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More about Credit

Click on a question below to view it's answer.

How can credit help me?

  • Able to buy needed items now
  • Don’t have to carry cash
  • Creates a record of purchases
  • More convenient than writing checks
  • Consolidates bills into one payment

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How can credit hurt me?

  • Interest (higher cost of items)
  • May require additional fees
  • Financial difficulties may arise if one loses track of how much has been spent each mont
  • Increased impulse buying may occur

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What are the 3 C's of credit?

  • Character-will you repay the debt? From your credit history, does it look like you possess the honesty and reliability to pay credit debts?
  • Have you used credit before?
  • Do you pay your bills on time?
  • Do you have a good credit report?
  • Can you provide character references?
  • How long have you lived at your present address?
  • How long have you been at your present job?
  • Capital-what if you don't repay the debt?
  • Do you have any valuable assets such as real estate, savings, or investments that could be used to repay credit debts if income is unavailable?
  • What property do you own that can secure the loan?
  • Do you have a savings account?
  • Do you have investments to use as collateral?
  • Capacity-can you repay the debt?
  • Have you been working regularly in an occupation that is likely to provide enough income to support your credit use?
  • Do you have a steady job? What is your salary?
  • How many other loan payments do you have?
  • What are your current living expenses? What are your current debts?
  • How many dependents do you have?

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What are my responsibilities?

  • Borrow only what you can repay
  • Read and understand your credit contract
  • Pay debts promptly
  • Notify creditor if you cannot make payments
  • Report lost or stolen credit cards promptly
  • Never give your card number over the phone unless you have initiated the call or are certain of the caller's identity

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What are my rights as a consumer?

  • Your consumer rights related to credit cards are protected by various federal laws.
  • The Fair Credit Reporting Act (FCRA) protects your right to know what's in your credit file and sets up procedures to ensure that credit reporting agencies or credit bureaus furnish correct information about you
  • The Fair and Accurate Credit Transactions Act of 2003 (FACTA) amends and strengthens the FCRA, provides protections against identity theft, improves resolution of consumer disputes, improves the accuracy of consumer records, and makes improvements in the use of and consumer access to creditor information
  • The Equal Credit Opportunity Act (ECOA) ensures that when you apply for credit, you won't be discriminated against because of your gender, race, marital status, or age
  • The Fair Credit Billing Act (FCBA) offers protection against billing errors (including limiting your liability for unauthorized purchases) and may help you reverse the purchase of inferior goods or services charged to your credit card
  • The Fair Debt Collection Practices Act (FDCPA) spells out what practices collection agents may and may not use to collect a debt

If you feel your rights have been violated and you can't resolve the issue with the creditor, you may file a complaint with one of the federal agencies responsible for enforcing consumer credit laws, including the Federal Trade Commission (FTC), or you can contact your state's attorney general.

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How do I build a credit history?

  • Establish a steady work record.
  • Pay all bills promptly.
  • Open a checking account and don't bounce checks.
  • Open a savings account and make regular deposits.
  • Apply for a local store credit card and make regular monthly payments.
  • Apply for a small loan using your savings account as collateral.
  • Get a co-signer on a loan and pay back the loan as agreed.

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What is the “20-10” Rule?

  • Never borrow more than 20% of your yearly net income.
  • If you earn $400 a month after taxes, then your net income in one year is: 12 x $400 = $4,800
  • Calculate 20% of your annual net income to find your safe debt load. $4,800 × 20% = $960 So, you should never have more than $960 of debt outstanding.
  • Note: Housing debt (i.e., mortgage payments) should not be counted as part of the 20%, but other debt should be included, such as car loans, student loans and credit cards.
  • Monthly payments shouldn't exceed 10% of your monthly net income.
  • If your take-home pay is $400 a month: $400 × 10% = $40 Your total monthly debt payments shouldn't total more than $40 per month.

    Note: Housing payments (i.e., mortgage payments) should not be counted as part of the 10%, but other debt should be included, such as car loans, student loans and credit cards.

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Fair Debt Collection Practices.

A debt collector must:

  • Inform you, in writing, of the amount of your debt, the name of the creditor, and an explanation of your right to dispute the debt.
  • If you dispute the debt, the debt collector must give you written proof of the debt.

A debt collector may not:

  • Contact you at unusual times or places.
  • Disclose what you owe to anyone but your attorney.
  • Harass or threaten you.
  • Use false statements.
  • Give false information about you to anyone.
  • Misrepresent the legal status of the debt.
  • Engage in any kind of unfair practice, such as trying to collect an amount greater than you owe.

If you feel you have been mistreated contact your state's attorney general. It doesn't hurt to ask.

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Source: http://www.practicalmoneyskills.com/english/at_school/teachers/college.php

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