Transcript Credit and Debt

Staying on Good Terms:
Managing Credit
and Debt
OSFA
Office of Student Financial Aid
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Types of Credit
Credit Alternatives
Open-End Credit
• Short term: electric
and power bills
•Revolving: credit, gas,
and retail cards
Closed-End Credit
• Automobile Loans
• Mortgage Loans
• Student Loans
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The Upside of Credit Use
Buy/consume now, pay later
Emergencies
Establish favorable credit history
Insurance and fraud protection
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The Downside of Credit Use
 The price of credit is high
Additional fees add to the cost
 Credit makes it easy to overspend
 You are vulnerable to fraud
Source:Garman & Forgue (2003), Personal Finance Seventh Edition. Houghton Mifflin pg. 165
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Credit and Debt:
All Cards Are NOT Created Equal
Credit
– Credit Cards
– Charge Card
Debt
– Stored Value Card
– ATM/Check Card
Smart Cards*
*Source: www.javaworld.com
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Credit Myths
You must give your permission for a credit
report to be issued
The credit reporting agency denied me
credit
When paid, the bad debt will go away
I’m not responsible for debts on joint
accounts or co-signed accounts if they are
not my purchases
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When Parents Give Students
Credit Cards
“Nationally, college graduates leave
school with an average of $18,900 in debt
from student loans...”
“…(a consumer credit counselor) has
worked with students with as much as
$14,000 in credit-card debt.”
Source:http://www.creditcardoffers101.com/News.html?url=http://api.yellowbrix.com/api/?service=story&
method=xml&ID=trafficlogic&story_id=39768469&password=ldfcly
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Ten Credit Mistakes:
1. Overspending
2. Carrying a permanent balance
3. Making only minimum payments
4. Holding too many credit cards
5. Assuming low interest rates stay the
same
Continue...
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Ten Credit Mistakes:
6. Paying higher interest than necessary
7. Paying extra for “incentive” credit cards
8. Not reading the disclosure statement
9. Paying off the wrong credit cards first
10. Ignoring extra fees or penalties
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Signs of Credit Trouble
Charge credit cards to the limit
Use one card to pay for another
Do not know your total debt
Borrow from family members to pay
debt
Using cash advances
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Staying Out of
Credit Card Trouble
Shop for the credit card with the best
terms
Limit the number of credit cards you have
Don’t charge perishable items
Payoff as much as possible every month
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Pay As Much As You Can!
($3,800 Balance at 17% APR)
% Balance paid
each month
Interest
Time to Pay Off
2.0 %
$ 8,390
32 years, 3 months
2.5 %
$ 4,641
12 years, 7 months
3.0 %
$ 3,222
8 years, 7 months
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Timing Makes a Difference
Try to pay all credit card bills on time
Pay off the credit card with the highest
interest rate first
Don’t Buy on impulse - Delay gratification
Notify your creditors if you can’t make your
payments on time
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Talking to Your Creditor
Ask them to lower your interest rate
Ask them to lower your credit limit
Ask them to change when your bill is
due
Discuss your situation with them and
set up a payment plan
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Other Credit Card
Suggestions
Report lost/stolen cards immediately
Store your credit cards in a safe place
Track your expenses
Document your concerns in writing
Order a copy of your credit file regularly
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What’s In Your Credit File?
Personal Identification Information
Public Record Information
Collection Agency Account Information
Credit Account Information
Companies That Requested Your Credit File
Most negative information stays on your file
7 yrs, except for bankruptcy which can stay
up to 10 yrs.
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Your Credit Report Impacts:
Purchasing a car
Purchasing a home
Obtaining a loan
Renting an apartment
Auto and life insurance
Acquiring a cell or home phone
Seeking employment
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How to Obtain
Your Credit Report
 EQUIFAX: 800-685-1111
www.equifax.com
 EXPERIAN: 888-397-3742
www.experian.com
 TRANS UNION: 800-888-4213
www.transunion.com
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Beware of
Higher Costs
Payday Loans
Tax Refund Loans
Rent-to-Own
Car Title Loans
Bounced Check Protection
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Credit Laws
 Fair Credit Reporting Act
 Equal Credit Opportunity Act
 Truth-In-Lending
 Fair Credit Billing Act
 Fair Debt Collection Practices Act
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Consumer Credit
Counseling Services
 Budget Counseling
 Debt Repayment Plan
– you agree to not use the cards
– pre-arranged agreement with creditor(s) for
reduced payment and interest in some cases
– you pay CCCS and they pay your creditors
– CCCS will not put the repayment plan on your
credit report BUT creditors may
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For Individual Help Contact:
Consumer Credit Counseling Service
www.cccsatl.org
800-251-CCCS
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Web site
E-mail address
Phone #
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Special Thanks to...
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