 30 days, 60
days, 90 days late on paying,
00:20:26.69\00:20:30.23
they put that
in your credit file
00:20:30.26\00:20:32.03
so that other
creditors can evaluate you
00:20:32.06\00:20:34.43
based on either character,
again capacity and capital.
00:20:34.46\00:20:39.33
A credit report, what is
it? What does it provide?
00:20:39.37\00:20:43.74
Anyone that looks at your credit
00:20:43.77\00:20:45.11
will see identification,
information and employment data
00:20:45.14\00:20:48.31
if you are employed, capacity.
00:20:48.34\00:20:52.21
They'll take a look
at your payment history.
00:20:52.25\00:20:53.88
They'll take a
look at other inquiries
00:20:53.92\00:20:56.45
in the system
inquires into your credit.
00:20:56.48\00:21:00.72
They'll look at credit scoring,
and the manner of the payment,
00:21:00.76\00:21:04.43
they have different codes
00:21:04.46\00:21:05.93
that they assess
to your specific file.
00:21:05.96\00:21:12.30
There are things that you can do
00:21:12.33\00:21:13.97
if there is information
on your credit report.
00:21:14.00\00:21:16.20
We're gonna get into
that when we talk about fraud,
00:21:16.24\00:21:19.27
ID theft, many of
these things are real
00:21:19.31\00:21:21.58
and they're relevant,
00:21:21.61\00:21:22.94
and will get into
that at a later time.
00:21:22.98\00:21:24.68
But the context is to understand
00:21:24.71\00:21:26.55
that you need to know,
how much you can afford,
00:21:26.58\00:21:30.49
understand that the
system in and of itself
00:21:30.52\00:21:33.05
has placed a rule of thumb
in place that you can say that,
00:21:33.09\00:21:37.69
based on my monthly net income,
I know how much per month
00:21:37.73\00:21:41.30
I should be paying back my
creditors on a monthly basis
00:21:41.33\00:21:46.10
as a part of my income,
00:21:46.13\00:21:47.74
that's 10 percent rule,
there's a 10 percent rule.
00:21:47.77\00:21:50.11
There is also a 20 percent rule
00:21:50.14\00:21:51.47
based on your yearly
or annual net income.
00:21:51.51\00:21:55.04
You shouldn't exceed
owing more than 20 percent
00:21:55.08\00:21:58.48
of your annual net
income, that's a 20-10 rule,
00:21:58.51\00:22:01.58
that's a rule of thumb.
00:22:01.62\00:22:03.32
It includes, I would suspect
loans based on a car note,
00:22:03.35\00:22:07.92
and of course credit
and those type of issues.
00:22:07.96\00:22:10.23
So once you're
looking at your budget
00:22:10.26\00:22:11.93
and of course you've already
assessed where you're at.
00:22:11.96\00:22:14.53
You have already
created that budget,
00:22:14.56\00:22:16.53
so you know how much you
make and how much it goes out.
00:22:16.56\00:22:19.30
And then of course you know
00:22:19.33\00:22:20.67
how much you can allocate
of that money that you pay out
00:22:20.70\00:22:23.77
towards paying your creditors.
00:22:23.81\00:22:26.24
Keep that in mind
00:22:26.27\00:22:27.61
and make sure you adhere to that
00:22:27.64\00:22:28.98
and don't go over rough,
00:22:29.01\00:22:30.35
so if you already are at
that 10 percent limit per month,
00:22:30.38\00:22:34.95
I can't really
afford any more credits,
00:22:34.98\00:22:36.42
so I better save,
pay off the credit
00:22:36.45\00:22:38.89
and increase my capacity
to purchase other things
00:22:38.92\00:22:42.89
without having to
necessary go into debt.
00:22:42.92\00:22:47.23
So, list five things,
00:22:47.26\00:22:51.23
and I'm gonna
give you the answer
00:22:51.27\00:22:52.60
so don't worry
too much about it.
00:22:52.63\00:22:54.07
Get ready to write this down
00:22:54.10\00:22:55.87
because this is
really good stuff.
00:22:55.90\00:22:57.41
Five things that you can do
to build a good credit history.
00:22:57.44\00:23:03.35
Five things, I'm
gonna list six in this case.
00:23:03.38\00:23:07.12
Establish a steady work record.
Establish a steady work record.
00:23:07.15\00:23:13.19
Number two, pay all
of your bills promptly.
00:23:13.22\00:23:17.89
Pay all of your bills promptly.
00:23:17.93\00:23:21.33
Number three,
open a checking account
00:23:21.36\00:23:26.07
and don't bounce any checks.
00:23:26.10\00:23:28.04
That means, before
you get to these things
00:23:28.07\00:23:30.91
about building a credit history,
00:23:30.94\00:23:32.34
you need to have a budget.
00:23:32.37\00:23:34.08
You need to know
where the money is going.
00:23:34.11\00:23:35.98
You need to be reconciling
00:23:36.01\00:23:38.05
any type of thing
coming in about your funds.
00:23:38.08\00:23:40.45
And when you open
that checking account,
00:23:40.48\00:23:42.85
reconcile your
checking account every month
00:23:42.88\00:23:45.82
and make sure you
know how much is in there,
00:23:45.85\00:23:48.09
you have
coverage for all the debts
00:23:48.12\00:23:49.46
that you're paying,
the outstanding checks
00:23:49.49\00:23:51.13
and make sure you
don't bounce any checks.
00:23:51.16\00:23:53.53
Number four, open
a savings account.
00:23:53.56\00:23:57.57
This gives you the capital
of the three C's, the capital.
00:23:57.60\00:24:03.04
They see a savings account
00:24:03.07\00:24:04.81
and you make
regular monthly deposits
00:24:04.84\00:24:07.91
to that savings account.
00:24:07.94\00:24:10.35
Then, of course number five.
00:24:10.38\00:24:13.28
Apply for a small loan
using your savings account
00:24:13.31\00:24:17.35
as collateral, that's something
that you should be aware of,
00:24:17.39\00:24:20.32
and then pay it back as agreed.
00:24:20.36\00:24:24.49
Another good thing to
establish good credit.
00:24:24.53\00:24:29.80
Then number six,
00:24:29.83\00:24:31.17
one is something I
don't technically adhere to
00:24:31.20\00:24:34.54
because it's one
of the rules of thumb
00:24:34.57\00:24:36.74
that they give to you
in building good credit.
00:24:36.77\00:24:38.94
I would suspect
that this only applies
00:24:38.97\00:24:41.34
to maybe a
student, a child of a parent
00:24:41.38\00:24:45.01
that is looking
to establish credit.
00:24:45.05\00:24:47.38
It says
basically to get a cosigner
00:24:47.42\00:24:49.88
for credit card and a loan,
00:24:49.92\00:24:51.92
and pay back the loan as agreed.
00:24:51.95\00:24:54.02
That cosigner can--
00:24:54.06\00:24:55.39
If you cosign for a
friend or for distant relative,
00:24:55.42\00:24:58.83
it can get sticky if
you don't pay it back,
00:24:58.86\00:25:00.83
because you're not
only impacting your credit,
00:25:00.86\00:25:03.33
you're impacting theirs.
00:25:03.37\00:25:05.60
So, as we look at
these specific issues,
00:25:05.63\00:25:07.70
I'm gonna ask you a
couple of questions.
00:25:07.74\00:25:09.34
Test question number one.
00:25:09.37\00:25:12.81
A, B or C does it
apply to character,
00:25:12.84\00:25:15.28
does it apply to capital
or does it apply to capacity?
00:25:15.31\00:25:19.45
I'll give you the
answers real quick.
00:25:19.48\00:25:21.02
Character is your
ability to pay on a--
00:25:21.05\00:25:23.72
That your record of
paying back on a timely basis.
00:25:23.75\00:25:26.79
Capital, do I
have a savings account
00:25:26.82\00:25:29.59
that I regularly put money into
00:25:29.62\00:25:32.13
and C, third C is
capacity, do I have a job?
00:25:32.16\00:25:36.00
Okay.
00:25:36.03\00:25:38.00
Do I have a savings
account, applies to what?
00:25:38.03\00:25:41.24
It applies to capital,
00:25:41.27\00:25:42.90
because I'm putting money
regular into a savings account
00:25:42.94\00:25:46.11
and that says to the
creditor that he has a capital.
00:25:46.14\00:25:50.75
Number two, question is,
have you used credit before?
00:25:50.78\00:25:55.72
Applies to your, character.
00:25:55.75\00:25:58.32
I pay back my
bills on a timely basis.
00:25:58.35\00:26:02.22
How about this one?
00:26:02.26\00:26:03.59
How long have you lived
at your present address?
00:26:03.63\00:26:07.13
That is character.
00:26:07.16\00:26:09.63
It says that you stay
and you pay your rent on time
00:26:09.66\00:26:13.17
and you are
someone that can be trusted
00:26:13.20\00:26:15.14
and you're not just someone
that's gonna be fly by night
00:26:15.17\00:26:17.41
and move in the
next two or three months.
00:26:17.44\00:26:19.71
That applies to character.
00:26:19.74\00:26:22.21
Do you have a steady
job? What does it apply to?
00:26:22.24\00:26:28.92
Capacity.
00:26:28.95\00:26:30.29
I have the ability
to make future money
00:26:30.32\00:26:33.82
to pay it back that debt.
00:26:33.86\00:26:37.16
That applies to capacity.
00:26:37.19\00:26:39.63
Number--
00:26:39.66\00:26:41.00
Whatever number I
met, next question.
00:26:41.03\00:26:43.37
Do you pay your bills on
time? Did you pay your bills?
00:26:43.40\00:26:46.74
You know what that
is, applies to character.
00:26:46.77\00:26:49.70
And the last
one I'll ask you is,
00:26:49.74\00:26:51.24
what are your current debts
00:26:51.27\00:26:53.11
and your
current living expenses?
00:26:53.14\00:26:55.48
What are your current debts
and current living expenses?
00:26:55.51\00:26:59.38
That applies to capacity.
00:26:59.41\00:27:03.89
The capacity to pay
it back, I have a job.
00:27:03.92\00:27:08.09
Those are issues
that you need to look at,
00:27:08.12\00:27:09.99
the three C's are what?
00:27:10.03\00:27:12.29
Character, I paid on time.
00:27:12.33\00:27:15.36
Capital, I have
a savings account.
00:27:15.40\00:27:18.43
Capacity, I have a job.
00:27:18.47\00:27:21.04
Major things that your
creditors will look for
00:27:21.07\00:27:23.67
as you begin the process of
developing a credit history.
00:27:23.71\00:27:29.61
It's essential
00:27:29.64\00:27:30.98
that you
establish a work record.
00:27:31.01\00:27:35.28
It's important
00:27:35.32\00:27:36.79
that you get in the habit
of paying your bills on time.
00:27:36.82\00:27:40.32
It's important that
you have a checking account
00:27:40.36\00:27:43.56
and you don't bounce checks.
00:27:43.59\00:27:45.39
It's important to
open a savings account,
00:27:45.43\00:27:48.16
and put money into
it on a timely basis.
00:27:48.20\00:27:51.60
I tell you right now
that budgeting is key.
00:27:51.63\00:27:55.77
Remember that you
should take it to the bank
00:27:55.80\00:27:59.31
and save.
00:27:59.34\00:28:00.91
God bless you.
00:28:00.94\00:28:02.28