Bill Cheeks

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Bill Cheeks President ABBA Associates,
Inc. wpc1945_at_aol.com
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The Debt Problem in America

• Almost one out of every 53 households in the
  United States filed for bankruptcy 2005.
• 40 of Americans say they live beyond their
  means.
• More college students leave college because of
  financial problems than due to grades
• 50-60 of Americans have poor credit histories.

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The Debt Problem in America

• In 2006, the total amount of US debt was 48
  trillion dollars - 167,287 per person.
• The average personal savings rate of Americans
  dropped again in 2006, down to a minus 1. This
  is the lowest since the Great Depression.
• Average college students leave college with
  20,000 in student loans and nearly 10 of the
  undergraduates owe more than 7000 in credit card
  debt.
• On average, each US Consumer has 4 credit cards
  with a 11,950 balance.

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Did You Know?

• Approximately 90 of Americans have never
  received any financial training. With personal
  debt soaring and personal savings decreasing,
  it's no wonder so many individuals find
  themselves in difficult financial situations.

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Observation

• Financing retirement in the USA is fast
  becoming the sole responsibility of the employee.

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The National Picture

• Nearly one in five households owes more than it
  owns.
• One in four female-headed households has zero or
  negative net worth.
• One in three minority-headed households has zero
  or negative net worth.
• One in four families does not own enough to
  subsist at the poverty level for three months.

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Realities of Saving for Retirement

• Participation and deferral rates in USA
  retirement savings plans are inadequate.
• 7 in 10 are not prepared for retirement.
• Workplace education and advice programs have been
  less than successful.
• Millions of employees say they cannot afford to
  save for retirement.
• Employees do not know what they dont know.
• Employers and employees do not understand the
  value of paying for good help-effective workplace
  financial programs.

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New World for Students and Adults
401K 403B 457
ROTH IRA AND TRADITIONAL IRA
MUTUAL FUNDS BOND FUNDS INDEX FUNDS
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Retirement Income Security
Social Security
Employer Pensions
Savings
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National Overview

• Bill Cheeks
• Regional Director
• Southern States
• 5209 Old Mountain Court
• Powder Springs, GA 30127
• wpc1945_at_aol.com

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Jumptart Coalition for Personal Financial
Literacy

• An independent, non-profit coalition of more than
  200 national organizations and entities.
• Non-Profit Organizations
• Educational Institutions
• Financial Associations
• Corporations
• Government Agencies

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Jumptart State Coalitions By Region
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National Initiatives

• National Biennial Survey
• Standards Benchmarks
• Public Awareness Campaign
• Clearinghouse
• Monitoring of Legislation

• Quarterly Newsletter
• April- Financial Literacy for Youth Month
• State Coalitions
• Assessment

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• Jumptart
• National Survey
• Of
• High School Students

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Jumptart National Initiatives Biennial
Financial Literacy Survey
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2006 Financial Literacy Survey Performance by
Ethnic Group
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2006 Financial Literacy Survey Performance by
Family Income
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2006 Financial Literacy Survey Performance by
Subject
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2006 Financial Literacy Survey Performance by
Educ. Plans
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2006 Financial Literacy Survey Performance by
Gender
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Jumptart National Initiatives 2006 Financial
Literacy Survey

• National , Biennial Benchmark Study
• High School 12th Grade Students
• 5,775 students at 305 schools in 37 states
• Surveyed in non-finance related classes
• National average score 52.4
• 38 Passed (Score of 60 or better)
• 6.9 Scored C or better (75)

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Jumptart National Initiatives Standards and
Benchmarks
3rd Edition, 2007
Jumptart Coalition for Personal Financial
Literacy
National Standards in K12 Personal
Finance Education With Benchmarks, Knowledge
Statements, and Glossary
Benchmarks for 4th, 8th and 12th Grades
Substantially Revised in 2007
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Jumptart National Initiatives Online
Clearinghouse

• 600 resources
• Many free
• Reviewed against standards
• Updated annually

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What should a financially literate high school
graduate know?

• Find, evaluate and apply financial information.
• Set financial goals and plan to achieve them.
• Develop earning potential and the ability to
  save.
• Use financial services effectively.
• Meet financial obligations.
• Build and protect wealth.

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State Coalitions Profile

• All-volunteer, grassroots organizations
• Bonded by common passion and belief
• Enjoy working together for singular purpose
  without competition

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Presidential Initiative
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http//www.JumpStart.org
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Get the Inside Tract How Creditors Judge Your
Character
ABBA Associates, Inc.
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What is Credit Scoring?
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How Credit Works

• When a consumer enters into a credit agreement,
  the creditor keeps a record of the consumers
  payment habits
• On a voluntary basis, that creditor may share
  information about the consumers accounts with a
  Consumer Reporting Agency (CRA) also called a
  credit bureau
• Of the estimated 210 million adults in the US
• 160 million have a full credit bureau record and
  credit score
• 30 million have a thin credit bureau record and
  lack a reliable score
• 20 million have no credit bureau record (no
  hit)

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Developing Credit Reporting Agency Scores
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Sample Credit Report
The five information zones
IDENTIFYING (PERSONAL) INFORMATION I. Wishfor
Credit 12 Lost Lane Sams Gas Oil 805 Main
St. Somewhere, USA 66666 Attendant Anytown,
America 77777 Date of Birth 1-25-45 SSN 888
88 8888 PUBLIC RECORD (LEGAL ITEMS) 9-96
Judgment 1000 Satisfied 3-97 COLLECTION
ITEMS 7-95 Collection 500 TRADE LINE (ACCOUNT)
INFORMATION Industry Date Date High Balance
Current Historical Reported Opened Credit Ra
ting Rating Bankcard 6-98 3-80 5,000 0 Curre
nt 120, 6 yrs ago Auto loan 6-98 7-87 8,000 1
,500 Current Retail 3-98 6-83 1,000 200 30
days INQUIRIES Date Industry Date Industry 7-01-
98 Bank 6-01-98 Auto finance 6-15-98 Oil
company 2-07-98 Retail
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2
3
4
5
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Types of Scores
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How are Credit Scores used?

• Lenders use scores to identify the level of risk
  they may be accepting if they extend new or
  additional credit
• Higher risk consumers are often asked to pay more
  for credit
• Lenders also use the score to determine what
  actions to take with their customers

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Knowing the score is important

• The higher your FICO score is ...
• The greater the number of credit options
• The lower loan rates and monthly payments will be
• The less likely there will be any loan-related
  issues

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Profile of high FICO score holders

• No late payments or other payment problems listed
  on credit reports
• Most use less than 10 percent of amount available
  on credit cards
• Most have opened no more than one new account in
  the past year
• Most have between 6 and 15 credit accounts listed
  on their credit reports. Of those accounts
• Between 3 and 6 accounts are active, the rest are
  dormant
• Between 2 and 6 accounts are credit cards issued
  by banks
• Between 2 and 5 accounts are credit cards issued
  by retail stores
• Between 1 and 4 accounts are car loans,
  mortgages, student loans or other types of
  installment account (that is, loans repaid in
  installments).

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FICO score brands at the Three Credit Reporting
Agencies

• Equifax BEACON
• Trans Union EMPIRICA
• Experian Experian/Fair, Isaac Risk Model
• Collectively these are known as FICO scores.
  Note that these are commercial brands names, and
  are not used for any credit scoring products made
  available directly to consumers

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How a Score Breaks Down
Your credit score is based on five factors. Here
is how much each factor contributes to the
overall score.
Requests for New Credit
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Payment History
Types of Credit in Use
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10
Length of Credit History
Amounts You Owe
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15
Source Fair, Isaac
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Delinquency Rates by FICO Score
87
71
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Rate of Credit Delinquencies
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15
5
2
1
FICO Score Range
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National Average Auto Finance Rates (APR) by FICO
Score
Score
Your Monthly Payment
Your APR
7.49
690-719
445.93
9.53
660-689
467.82
12.34
625-659
498.99
546.77
16.46
590-624
551.18
16.83
500-589
11/5/2004
Source myfico.com
Payments calculated on 21,000 financed with 60
month term and 15 down payment.
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Fixed Rate Mortgage
150,000 30 year
Payments calculated on 150,000 financed with 30
year term and 20 down payment.
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Factors that Lower Your Score
The top 10 most frequently given score reasons

• Serious delinquency
• Serious delinquency, and public record or
  collection filed
• Derogatory public record or collection filed
• Time since delinquency is too recent or unknown
• Level of delinquency on accounts
• Number of accounts with delinquency
• Amount owed on accounts
• Proportion of balances to credit limits on
  revolving accounts is too high
• Length of time accounts have been established
• Too many accounts with balances

Source FairIsaac.com
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Vantage Score

• First tri-bureau consumer credit risk model of
  its kind
• Jointly developed by data and analytic experts
  from the nations three major credit reporting
  companies
• Score range is 501 990

Source FairIsaac.com
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Whats Your Score?
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Low FICO Scores
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Top 10 tips for consumers

• Check your FICO score well before applying for a
  loan.
• Have any co-applicants do the same.
• Rid your credit report of any errors.
• Dont close an account to remove it from your
  record.
• Pay your bills on time consistently.
• Keep credit card balances low.

• Pay off debt rather than moving it around.
• Dont open new credit card accounts you dont
  need.
• Shop for a loan within a focused period of time.
• Contact your creditors or see a certified credit
  counselor if youre having financial
  difficulties.

Monitor your process if youre working to improve
your score.
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Bill Cheeks President ABBA Associates,
Inc. wpc1945_at_aol.com