Virtual Credit Voyage

Virtual Credit Voyage

Welcome! This workshop is based on content developed by ideas42 with generous support from Capital One *This workshop is not intended to provide financial advice or guidance; instead we’re here to help provide key terms and share best practices that can help improve your relationship with money. Any opinions or advice is of the organization and not necessarily Capital 2 One’s.

Virtual Webinar Muted lines Raise your hand if you’d like to be unmuted Type on the chat box any time! 3

Type your name in the “Chat” function 4

Preparing for the workshop What you’ll need during this workshop: Pen/pencil Paper - or Something to keep notes on 5

Where You’ll Go Along Your Journey Step 1: Come to the “Credit Voyage” Training (DONE!) Step 2: Choose Your Destination Step 3: Learn Why Credit Matters & Ways to Improve It Step 4: Chart Your Next Steps After Today: Continue your journey to your Destination! 6

Step 2 Choose Your Destination 7

Journeys are Tough, but the Destination is Worth it. Your destination is your goal. What goal could strong credit help me reach? Homeownership Owning or Renting a Home Owning or Leasing a Car Qualifying for new credit cards 8

1. What’s YOUR Destination? 2. Why is this important to you? Type your destination in the “Chat” function 9

Step 3 Why Credit Matters 10

What is a Credit Score? CREDIT SCORE: A number that summarizes how likely lenders think you are to repay credit. Most credit scores range from 300-850. Source: CFPB website 2019 A good credit score can qualify you for loans to Usually, a higher score gives you access to better interest rates Get a credit card Buy a car Buy a house Pay for higher education 11

Has anyone here seen their credit score? Respond on chat Quick Checkin Don’t worry if you’ve got a way to go. We all start somewhere. No matter what your score is today, you’re in the right place to improve it! 12

Check Your Progress Check Your Credit Score through CreditWise from Capital One, or by using other credit monitoring tools.

A Story About Why Credit Matters Ms. Garcia and Mr. Jones both want to buy the same car. 14

A Story About Why Credit Matters They both apply for and receive a 3-year loan for 10,000. 15 10,00 0, 3 years 10,00 0, 3 years

A Story About Why Credit Matters After 3 years, Mr. Jones has paid almost 3,000 more than Ms. Garcia. What happened? Send responses by chat! 16 Type your response in the “Chat” function

A Story About Why Credit Matters Mr. Jones’ 420 credit score qualified him for a high 20% interest rate. Ms. Garcia’s 720 credit score qualified her for a low 3.5% interest rate. He paid 13,378. She paid 10,548. 17

(Interest) Can Be Affected by Two Main Factors Interest Rate or 18 Time to Pay Off Debt Source: (2019). U.S. Financial Health Pulse. Financial Health Network. Cost of Borrowing Money

Higher Credit Scores Can Make it Cheaper to Borrow Credit Score Interest Rate 19 Cost of Borrowing Money AND, higher credit scores can increase the chances that you’ll get access to credit!

A Strong Credit Score Has Five Ingredients 35%: Payment History is whether you’ve paid consistently and on-time in the past. 30%: Credit Utilization is the percentage of your available credit (aka your limit) that you’ve spent, or borrowed. 15%: Credit History is the length of time each account’s been open and time since the account’s most recent action. 10%: New Credit tracks whether you’ve opened up new lines of credit. 10%: Credit Mix refers to your mix of different kinds of credit – like credit cards, or student loans. 20

It Takes Time To Build a Strong Credit Score After you first take out debt, it can take months or years to build a strong credit score. Keeping your oldest account open and active Staying under 30% of your credit utilization Repaying consistently and on time. Months or Years Source: (2019). U.S. Financial Health Pulse. Financial Health 22

But Taking Out Debt Isn’t Always The Best Strategy Debt can be bad if it’s attached to an expensive, high interest rate, it will take a long time to repay, and you don’t think you will have the money to pay it down. Information Source: (March, 2019) Understand your credit score. CFPB. https://pueblo.gpo.gov/CFPBPubs/pdfs/CFPB117.pdf Debt can help you strengthen your credit score if you’re able to get a low interest rate, you can pay it off quickly, and it helps you build a history of paying consistently and on time. 23

the Minimum Can Have a Huge Impact on Debt Name Initial Interest Monthly Balance Rate Paymen t Interes Years to Pay Off t Paid Mr. Lewis 2,500 18% 25 (minimum) 4,828 19 Ms. Davis 2,500 18% 35 2,356 10 24 Ms. Clark 2,500 18% 125 444 2

By paying more than the minimum, Ms. Clark pays off her loan in 2 years with minimal interest. By paying the minimum, Mr. Lewis pays 4384 more than Ms. Clark, and it takes him almost 10X longer to pay it off. Time to Pay Off Debt Cost of 25 Borrowing Money

1. Has anything surprised you Group Discussi on so far? 2. What will you remember tomorrow? Type your responses in the Chat function

Step 4 Charting Next Steps! 27

Instructions: During this next section, we’ll review Four Strategies that can help you strengthen your credit. As we review them, think about one strategy you’d most like to pursue - the one that feels most relevant to your life. Not all of them will be for everyone, and we’ll help you choose. 28

Let's Choose a Strategy

#1: Start Building A Credit History Having a credit history and score can be important to accessing financial opportunities in the future. Without either, you can be limited in your ability to achieve your financial goal. With this strategy, you will work towards building a credit history, starting with considering a secured card. 30 Information Source: (2015). 45 million Americans are living without a credit New to Credit? You’re not alone: Over 25 Million American adults don’t have a credit history.

#2: Improve Payment History A single missed payment can drop your credit score by as many as 100 points; your payment history is an important factor in calculating credit scores. 31 With this strategy, you’ll be working towards paying your bills consistently and on-time. Information Source: (March, 2019) Understand your credit score. CFPB. https://pueblo.gpo.gov/CFPBPubs/pdfs/CFPB117.pdf

#3: Stay Under 30% of your Credit Limit Keeping credit card utilization (the total amount that you charge DIVIDED BY your the sum of your credit limits) below 30 percent can boost your credit score significantly. 32 With this strategy, you’ll learn tactics to stay under 30 percent of your credit limit. Information Source: (March, 2019) Understand your credit score. CFPB. https://pueblo.gpo.gov/CFPBPubs/pdfs/CFPB117.pdf

#4: Manage Accounts Having a longer account history, a mix of accounts, and fewer inquiries can moderately affect your credit score. With this strategy, you’ll work towards maintaining old accounts and opening new accounts or credit lines with caution. 33 Information Source: Credit Checks: (2019). What are credit inquiries and how do they affect your FICO Score? myFico

Poll Question: Which strategy did you choose?

On our paper . Step from my strategy

Charting your steps Review and choose one step that you can take now Review and choose a step you can do in the future

Based on your Strategy, Choose a Step that you can do now Strategy Suggested next steps: Look up your payment due dates. Set up reminders to pay through your account or a mobile app. Set up automatic payments. Calculate your total utilization with a credit monitoring tool. Set balance alerts to notify if you exceed a limit you set for yourself. Make a list of all of your accounts; keep the oldest accounts open. Steps you can do now Steps you can do in the future Savings Steps: Identify opportunities to reduce expenses. Cancel subscriptions to underused apps, magazines or entertainment accounts. Compare prices for your insurance, phone plan and Internet. Check prices online, or use apps like Honey or Wikibuy. Identify which secured card you want to apply for. 37

Break It Down! Calculate my total utilization Using my credit monitoring app At home after putting the kids down for bedtime 12/20 At 11 pm

Based on your Strategy, Choose a Step that you can do now Strategy Suggested next steps: Look up your payment due dates. Set up reminders to pay through your account or a mobile app. Set up automatic payments. Pay at least the minimum each billing period. Pick a savings (see box on thewith right). Calculate yourstep total utilization a credit monitoring tool. Set balance alerts to notify if you exceed a limit you set for yourself. Check your credit utilization weekly. Make more regular payments throughout the month. If you’re able, more thanthe theoldest minimum. Make a list of consider all of yourpaying accounts; keep accounts Pick a savings step (see box on the right). open. Check Credit Report (annualcreditreport.com) once a year. Pay off high interest accounts right away. Make small payments with oldest accounts to keep them active. Identify which secured card you want to apply for. Use credit monitoring tool toon regularly check your score. Pick a savings step (see box the right). Apply for secured card. Repay credit card debt consistently. Steps you can do now Steps you can do in the future Savings Steps: Identify opportunities to reduce expenses. Ask your Facilitator about attending Capital One’s Savings training. Cancel subscriptions to underused apps, magazines or entertainment accounts. Compare prices for your insurance, phone plan and Internet. Check prices online, or use apps like Honey or Wikibuy. 39

Break It Down! Make more regular payments throughout the month 11/20 Setting up automatic payments At 10:30 pm At home after putting the kids down for bedtime

Let's talk about your goal! Visualize what it will look like to reach your Destination. What are you wearing, feeling, thinking? Who’s with you? TIP: Be as detailed as you can! Research shows this can help you achieve your goal. Information Source: Duckworth, A. L., Kirby, T., Gollwitzer, A., & Oettingen, G. (2013). From Fantasy to Action: Mental Contrasting with Implementation Intentions (MCII) Improves Academic Performance in Children. Social psychological and personality science, 41

1. Which obstacles might come up as I try to do my next steps? 2. How will I overcome them? TIP: Research shows that thinking about overcoming obstacles can help you tackle them and achieve your goal. 42

Overcoming Obstacles

Let’s Set Reminders! 44

Act Now – Set a Reminder! Use a reminder app or set one through your phone calendar. Write down your steps on a paper calendar. Take a picture of your plan and set it as the lock screen on your phone. Write a reminder on a slip of paper and put it in your wallet. 45

What questions might you have? 46

Thank you!