A year after declaring bankruptcy and moving with her daughter back into her parents home, June Maffeo is about to get a degree in nursing. As she starts out in a new career, she also wants to begin a new lifeone built on a solid financial base. June will be starting out as a full-time nurse at a salary of $52,000 a year, and she plans to continue working at a second (part-time) nursing job with an annual income of $10,500. Shell be paying back $24,000 in bankruptcy debts and wants to be able to move into an apartment within a year and then buy a condo or house in five years. June wont have to pay rent for the time that she lives with her parents. She also will have child care at no cost, which will continue after she and her daughter are able to move out on their own. While the living arrangement with her parents is great financially, the accommodations are tight, and Junes work hours interfere with her parents routines. Everyone agrees that one more year of this is about all the family can take. However, before June is able to make a moveeven into a rented apartmentshell have to reestablish credit over and above paying off her bankruptcy debts. To rent the kind of place shed like, she needs to have a good credit record for a year; to buy a home, she must sustain that credit standing for at least three to five years.

Important to build credit

1. How can you use the debt safety ratio to determine whether your debt obligations are within reasonable limits?
2. Describe credit scoring and explain how its used (by lenders) in making a credit decision.
3. In our case, what steps can the individual take to establish credit with a bank?