Welcome to the "Mind Your Finances" Program Course Material.

Mind Your Finances is a 7 module course. Upon completion of all 7 modules you will receive credit of 14 hours toward your sweat-equity requirements.

If you have difficulty with this form please contact Sandra Holmes.

At the completion of this program you will:

• Have a clear understanding of basic financial terms and concepts so that you can make effective decisions about your finances.
• Understand the importance and discipline necessary to set financial goals and create realistic budgets.

These modules will help you:

• Set financial goals for yourself and your family
• Track your spending
• Create a helpful budget
• Create spending plans to support your budget
• Create a savings plan to build your emergency fund
• Better understand attitudes about money
• Learn about "good debt" and "bad debt"
• Plan for your future retirement

Please note that all modules must be completed to receive your certificate. All courses are required. After reading the material please answer all questions and click submit. You will receive a confirmation of your course submission.

How is an I.O.U. letter to a friend or relative different than a credit card balance?

 

America LOVES Credit Cards.

There are over 609 MILLION credit cards in the United States. Total credit card debt: $793 BILLION.

Let's Compare Credit Card Offers.

Two Types of Credit

Unsecured Credit: Credit cards are unsecured credit. This means that the bank or company has decided that based on your past credit history, it is willing to take a risk and allow you to charge up to a certain credit limit that is specific to you. You are required to pay at least the minimum amount each month on your debt, but you can continue to add charges to the card. Each time you add to the amount owed, the minimum amount you are required to pay each month increases. You also pay interest on the money owed. Interest charges can easily be between 18% to 28% range.

Secured Credit: Home mortgages, car loans, and other installment loans that allow you to buy other items such as furniture and appliances are types of secured credit. The bank or organization provides you with credit that you immediately convert into debt. In the case of a home mortgage, the home is the security for the debt. If you stop making payments, the bank can reclaim the home and sell it to collect the amount outstanding on the loan. Banks and other lending institutions provide secured loans for cars, home furniture, and appliances in the same manner.
 

 The Cost of Credit: Understanding Interest

Credit costs money.

If you must use credit, you want it to cost you AS LITTLE as possible. The cost of credit is usually the interest rate. So what exactly is interest? Consider interest a fee you pay to access credit. Let's look at an example:

You need a car to get to work. See how much credit will cost when you borrow $5000 on a 4-year auto loan. The below dollar amount is the total that you will pay over the 4 years.

At 5%     -     $5,527

At 10%   -     $6,087

At 15%   -     $6,679

At 20%   -     $7,303

At 25%   -     $7,957

Introducing: The Credit Score

A credit score is like a "grade" on your creditworthiness. The higher the score, the better. So what makes up a credit score?

Banks and companies have to make thousands of decisions every day regarding how much credit to provide their customers. Credit is the maximum amount of money they are willing to allow you to borrow. The decisions they make are based on what is known as the 5 C's of Credit.

The Five C's of Credit

Capacity: Capacity refers to the ability to repay the debt. The lender looks at your income and your other financial obligations to determine your "capacity" or ability to repay. If you have a lower income but no other debt obligations, you may have a higher capacity than someone with high income but a large mortgage and student loan debt.

High Capacity Example: Executive making $1 million each year with no debts.

Low Capacity Example: A person who has been unemployed for 3 years. No income=no capacity to repay.

Capital: Capital refers to the borrower's net worth, or wealth. The lender will be less worried about loaning to a person with a high savings account balance with few debts than to a person with no emergency fund and high auto loans.

High Capital: Someone who has money in the bank and few large loans.

Low Capital: A person with no emergency fund and large debts.

Conditions:  Conditions refer to the state of the economy (national and local) and the availability of money. If the economy is not doing well, the lender will be less willing to provide credit.

Good Conditions: Thriving Economy

Bad Conditions: Depression or Recession

Collateral: Collateral refers to an asset pledged against a loan to give the lender more security that the loan will be repaid. The lender is more confident about getting at least some of the money back when there is collateral.

Example of Collateral: A car or home that you are borrowing on.

Character: Character refers to the lender's assessment of the person's experience repaying debt. Consumers who have failed to repay debt to other banks or companies will find that credit is harder to get and more expensive in the future. Credit becomes more expensive when banks and companies feel that the risk in providing credit is very high. When the risk is high, they charge higher interest rates on the credit they provide.

Good Character: Always pay bills on time.

Bad Character: Never open bills, pay them late if ever.

What is a credit score?

Rating used to predict the risk a lender assumes in granting you credit
How likely you are to make your payments on time in the next two to three years
Based on a complex mathematical model that evaluates many types of information found in a credit file
You have more than one credit score but FICO scores are used by over 70% of nation's creditors.

What is "Good Credit" and why do I need it?

Good Credit VS. Bad Credit

Benefits of Good Credit

• Easier to get a job (many employers check credit history)
• Qualify for lower interest rates on all kinds of loans
• Lower car insurance premiums
• Lower home insurance premiums

Cost of Bad Credit

• Harder to get a job
• Hard to get credit when you need it
• Higher interest rates on loans, credit cards, etc. 
• Higher car insurance premiums
• Higher home insurance premiums
• Higher deposits to establish new services

Recipe for GREAT Credit

• ALWAYS pay your bills on time
• Borrow as little as possible
• Keep your oldest card open forever (if no annual fee)
• Don't apply for new credit too often

Percentage of Population FICO Score Range

• Top 20% Above 780
• Next 20% 740-779
• Middle 20% 690-739
• Next 20% 620-689
• Bottom 20% Below 619

Credit Counseling Agencies

What if you get into credit card debt over your head?

Credit counseling agencies help people who are overextended and need help paying their debts. Many people fall into this category today because they do not have the discipline or confidence to fix their situations. Credit counseling assists people so they can deal with financial stress, develop workable budgets, bring credit accounts up to date, resolve specific credit problems, and make plans to get out of debt.

Not-for-profit credit counseling organizations provide counseling and debt management services at low fees and are focused on helping their clients get out of debt. Many of these organizations work over the phone so that the client can be at home near all of his or her financial information.

Most not-for-profit credit counseling organizations offer a debt management program (DMP) as a way to help you get out of debt faster and with a lot less hassle. These programs have a strong commitment to personal financial education for their clients so that debt problems stay away once they are solved.

Under a DMP, the not-for-profit agency will negotiate with creditors for lower interest rates and lower payments on unsecured debts. Typically, DMP programs only focus on unsecured debt.

The credit counseling organizations also work with creditors to "re-age" debts. That is, the creditor waives administrative fees and late charges and brings credit accounts up to date. The person participating in the DMP makes monthly payments to the credit counseling agency, which then disburses payments to all creditors who have agreed to the plan. A DMP can help the consumer pay off all unsecured debts in as few as three or four years, rather than ten or more years for those not enrolled in the program.

Maria has never checked her credit history. After taking a personal finance class and learning about credit histories, she goes to Annual Credit Report.com and downloads her credit history. She is shocked to see that she is more than 5 years delinquent on a medical bill. The clinic had told her that they were going to waive the balance, but it is showing on her report. 

Please make sure you have read all of the material and completed all of the activities in this module before clicking submit.