Chapter 10 introduced you to understanding if having your own business is right for you. It addressed the importance of knowing and trusting yourself. We provided self-assessments to perform, as well as a self-reflection questionnaire. We provided the means for you to determine your personality type. We defined the purpose of the textbook and course. We then defined the enormity of the task of starting your own business. We discussed the means to determine “What do you want?” We then explained the personal impact starting your own business can make on your life. We provide an awareness of the false intentions of others. We explained what you are responsible to know to make your business successful. Lastly, we introduced a basic understanding of psychology. The following exercises will help reinforce the concepts presented in the textbook.
Key Terms
FICO
a type of credit score created by the formerly known Fair Isaac Corporation, a major analytics software company.
FICO 2
Older version scoring system, most widely used for mortgage
lending
FICO 3
Older version scoring system, most widely used in credit card lending
FICO 5
Older version scoring system used in auto lending
FICO 8
most current and most widely used FICO scoring system
FICO 9
most current version used in auto lending
FACTA: Fair and Accurate Credit Transactions Act
an amendment to FCRA that was added, primarily, to protect consumers from identity theft. The Act stipulates requirements for information privacy, accuracy and
disposal and limits the ways consumer information can be shared.
FTC: Federal Trade Commission
an independent agency of the U.S.
government that aims to protect consumers and ensure a strong competitive
market by enforcing consumer protection and antitrust laws. The FTC also
seeks to protect consumers from predatory or misleading business
businesses.
FCRA: The Fair Credit Reporting Act
a federal law that defines how
credit bureaus are supposed to operate. Under the FACT you have a right to a free copy of your credit report once a year.
Credit score
your credit history expressed as a number based on certain
factors with varying weights to those factors in a calculation accepted by the
industry.
Credit Bureau
a company that collects information relating to the financial
actions of individuals and makes it available to credit card companies, banks,
and other financial institutions to allow them to make lending decisions.
Vantage Score
a current scoring system agreed upon by the 3 major credit bureaus creating a tri-bureau model of scoring.
Expected Outcomes
Be able to define what a credit score is
Be able to define FICO
Be able to define and differentiate the different types of credit scores
Know the factors that influence your credit score
Understand the factors involved in having excellent credit
Know the factors that banks look at when viewing your credit
Know the game that is played with your credit and how you can best play it
Know a strategy to help position you to get the best deal on loans to get the financing you need
Recognize other factors lenders look at when considering you for a loan
Understand the process of establishing your business credit
Key Concepts
The whole credit score system is a big game and it is important for you to know how to play it.
A credit score is your credit history expressed as a number.
Credit scores are used by lenders to make determinations to lend you loans and credit, and what the terms of the offer will be.
The 3 major credit bureaus are Experian, Equifax, and Transunion
The Fair Credit Reporting Act (FCRA) is a federal law that defines how credit bureaus are supposed to operate. Under the FACT you have a right to a free copy of your credit report once a year
FICO is a major analytics software company that provides products and services to both businesses and consumers. There are different types of FICO scores used for different types of loans.
The 3 major credit bureaus created Vantage Score in 2006 to compete with FICO
Credit score factors are weighed by lenders to get a picture of your lending risk level and your ability to repay the loan. Different lenders weight different factors differently.
Consult a credit repair service or attorney to be sure your credit report is accurate and in good standing without any negative blemishes.
Use certain strategies to improve your credit score.
Banks look at many additional factors including your capacity,collateral, and conditions.
Use the start up of your practice to establish new good business credit.
Remember, the credit score system is one big game. You need to learn how to play it, and you need to follow their rules.
Chapter Slogans
Credit scores are a game; learn how to play.
It’s all about risk.
POUND THE PAVEMENT
Speak with different credit repair services. See what they offer. Are they just spouting out prewritten letters in a generic form, or are they really working to have your specific blemish removed. Have free consultations with credit repair attorneys, see if the more personal
approach may be a better fit for you. Is the higher cost of an attorney worth the more personal approach?
THINGS TO CONSIDER
Are you looking for a get rich quick endeavor, or are you in this for the long haul?
Taking years to save money and build credit will place you in a stronger position when you finally start your business. You will need to borrow less, and what you need to borrow will be easier to get approved.If you see this as a get rich quick scheme, you will fail.However, if you see this as your life’s dream, then 5 years to prepare for what will be the rest of your life is not as big a delay as you might initially perceive it to be.
What is your credit score? What are your credit habits? Do you pay off immediately, do you over use the balance and max out cards? Take an assessment of your credit use habits and see where you need to modify your behavior to improve your score.
Is your credit severe enough to warrant investing in a credit repair service?
Establish a business credit card to build business credit just as you would for your personal credit.
