Confessions of a Shopaholic Understanding Credit This about

Confessions of a Shopaholic & Understanding Credit This about what you JUST watched… what is Rebecca’s credit like? How do you select a credit card? How do you fix an issue, if you see a fraudulent charge?

CREDIT DEFINITIONS Credit Trust given to another person for future payment of a loan, credit card balance, etc. 2

What do you think Rebecca’s credit score would be? • She got into trouble because she didn’t really understand the Terms of her cards.

WHAT MAKES UP A TYPICALIMPROVING YOUR CREDIT SCORE? • • Source: Fair Isaac and Consumer Federation of America, 2005 4 Pay bills on time. Get current and stay current. Don’t open a lot of new accounts too rapidly. Correct mistakes. Shop for loan rates within a focused period of time. Keep balances low on revolving credit. Pay off debt. Check your credit report.

SHOPPING FOR A CREDIT CARD DECISIONS, DECISIONS. . . ANNUAL FEE? APR? COMPUTATION METHOD? GRACE PERIOD? FINANCE CHARGE? CREDIT LIMIT? CARD INCENTIVES? 5

TYPES OF CREDIT CARDS Private Label • Issued by a single source • Can only be used at a single source • Examples: Department Stores, Gasoline Companies General Label • Issued by a single source • Can be used in many places • Examples: Bank Card, Major Credit Card 6

QUESTIONS TO ASK WHEN SHOPPING FOR A CREDIT CARD • • • 7 Annual fee Annual percentage rate (APR) Minimum payment (usually 3 -5% of total balance) Computation method (average daily vs adjusted) Grace period (usually 21 days to pay balance, without interest added) Finance charges Card incentives (any perks? ) If you need help defining these words…. You may use Investopedia http: //www. investopedia. com/terms/f/finance_charge. asp? ad=dir. N&qo=invest opedia. Site. Search&qsrc=0&o=40186 This link explains “finance charges”

Activity #1: evaluate cards • You are going to RESEARCH the terms of some real cards, by completing Activity #1: • Click here…. . • http: //www. creditcards. com/top-creditcards. php

When you finish activity #1: • Continue with this slide show… • Let’s look at what happens when you don’t pay your balance each month or if you hit your credit limit. • What hurts your credit score? • What laws have your government passed to help you, as a borower?

COSTS OF CREDIT How much can credit cost? If you make only the minimum payment for an item, here are some examples of what you might actually pay and how long it will take you to pay it. 10

MEASURING THE SERIOUSNESS OF CREDIT TROUBLE SIGNS Rate how serious you think each of the following trouble signs is. 1 = Not Serious 4 = Very Serious Trouble Signs • • 11 Delinquent Payments Default Notices Repossessions Collection Agencies • Lien • Garnishment

CREDIT SAFEGUARDS FOR CONSUMERS Truth In Lending Act Fair Credit Reporting Act Equal Credit Opportunity Act Fair Credit Billing Act Fair Debt Collection Practices Act 12

THE FAIR AND ACCURATE CREDIT TRANSACTION ACT One of the primary objectives behind the Fair and Accurate Credit Transaction Act (the FACT Act) is to help consumers fight the growing crime of identity theft. The following are some highlights of the Act. • • • 13 Free credit reports Fraud alerts and Active Duty alerts Truncation: credit cards, debit cards, Social Security Number Red flags Disposal of consumer reports Credit scores

CORRECTING CREDIT ERRORS 1. Circle the incorrect items on your credit report. 2. Write a letter to the reporting agency, telling them which information you think is inaccurate. Provide supporting documentation. 3. Send all materials by certified mail. 4. Send a similar letter to the creditor whose reports you disagree with. 5. The reporting agency will conduct an investigation. 6. If negative information is accurate, it can stay on your report for 7 -10 years. 14

CORRECTING CREDIT PROBLEMS • • • 15 Take responsibility for actions. Communicate with creditors. Debt Consolidation Credit Counseling Bankruptcy