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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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Buy/consume now, pay laterEmergenciesEstablish favorable credit historyInsurance and fraud protection

The Upside of Credit Use

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The Downside of Credit Use

The price of credit is highAdditional fees add to the costCredit makes it easy to overspendYou are vulnerable to fraud

Source:Source:Garman & Forgue (2003), Garman & Forgue (2003), Personal FinancePersonal Finance Seventh Edition. Houghton Mifflin Seventh Edition. Houghton Mifflin pg. 165 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 awayI’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:Source:http://www.creditcardoffers101.com/News.html?url=http://api.yellowbrix.com/api/?http://www.creditcardoffers101.com/News.html?url=http://api.yellowbrix.com/api/?service=story&method=xml&ID=trafficlogic&story_id=39768469&password=ldfclyservice=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!

% 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

($3,800 Balance at 17% APR)

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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 rateAsk them to lower your credit limitAsk them to change when your bill is

dueDiscuss 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 InformationPublic Record InformationCollection Agency Account InformationCredit Account InformationCompanies That Requested Your Credit FileMost 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 carPurchasing a home Obtaining a loanRenting an apartmentAuto and life insuranceAcquiring a cell or home phoneSeeking employment

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How to Obtain Your Credit Report

EQUIFAX: 800-685-1111

www.equifax.comEXPERIAN: 888-397-3742

www.experian.comTRANS UNION: 800-888-4213

www.transunion.com

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Beware of Higher Costs

Payday LoansTax Refund LoansRent-to-OwnCar Title LoansBounced 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.org800-251-CCCS

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Web site

E-mail address

Phone #

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Special Thanks to...