If after obtaining a copy of your report, you discover an error, notify the credit reporting agency. They can assist you in taking the necessary steps to correct the report and will investigate the error(s).
After contracting the credit reporting agency, tell the creditor or other information provider in writing that you dispute an item. You will want to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any credit reporting agency, it must include a notice of your dispute. In addition, if are correct- that is, if the disputed information is not accurate- the information provider may not use it again.
First, contact the credit reporting agency to dispute any errors.
If you need help, credit counselors will write and submit letters on your behalf to the credit reporting agencies to correct your credit reports.
Checking Your Credit Report
Check your credit report once a year by obtaining a copy from each of the following credit reporting agencies:
Equifax: 800-685-1111
http://www.equifax.com/
Experian: 888-397-3742
http://www.experian.com/
Trans Union: 800-888-4213
http://www.tansunion.com/
You can get a free copy of your credit report upon request once every 12 months from http://www.annualcreditreport.com/ or 877-322-8228.
As suggested earlier, make certain that you monitor your credit report. This is especially important if you are planning a major purchase such as a house. Checking your credit report ahead of time can help eliminate any surprise and allow you plenty of time to ensure that any errors are corrected.
Because credit data may vary somewhat by company, it is important to obtain a copy of your credit report from each of the three agencies at little or no cost. Although subject to change, the current average cost of a credit report is between $8.50 and $13. In some cases this cost may include your credit score as well. In many circumstances, however, the cost of obtaining a credit report is free.
Remember, one credit report per year is free. A credit report is also free once a year if you certify in writing that (1) you’re unemployed and plan to look for a job within 60 days, (2) you’re on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a credit reporting agency may charge you a copy of your report.
Equifax: 800-685-1111
http://www.equifax.com/
Experian: 888-397-3742
http://www.experian.com/
Trans Union: 800-888-4213
http://www.tansunion.com/
You can get a free copy of your credit report upon request once every 12 months from http://www.annualcreditreport.com/ or 877-322-8228.
As suggested earlier, make certain that you monitor your credit report. This is especially important if you are planning a major purchase such as a house. Checking your credit report ahead of time can help eliminate any surprise and allow you plenty of time to ensure that any errors are corrected.
Because credit data may vary somewhat by company, it is important to obtain a copy of your credit report from each of the three agencies at little or no cost. Although subject to change, the current average cost of a credit report is between $8.50 and $13. In some cases this cost may include your credit score as well. In many circumstances, however, the cost of obtaining a credit report is free.
Remember, one credit report per year is free. A credit report is also free once a year if you certify in writing that (1) you’re unemployed and plan to look for a job within 60 days, (2) you’re on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a credit reporting agency may charge you a copy of your report.
If Credit Is Denied
Remember to make sure that you are fully aware of, and understand the reason(s) you were denied credit. If you do not, make certain that you seek information and assistance from a credit industry professional.
When you are denied credit, the Equal Credit Opportunity Act (ECOA) requires that the creditor notify you I writing with the principal reason(s) you were denied if you ask within 60 days. If you were denied due to your credit history, you are entitled to a free copy of your credit report.
When you are denied credit, the Equal Credit Opportunity Act (ECOA) requires that the creditor notify you I writing with the principal reason(s) you were denied if you ask within 60 days. If you were denied due to your credit history, you are entitled to a free copy of your credit report.
Common Barriers to Credit
Now that you are familiar with the issues surrounding establishing credit, credit reports and agencies, types of credit accounts, and some of the primary credit laws, it is important to go back and review some of the most common barriers to obtaining credit.
As has been stated, late payments recorded on your credit history are one of the primary barriers to credit. Therefore, it is critical to routinely inspect your credit report for incorrect information.
Many persons, especially first time home buyers, may have difficulty securing a home mortgage, due to lack of credit history. If you are new to using credit, begin by establishing a banking presence and developing a positive credit history.
If a family member or good friend asks you to co-sign for a loan or credit account, know what you are getting into. Co-signing can negatively impact your credit if the primary borrower does not pay. Other creditors may believe that you have not successfully managed your credit, and thereby not give you a credit card or loan.
It is very important to manage your credit in a manner to avoid judgments, collection accounts, charge-offs, bankruptcies, and foreclosure. These items are viewed negatively and will stay on a credit report for several years.
Finally, always be sure to pay off all students loans. An unpaid student loan can prevent you from obtaining a home mortgage in the future.
As has been stated, late payments recorded on your credit history are one of the primary barriers to credit. Therefore, it is critical to routinely inspect your credit report for incorrect information.
Many persons, especially first time home buyers, may have difficulty securing a home mortgage, due to lack of credit history. If you are new to using credit, begin by establishing a banking presence and developing a positive credit history.
If a family member or good friend asks you to co-sign for a loan or credit account, know what you are getting into. Co-signing can negatively impact your credit if the primary borrower does not pay. Other creditors may believe that you have not successfully managed your credit, and thereby not give you a credit card or loan.
It is very important to manage your credit in a manner to avoid judgments, collection accounts, charge-offs, bankruptcies, and foreclosure. These items are viewed negatively and will stay on a credit report for several years.
Finally, always be sure to pay off all students loans. An unpaid student loan can prevent you from obtaining a home mortgage in the future.
Credit Laws
The Equal Credit opportunity Act (ECOA) provides protection relating to discrimination, type of income considerations, and your right to be provided with the reason(s) for credit denial. Also, you cannot be denied credit because you have exercised a right under the Consumer Protection Act.
Each of the credit laws listed provides additional consumer protections. As stated, the Fair Credit Reporting Act provides the “right to know;” the Truth-in-Lending Act requires disclosure of the cost of credit and repayment terms; and the Fair Credit Billing Act establishes procedures for resolving billing errors.
The Fair debt Collection Practices Act regulates debt collectors and prohibits certain types of practices.
One of the primary sources for further information regarding credit regulations and consumer protection information is the Federal Trade Commission (FTC), as well as State Attorney Generals’ offices. For more information, you may wish to visit the FTC website at http://www.ftc.gov/. the site contains an enormous amount of information, including in-depth information on car leasing, children’s issues, investments, senior citizen issues, telemarketing, telephone services, and much, much more.
Each of the credit laws listed provides additional consumer protections. As stated, the Fair Credit Reporting Act provides the “right to know;” the Truth-in-Lending Act requires disclosure of the cost of credit and repayment terms; and the Fair Credit Billing Act establishes procedures for resolving billing errors.
The Fair debt Collection Practices Act regulates debt collectors and prohibits certain types of practices.
One of the primary sources for further information regarding credit regulations and consumer protection information is the Federal Trade Commission (FTC), as well as State Attorney Generals’ offices. For more information, you may wish to visit the FTC website at http://www.ftc.gov/. the site contains an enormous amount of information, including in-depth information on car leasing, children’s issues, investments, senior citizen issues, telemarketing, telephone services, and much, much more.
What Should I Do If I Am Turned Down for credit?
If your application for credit is denied, it is very important for you to secure a copy of the report and determine why you were turned down. If the information on the credit report is accurate, you may need to work on the reason(s) for the denial. For example, if you have been consistently late making payments, you will need to address this issue and make it a number one priority to always pay on time.
Non-Traditional or Alternative Credit reports:
Regulation B of the Equal Credit opportunity Act (ECOA) states that creditor shall consider:
“(ii) on the applicant’s request, any information the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant’s creditworthiness, and (iii) on the applicant’s request,, the credit history, when available, of any account reported in the name of the applicant’s spouse that the applicant can demonstrate accurately reflects the applicant’s creditworthiness.”
The creditor can restrict the types of credit history and credit references that will consider, nut a creditor:
“Must consider credit information not reported through a credit bureau when the information relates to the same types of credit references and history that the creditor would consider if reported through a credit bureau.”
This particular important if you been paying on, for example, a mortgage that hasn’t been reported or where the family credit card was in your husband’s name nut you paid the bills.
Having no credit history is an obstacle to obtaining credit. To extend credit to someone, lenders need proof that the borrower is able to make payments in full and on time.
If you have no credit history and you do not have a bank account, many lenders will consider a “non-traditional” credit file as a basis for extending credit.
Remember:Pay on time, avoid too many inquires and public record items, and do not apply for more credit than you need.
Non-Traditional or Alternative Credit reports:
Regulation B of the Equal Credit opportunity Act (ECOA) states that creditor shall consider:
“(ii) on the applicant’s request, any information the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant’s creditworthiness, and (iii) on the applicant’s request,, the credit history, when available, of any account reported in the name of the applicant’s spouse that the applicant can demonstrate accurately reflects the applicant’s creditworthiness.”
The creditor can restrict the types of credit history and credit references that will consider, nut a creditor:
“Must consider credit information not reported through a credit bureau when the information relates to the same types of credit references and history that the creditor would consider if reported through a credit bureau.”
This particular important if you been paying on, for example, a mortgage that hasn’t been reported or where the family credit card was in your husband’s name nut you paid the bills.
Having no credit history is an obstacle to obtaining credit. To extend credit to someone, lenders need proof that the borrower is able to make payments in full and on time.
If you have no credit history and you do not have a bank account, many lenders will consider a “non-traditional” credit file as a basis for extending credit.
Remember:Pay on time, avoid too many inquires and public record items, and do not apply for more credit than you need.
Types of Accounts
There are essentially three types of accounts that are most commonly used. They include installment, revolving, and open 30-day.
Installment credit is one of the commonly used types of credit accounts. As stated above, installment credit is granted when a consumer signs a contract to repay a fixed amount in equal payments over a specific period of time. You will also hear this account referred to as “installment loan.”
For example, a car loan in the amount of $5,000 with a monthly payment of $228 for two years (24 months) is an installment loan.
Revolving credit accounts allow consumers the option of paying the debt off in full each month or paying the minimum payment as specified by the creditor.
A Visa® card, for example, is a type of revolving credit account. As you know, of your current balance is $500, you have the option to either pay the debt in full or make the minimum monthly payment.
NOTE: if you pay off the debt in full each month, you do not pay any interest charges. If however, you carry a balance forward, you pay interest on the remaining balance in addition to all future purchases.
Therefore, it is highly recommended that you pay the full balance each month. If you cannot, always pay more than the minimum due.
An open 30-Day credit account requires the consumer to repay the full balance owed each month.
A credit grantor well known for providing this type of account is American Express.
Installment credit is one of the commonly used types of credit accounts. As stated above, installment credit is granted when a consumer signs a contract to repay a fixed amount in equal payments over a specific period of time. You will also hear this account referred to as “installment loan.”
For example, a car loan in the amount of $5,000 with a monthly payment of $228 for two years (24 months) is an installment loan.
Revolving credit accounts allow consumers the option of paying the debt off in full each month or paying the minimum payment as specified by the creditor.
A Visa® card, for example, is a type of revolving credit account. As you know, of your current balance is $500, you have the option to either pay the debt in full or make the minimum monthly payment.
NOTE: if you pay off the debt in full each month, you do not pay any interest charges. If however, you carry a balance forward, you pay interest on the remaining balance in addition to all future purchases.
Therefore, it is highly recommended that you pay the full balance each month. If you cannot, always pay more than the minimum due.
An open 30-Day credit account requires the consumer to repay the full balance owed each month.
A credit grantor well known for providing this type of account is American Express.
How Credit reporting Agencies Work
Credit reporting agencies do not deny or extend credit. They simply collect and store credit data on all consumers or users of credit.
The information on whether or not you have made your payment on time, is sent, normally monthly, from lenders and creditors to credit reporting agencies. Then, upon the request of a credit grantor (a lender or creditor), the information about you is sold to the credit grantor in the form of a credit report.
The credit grantor will review the information and use it to make a determination as to whether or not to grant you credit and if so, at what terms and conditions.
One of the primary elements reviewed by credit grantors is your payment history. Credit reports will provide several pieces of information relating to each of your accounts, both past and present. Some of the information includes things such as: the date the account was opened, the credit line, the highest amount you have ever charged or borrowed, and perhaps most importantly, a two-year history, month by month, indicating if each month’s payment was made on time. If not, the report will show if the payment was 30, 60, 90, 120, or more days late.
The information on whether or not you have made your payment on time, is sent, normally monthly, from lenders and creditors to credit reporting agencies. Then, upon the request of a credit grantor (a lender or creditor), the information about you is sold to the credit grantor in the form of a credit report.
The credit grantor will review the information and use it to make a determination as to whether or not to grant you credit and if so, at what terms and conditions.
One of the primary elements reviewed by credit grantors is your payment history. Credit reports will provide several pieces of information relating to each of your accounts, both past and present. Some of the information includes things such as: the date the account was opened, the credit line, the highest amount you have ever charged or borrowed, and perhaps most importantly, a two-year history, month by month, indicating if each month’s payment was made on time. If not, the report will show if the payment was 30, 60, 90, 120, or more days late.
Credit Myths
You must give your permission for a report to be issued. The fact is, companies with a permissible purpose may access reports without the consumer’s direct consent. Another example is “the credit reporting agency denied me credit.” Credit reporting agencies do not deny or extended credit. They are businesses that collect and retain credit data and provide it for a fee to lenders and creditors for their review in assessing whether or not to extend credit.
“When paid, the bad debt will go away.” Because credit reports provide a history of your credit, bad debts, charge offs, late payments, judgments, etc., will stay in your credit report, in some cases, for up to 7 to 10 years. (Negative information stays on a credit report for seven years; public record information such as bankruptcy and foreclosure will stay on a credit report for up to ten years.)
Any time you are a joint account owner or cosigner, no matter if you have paid your “share” or not, both parties are held 100% responsible for the payment. In other words, if you pay your share and the other person does not, both of you will receive the same negative credit ratings. This is also true of divorce situations. A divorce does not automatically separate jointly held accounts. To ensure your protection, the accounts may need to be paid in full and closed, and if desired, reopened as a single owner account.
Despite numerous changes in the credit industry, such as credit scores and other predictive factors, credit reports are still the number one tool used to assess your credit.
“When paid, the bad debt will go away.” Because credit reports provide a history of your credit, bad debts, charge offs, late payments, judgments, etc., will stay in your credit report, in some cases, for up to 7 to 10 years. (Negative information stays on a credit report for seven years; public record information such as bankruptcy and foreclosure will stay on a credit report for up to ten years.)
Any time you are a joint account owner or cosigner, no matter if you have paid your “share” or not, both parties are held 100% responsible for the payment. In other words, if you pay your share and the other person does not, both of you will receive the same negative credit ratings. This is also true of divorce situations. A divorce does not automatically separate jointly held accounts. To ensure your protection, the accounts may need to be paid in full and closed, and if desired, reopened as a single owner account.
Despite numerous changes in the credit industry, such as credit scores and other predictive factors, credit reports are still the number one tool used to assess your credit.
Managing Your Credit (Part III)
All lenders and creditors want to feel assured that you are a good credit risk and will repay your obligation on time. One of the primary elements considered is stability.
- How long have been employed (either at the same job or in the same line of work)? Do you have stable income?
- Have you moved frequently? Too many moves may lead the creditor/lender to believe that you have been evicted and/or are financially irresponsible.
- Do you own a home or are you renting an apartment? Owning a home has traditionally been thought to indicate stability and “having roots in the community.”
- Do you have money in the bank (in savings and checking accounts)? Having established and maintained a savings account will provide the lender with proof that you have managed your finances responsibly and that you have been able to “set money aside.” Also, use your checking account wisely.
It is very important to obtain a copy of your credit report and carefully examine it for accuracy at least once a year. Any errors, such as incorrect name spelling, Social Security number, account numbers, loan balances, etc., should be reported to the credit reporting agency.
If you have a common name, it is especially important to make sure that items such as negative public records or accounts not belonging to you, are not listed on the report.
There may be a small charge to get your report. However, there is no charge to obtain your credit report if you are denied credit due to your credit history.
Always, always, always pay your bills on time. Failure to pay bills on time, before the due date, is the number one factor that negatively affects your credit. Despite this, people commonly believe that paying a few days late, or skipping a month and then paying a payment extra the next, or catching up every once in a while is acceptable. It is not! Every time a payment is made late, you run the risk of the creditor or lender reporting the late payment to the credit reporting agency.
What if you have a “good reason” for paying late, such as, “I lost my job?” The payment is still due on time. In the event of a crisis, however, immediately contact the creditor or lender to notify them of your situation. This type of communication will go a long way and may, in a short-term crisis, secure you a short-term “grace period.” Never, however, assume that these types of agreements or negotiations are “automatic.”
Additionally, you can request that a note be put in your credit report file indicating the “good reason” for being late on payments. This does not, however, remove the negative entry from your credit report, but simply provides an explanation.
Tip on making a payment late: if you happen to forget to pay a bill on time (before the due date), be sure to immediately pay it. Although you may have to pay a late fee and interest, many creditors do not report to the credit reporting agency until a payment is 30 days late.
Managing Your Credit (Part II)
If a family member or good friend asks you to co-sign for a loan or credit account, know what you are getting into! Co-signing can negatively impact your credit if the primary borrower (your family member or friend) doesn’t pay. As a result, other creditors may believe that you have not successfully managed your credit, and thereby, not give you a credit card or loan.
Make sure that you understand what co-signing involves:
Make sure that you understand what co-signing involves:
- You are being asked to guarantee the debt. Think carefully before you do. If the primary borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
- You may have to pay up to the full amount of the debt if the primary borrower does not pay. You may also have to pay late fees, legal, or collection cost, which increases this amount.
- The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the primary borrower, such as suing you, garnishing your wages, etc. if this debt is ever in default, that fact may become a part of your credit record.
If you do co-sign, keep in mind that:
- Even if you’re not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the co-signed loan as one of your obligations.
- Before you pledge property to secure the loan, such as your car, furniture, or real property, make sure you understand the consequences. If the borrower defaults, you could lose these items.
- Ask the lender to agree, in writing, to notify you if the borrower misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.
- Make sure you get copies of all important papers, such as the loan contract, the truth-in-Lending Disclosure Statement, and warranties- if you’re co-signing for a purchase.
- Stay in contact with the borrower to ensure that the loan is being repaid in full, on time, every time.
Apply only for the credit that you need or for one or two credit cards in order to establish a credit history and to demonstrate the responsible use of credit.
Remember that every time you fill out a credit application, an inquiry is made by the potential lender or creditor. Too many inquiries listed on your report tend to be a “red flag,” giving the impression that you are desperately seeking credit.
DO NOT apply for unnecessary credit. DO NOT accept every credit card solicitation.
Be especially wary of taking out credit cards that you do not plan to use just to get a small one-time discount.
Managing Your Credit
The credit industry has established a debt-to-income ratio to determine what a manageable amount of credit is for each individual. It recommends that your expenses (excluding a home mortgage) should not exceed more than 20% of your take-home pay (net income).
In other words, if you make $2,000 per month, your total monthly debt payments, such as car loan payments, credit card payments, student loan payments, etc. should not exceed $400 per month.
Formula to calculate debt-to-income ratio: Net monthly income *.20= maximum monthly debt.
For example: If a person’s net monthly income is $2,500, then to determine the maximum monthly debt payments, take $2,500*.20 which equals $500. (in this example, no more than $500 per month should be spent on monthly debts.)
Obviously, the less debt you have, the stonger your application, and the better your chances of securing credit at favorable terms.
The key to managing crdit is first establish credit by securing a loan and/or credit card, and second to make payments on time, as stipulated by terms and conditions of the loan or credit card company.
Having credit, both past (paid off loans) and current credit, with payments being paid on time, will provide lenders with the confidence that you handle credit responsibly.
Too many loans and/or too many credit cards, (generally more than four or five) may lead the lender to believe that you are overextended or that issuance of additional credit may cause you to fall behind on future payments.
Also, you do not want to borrow the full line of credit available on any individual credit card. It is better to have credit available on both cards instead of “mixing out” one card and having the full amount of credit available on another.
It is important for both partners in a marriage or relationship to establish their own credit to protect the family from unforeseen circumstances like death, divorce, or other life changes, and to achieve financial goals.
Kinds of Accounts
To ensure that you and your family are protected, find out now what kind of credit accounts you have. You can either check the application(s) or ask your creditor(s). there are two basic kinds of credit accounts.
In other words, if you make $2,000 per month, your total monthly debt payments, such as car loan payments, credit card payments, student loan payments, etc. should not exceed $400 per month.
Formula to calculate debt-to-income ratio: Net monthly income *.20= maximum monthly debt.
For example: If a person’s net monthly income is $2,500, then to determine the maximum monthly debt payments, take $2,500*.20 which equals $500. (in this example, no more than $500 per month should be spent on monthly debts.)
Obviously, the less debt you have, the stonger your application, and the better your chances of securing credit at favorable terms.
The key to managing crdit is first establish credit by securing a loan and/or credit card, and second to make payments on time, as stipulated by terms and conditions of the loan or credit card company.
Having credit, both past (paid off loans) and current credit, with payments being paid on time, will provide lenders with the confidence that you handle credit responsibly.
Too many loans and/or too many credit cards, (generally more than four or five) may lead the lender to believe that you are overextended or that issuance of additional credit may cause you to fall behind on future payments.
Also, you do not want to borrow the full line of credit available on any individual credit card. It is better to have credit available on both cards instead of “mixing out” one card and having the full amount of credit available on another.
It is important for both partners in a marriage or relationship to establish their own credit to protect the family from unforeseen circumstances like death, divorce, or other life changes, and to achieve financial goals.
Kinds of Accounts
To ensure that you and your family are protected, find out now what kind of credit accounts you have. You can either check the application(s) or ask your creditor(s). there are two basic kinds of credit accounts.
- An individual account. When you apply for an individual account, only your own income, assets, and credit history are considered by the creditor. Whether married or single, you alone are responsible for paying off the debt on this account. The account will appear on the individual’s credit report.
- A joint account. The income, financial assets, and credit history of both spouses are taken into consideration for a joint account. No matter who actually handles the household bills, both spouses are responsible for seeing that all debts are paid. A creditor who reports the credit history of a joint account to credit reporting agencies must report it in both names.
Items Needed to request Your Credit Report
The information below is needed to request a copy of your credit report. The purpose of the information is to ensure the report is about the right person. The two most critical elements are your full name and your Social Security number.
- Full name (including Jr. Sr. III).
- Current and previous addresses ( for a 5-year period) with zip codes.
- Spouse name.
- Social Security number.
- Date of birth.
Because credit data may vary somewhat by company, it is important to obtain a copy of your credit report from the three credit reporting agencies: Equifax, Experian, and TransUnion. A copy of the report can be obtained from the agencies at little or no cost. Also, you can receive a free copy of your credit report once every 12 months from www.annualcreditreport.com or 877-332-8228.
Note: Be aware that sometimes information about people with similar names can show up on your report. Therefore, always make sure that the Social Security number and account data on the report are correct. This is another reason to review your own credit report.
Although there must be a cost, you always have the right to look at what information is contained in your credit report or credit file.
What’s Contained in a Credit Report?
A copy of your credit report is “pulled” or requested any time you fill out an application fot the extension of credit. Credit reports may also be requested periodically by lenders or creditors with whom you have existing accounts.
Because credit reports are a “history” of your credit activity, they will contain both current and past account data.
Important Note: potential creditors review your credit history every time you apply for credit. Each creditor review-called an “inquiry”- shows up on your credit report, even if you are denied credit or decide to decline the credit. Too many inquires showing up on your credit report can be a sign to creditors that you are overextending yourself and/or trying to transfer debt around onto additional cards. Inquires stay on your credit report for 24 months. Therefore, be aware of how often you apply for credit and do not apply for credit too often.
When shopping for a car or home mortgage, however, you do not have the flexibility of checking out your financing options within a short period of time. Doing so will show that you were comparison-shopping versus desperately seeking credit.
Specifically, credit scores do not include car or home mortgage loan inquires that occurred within a 30-day period of time prior to the score being calculated. Furthermore, for your benefit, car and home mortgage inquires that occurred within any 14-day period of time are considered as one inquiry.
Requesting a copy of your own credit report for your personal review is strongly encouraged and does NOT negatively affect your credit history. It is considered a soft inquiry.
Always try to avoid getting into situations that generate “public record” information that could be added to your credit report. Public record information is a sign that you may be, or are getting into financial trouble.
Because credit reports are a “history” of your credit activity, they will contain both current and past account data.
Important Note: potential creditors review your credit history every time you apply for credit. Each creditor review-called an “inquiry”- shows up on your credit report, even if you are denied credit or decide to decline the credit. Too many inquires showing up on your credit report can be a sign to creditors that you are overextending yourself and/or trying to transfer debt around onto additional cards. Inquires stay on your credit report for 24 months. Therefore, be aware of how often you apply for credit and do not apply for credit too often.
When shopping for a car or home mortgage, however, you do not have the flexibility of checking out your financing options within a short period of time. Doing so will show that you were comparison-shopping versus desperately seeking credit.
Specifically, credit scores do not include car or home mortgage loan inquires that occurred within a 30-day period of time prior to the score being calculated. Furthermore, for your benefit, car and home mortgage inquires that occurred within any 14-day period of time are considered as one inquiry.
Requesting a copy of your own credit report for your personal review is strongly encouraged and does NOT negatively affect your credit history. It is considered a soft inquiry.
Always try to avoid getting into situations that generate “public record” information that could be added to your credit report. Public record information is a sign that you may be, or are getting into financial trouble.
Establish a Financial Presence
What does it mean to establish a financial presence? Simply put, it is the process of setting up accounts with a financial institution, and demonstrating the responsible use of these accounts.
What constitutes responsible use? Avoid bouncing checks, keep accounts above any required “minimum balance,” make regular deposits, and contact the financial institution promptly if there are any account related problems.
Beware: If you bounce checks at one bank, the bank may report your name to an industry-wide verification system. As a result, other banks may refuse to allow you to open a checking account.
If granted an ATM card, be sure to protect it against fraudulent use by keeping it and your personal identification number (PIN) in a safe and secure location.
Don’t give anyone your PIN. Always remember to document account withdrawals (checks and ATM) to prevent going below your required minimum balances or bouncing checks.
What constitutes responsible use? Avoid bouncing checks, keep accounts above any required “minimum balance,” make regular deposits, and contact the financial institution promptly if there are any account related problems.
Beware: If you bounce checks at one bank, the bank may report your name to an industry-wide verification system. As a result, other banks may refuse to allow you to open a checking account.
If granted an ATM card, be sure to protect it against fraudulent use by keeping it and your personal identification number (PIN) in a safe and secure location.
Don’t give anyone your PIN. Always remember to document account withdrawals (checks and ATM) to prevent going below your required minimum balances or bouncing checks.
What’s the Real Deal on Establishing Good Credit?
What is the real deal on establishing good credit? What does it take? What does it really mean? How do you begin? This slide offers some of the guiding principle of getting started.
The key is to start and not rush into anything. Once ready, it is advisable to open a checking and savings account. Shop around for free or low-cost checking account options.
Most banks and credit unions also offer credit cards. Review interest rates and fees carefully. Do not be turned by low introductory rates, only to find that the rate goes up dramatically in a few months. Be sure to ask the credit card issuer if they report how you pay to a credit reporting agency. If they do not, you cannot establish credit using the card, even if you pay it off every month.
In most cases, one or two credit cards, used wisely, should suffice. Do not charge the limit of one card. It is better to charge less on both cards with room to spare.
Do not charge more than you can afford and get in the habit of paying off the card in full every month. Make absolutely certain that your payments are made on time!
The key is to start and not rush into anything. Once ready, it is advisable to open a checking and savings account. Shop around for free or low-cost checking account options.
Most banks and credit unions also offer credit cards. Review interest rates and fees carefully. Do not be turned by low introductory rates, only to find that the rate goes up dramatically in a few months. Be sure to ask the credit card issuer if they report how you pay to a credit reporting agency. If they do not, you cannot establish credit using the card, even if you pay it off every month.
In most cases, one or two credit cards, used wisely, should suffice. Do not charge the limit of one card. It is better to charge less on both cards with room to spare.
Do not charge more than you can afford and get in the habit of paying off the card in full every month. Make absolutely certain that your payments are made on time!
Additional Banking Services
Financial institutions provide additional services for free or low fee with some deposit accounts. Remember to keep track of the fees charged, if any.
ATM
An ATM, or automated teller machine, is a machine you can use 24 hours a day to make deposits, withdrawals, and transfer money. Unlike a check cashing company, the financial institution does not have to be open for you to use an ATM. In addition, there are literally dozens of ATMs in any given neighborhood or community.
When you use an ATM, you need a card issued by the financial institution and a personal identification number, or PIN. A PIN is a special password or set of numbers to use your ATM card. The PIN is used for security purposes so no one else can access your account.You can use the ATM for many services but there might be a fee involved. Most people use the ATM to get cash or make deposit to their checking, savings, or other account. If you use another financial institution’s ATM, you might be charged an additional fee. Generally, you can only make deposits at your financial institution’s ATM. Be sure that you only use an ATM from an accredited financial institution to avoid becoming the victim of a scam. Also remember to keep your ATM transaction receipts to help you keep track of your withdrawals and to protect against identity theft.
Debit Card
A debit card is a plastic card, sometimes called a “check card.” The debit card usually has the name of your financial institutions and may have a MasterCard® or Visa® logo. The card has a magnetic strip on the back that allows you to pay for goods and services at stores and other businesses that accept MasterCard® or Visa® credit cards.
The debit card also functions as an ATM card. With debit cards, you can make deposits to withdrawals from your checking accounts at ATMs. Most debit cards require a PIN if you use the card as an ATM card.
A debit card may look like a credit card and may be accepted by stores that accepted by stores that accept credit cards, but it is not a credit card. When you use a debit card, the money comes directly out of your account and reduces your account balance. You do not receive a bill and then have a few days to pay the bill like you do with a credit card.
Again, keep track of all debit card receipts to protect against identity theft.
Direct Deposit
With direct deposit, your paycheck or benefit check is electronically transferred and directly deposited into your account. The amount of money is immediately available. Some financial institutions may not charged monthly fees if direct deposit is used with certain accounts.
Loan
A loan is money you borrow from a financial institution with a written promise or a “note” to pay it back later. With a loan, financial institutions charge you fees and interest to borrow the money. You can talk to a customer service representative for more information about the loans they offer.
Money Order
A money order is similar to a check. It is used to pay bills or make purchase when cash is not accepted. Many businesses sell money orders for a fee. If you need to use a money order, shop around for the best price. Remember o keep copies of money order receipts used to pay bills for at least 12months. This is important if you have not established a credit history and you go to apply for a mortgage. The receipts can serve as documentation of how you pay your rent and other bills.
Telephone Banking
Allows you to:
ATM
An ATM, or automated teller machine, is a machine you can use 24 hours a day to make deposits, withdrawals, and transfer money. Unlike a check cashing company, the financial institution does not have to be open for you to use an ATM. In addition, there are literally dozens of ATMs in any given neighborhood or community.
When you use an ATM, you need a card issued by the financial institution and a personal identification number, or PIN. A PIN is a special password or set of numbers to use your ATM card. The PIN is used for security purposes so no one else can access your account.You can use the ATM for many services but there might be a fee involved. Most people use the ATM to get cash or make deposit to their checking, savings, or other account. If you use another financial institution’s ATM, you might be charged an additional fee. Generally, you can only make deposits at your financial institution’s ATM. Be sure that you only use an ATM from an accredited financial institution to avoid becoming the victim of a scam. Also remember to keep your ATM transaction receipts to help you keep track of your withdrawals and to protect against identity theft.
Debit Card
A debit card is a plastic card, sometimes called a “check card.” The debit card usually has the name of your financial institutions and may have a MasterCard® or Visa® logo. The card has a magnetic strip on the back that allows you to pay for goods and services at stores and other businesses that accept MasterCard® or Visa® credit cards.
The debit card also functions as an ATM card. With debit cards, you can make deposits to withdrawals from your checking accounts at ATMs. Most debit cards require a PIN if you use the card as an ATM card.
A debit card may look like a credit card and may be accepted by stores that accepted by stores that accept credit cards, but it is not a credit card. When you use a debit card, the money comes directly out of your account and reduces your account balance. You do not receive a bill and then have a few days to pay the bill like you do with a credit card.
Again, keep track of all debit card receipts to protect against identity theft.
Direct Deposit
With direct deposit, your paycheck or benefit check is electronically transferred and directly deposited into your account. The amount of money is immediately available. Some financial institutions may not charged monthly fees if direct deposit is used with certain accounts.
Loan
A loan is money you borrow from a financial institution with a written promise or a “note” to pay it back later. With a loan, financial institutions charge you fees and interest to borrow the money. You can talk to a customer service representative for more information about the loans they offer.
Money Order
A money order is similar to a check. It is used to pay bills or make purchase when cash is not accepted. Many businesses sell money orders for a fee. If you need to use a money order, shop around for the best price. Remember o keep copies of money order receipts used to pay bills for at least 12months. This is important if you have not established a credit history and you go to apply for a mortgage. The receipts can serve as documentation of how you pay your rent and other bills.
Telephone Banking
Allows you to:
- Check account balances.
- Transfer money between accounts.
- Obtain account history, such as most recent deposits or withdrawals.
- Report a lost, stolen, or damaged card.
Deposit Accounts
Bank accounts that allow you to add money to the account are called deposit accounts. Checking and savings accounts are two examples of deposit accounts.
Checking Account
A checking account is an account that lets you write checks to pay bills or to buy goods and services. The financial institution takes the money from your account and pays it to the person named on the check. The financial institution sends you a monthly record of the deposits and withdrawals made. This is called a BANK STATEMENT.
Savings Account
A savings account is an account that earns interest.You can open a savings account with a few dollars and then deposit more money to your account over time to earn more interest and build your savings. Keep in mind that if you make a lot of withdrawal from your account over time and your balance falls below the amount set by the bank when you open the account, you might have to pay a monthly fee.It’s a good idea to compare the rules of different accounts. For example, financial institutions might require you to have a certain balance to open an account, earn interest, or avoid fees. This is usually called a “minimum balance.”
Checking Account
A checking account is an account that lets you write checks to pay bills or to buy goods and services. The financial institution takes the money from your account and pays it to the person named on the check. The financial institution sends you a monthly record of the deposits and withdrawals made. This is called a BANK STATEMENT.
Savings Account
A savings account is an account that earns interest.You can open a savings account with a few dollars and then deposit more money to your account over time to earn more interest and build your savings. Keep in mind that if you make a lot of withdrawal from your account over time and your balance falls below the amount set by the bank when you open the account, you might have to pay a monthly fee.It’s a good idea to compare the rules of different accounts. For example, financial institutions might require you to have a certain balance to open an account, earn interest, or avoid fees. This is usually called a “minimum balance.”
Basic Banking Terms
Deposit: A deposit is money you add to your account. When you add money to your account, you must fill out a deposit slip. The deposit slip tells the financial institution how much money you are adding. If you deposit cash, the funds will be immediately available. But if, for example, you deposit your paycheck or a check drawn on an out-of-state financial institution, you may not have immediate use of the funds. The financial institution must first make sure there are funds to cover your check from the financial institution at which the check was originally drawn. Be sure to ask the financial institution how many days from the date of your deposit you can use the money you deposited.
Balance: Your balance is the amount of money you have in your account.
Balance: Your balance is the amount of money you have in your account.
Withdrawal: When you make a withdrawal, you are withdrawal slip, or by using an ATM. It is important to know how much is in your account so you won’t try to withdrawal more money than you have. Keep a record of how much money you withdrawal and how much money is left in your account. With a checking account, if you “overdraw” –write a check for more money than you have in you account- you will be charge a fee. Only write checks against funds that are available.
Fees: Financial institutions charge you fees for providing you with various services. For example, a monthly maintenance fee might be charged for maintaining your account. You for more money than you have in your account.
Interest: Interest is the additional money in your account that the financial institution pays you for keeping your money than you have in your account.
Note: Interest is not earned on all deposit accounts. Financial institutions offer both interest- bearing and non-interest bearing accounts.
Fees: Financial institutions charge you fees for providing you with various services. For example, a monthly maintenance fee might be charged for maintaining your account. You for more money than you have in your account.
Interest: Interest is the additional money in your account that the financial institution pays you for keeping your money than you have in your account.
Note: Interest is not earned on all deposit accounts. Financial institutions offer both interest- bearing and non-interest bearing accounts.
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