Ditching your debt and Ditching your debt and Controlling your CreditControlling your Credit

Jennifer AbelJennifer Abel

703-228-6417703-228-6417

jabel@vt.edujabel@vt.edu

What we’ll coverWhat we’ll cover

The pitfalls of creditThe pitfalls of credit Credit reports and scoresCredit reports and scores Correcting errors on reportsCorrecting errors on reports Creating a debt repayment planCreating a debt repayment plan Communicating with creditorsCommunicating with creditors Credit counseling services: getting help and Credit counseling services: getting help and

spotting the scamsspotting the scams

Pitfalls of creditPitfalls of credit

Not managing your credit wisely can lead to:Not managing your credit wisely can lead to: Increased annual percentage rates (APRs)Increased annual percentage rates (APRs) Unnecessary feesUnnecessary fees A decline in your credit scoreA decline in your credit score Denials of future credit requestsDenials of future credit requests

Credit reports and scoresCredit reports and scores

Lenders report your credit usage to Credit Lenders report your credit usage to Credit Reporting Bureaus. The three largest are:Reporting Bureaus. The three largest are: EquifaxEquifax ExperianExperian TransUnionTransUnion

What is in a credit report?What is in a credit report?

Identifying InformationIdentifying Information

Credit HistoryCredit History

Public Record InformationPublic Record Information

InquiriesInquiries

What is not in a credit report?What is not in a credit report?

IncomeIncome Length at Job or ResidenceLength at Job or Residence Amount of SavingsAmount of Savings Job TitleJob Title ReferencesReferences AgeAge

Fair and Accurate Credit Fair and Accurate Credit Transactions ActTransactions Act

Allows you to get a free copy of credit report Allows you to get a free copy of credit report annually from each bureau (does not include score)annually from each bureau (does not include score)

Limits who can look at your reportLimits who can look at your report Limits how long negative info can stay there Limits how long negative info can stay there

(generally 7 years)(generally 7 years) Positive info stays for ten yearsPositive info stays for ten years Keeps inaccurate info from staying in your fileKeeps inaccurate info from staying in your file

Methods of checking your reportMethods of checking your report

On-line: On-line: www.annualcreditreport.comwww.annualcreditreport.com By phone: 1-877-322-8228 By phone: 1-877-322-8228 By mail:By mail:

Annual Credit Report Request Service Annual Credit Report Request Service P.O. Box 105281 P.O. Box 105281 Atlanta, GA 30348-5281 Atlanta, GA 30348-5281

YES!

Says Says Who?Who?

Credit Score: FICOCredit Score: FICO

A number between 350 and 850 that reflects A number between 350 and 850 that reflects your creditworthinessyour creditworthiness

Not provided with your free report; must pay Not provided with your free report; must pay fee of $7.95 per report to obtain scorefee of $7.95 per report to obtain score

Mortgage and auto lenders now required to Mortgage and auto lenders now required to divulge your score when evaluating your creditdivulge your score when evaluating your credit

Credit Scoring FactorsCredit Scoring Factors

Balance vs. Limit

30%

35%

Pay on Time

10%

Credit Mix

10%

New Credit & Inquires

15%Years Using Credit

Correcting errors on your reportCorrecting errors on your report

Contact the fraud department of each bureauContact the fraud department of each bureau They must investigate and provide answer They must investigate and provide answer

within 45 dayswithin 45 days You can place fraud alert on your report and You can place fraud alert on your report and

include 100 word statementinclude 100 word statement

How to opt out of pre-approved How to opt out of pre-approved credit card offerscredit card offers

The national credit bureaus offer a toll-free The national credit bureaus offer a toll-free number that enables consumers to opt-out of number that enables consumers to opt-out of all pre-approved credit offers with just one all pre-approved credit offers with just one phone call. phone call.

Call 1-888-5-OPTOUT (1-888-567-8688) for Call 1-888-5-OPTOUT (1-888-567-8688) for more information.more information.

Creating a debt repayment planCreating a debt repayment plan

Stop incurring new debtStop incurring new debt List whom you owe, total balances, monthly List whom you owe, total balances, monthly

payments, APRpayments, APR Develop a spending and saving plan to Develop a spending and saving plan to

determine how much you have available for determine how much you have available for debt paymentsdebt payments

Make a schedule of monthly paymentsMake a schedule of monthly payments Go to Go to www.powerpay.orgwww.powerpay.org for help for help

Communicating with creditorsCommunicating with creditors

Ask for reductions in APR, credit limit Ask for reductions in APR, credit limit increases, fees waivedincreases, fees waived

If going to miss a payment, contact creditor If going to miss a payment, contact creditor ahead of time to explain situationahead of time to explain situation

Get the name and employee ID or badge Get the name and employee ID or badge number of the person you talknumber of the person you talk

Document date, time, and result of all calls in Document date, time, and result of all calls in writingwriting

Communicating, cont.Communicating, cont.

If not satisfied, ask to speak to managerIf not satisfied, ask to speak to manager State clearly what you are asking for (e.g. new State clearly what you are asking for (e.g. new

payment plan, reverse fees, lower interest rate)payment plan, reverse fees, lower interest rate) Be polite but persistentBe polite but persistent If you are being harassed by collectors, can If you are being harassed by collectors, can

ask them to stop calling youask them to stop calling you Provision of the Fair Debt Collection Practices ActProvision of the Fair Debt Collection Practices Act

Credit counselingCredit counseling

Avoid scams: choose a reputable agencyAvoid scams: choose a reputable agency Many services charge fees; consider if what Many services charge fees; consider if what

they are asking for is reasonablethey are asking for is reasonable Many things they charge money for you can Many things they charge money for you can

do yourselfdo yourself Find a reputable agency through the National Find a reputable agency through the National

Foundation for Credit Counseling: Foundation for Credit Counseling: http://www.nfcc.org/http://www.nfcc.org/

The truth about credit repairThe truth about credit repair

No one No one can have accurate information can have accurate information removed from your credit report.removed from your credit report.

If you have had credit problems in the past, it If you have had credit problems in the past, it can take years to repair your credit can take years to repair your credit legitimately.legitimately.

No one can create a new identity for you.No one can create a new identity for you. You can order your credit report yourself. If You can order your credit report yourself. If

you see errors on your report, you can also you see errors on your report, you can also request that the credit reporting agencies make request that the credit reporting agencies make appropriate changes.appropriate changes.

RULES OF RULES OF THUMBTHUMB

DO NOT BUY WHAT YOU CANNOT DO NOT BUY WHAT YOU CANNOT AFFORDAFFORD

ITEMS SHOULD LAST LONGER THAN ITEMS SHOULD LAST LONGER THAN PAYMENTSPAYMENTS

DON’T THINK MINIMUM PAYMENTDON’T THINK MINIMUM PAYMENT USING CREDIT COMMITS FUTURE USING CREDIT COMMITS FUTURE

INCOMEINCOME