New to Credit - Better Business Bureau...use the FICO score. Th esc or ang f m 3 0t 85 d can vary...

published X date

Data SecurityMade Simpler

Sponsored by

Published April 2010

New to Credit

© 2010 Council of Better Business Bureaus.

Introduction Credit can be a strong financial

tool to help consumers

and small business owners

manage their money. Effectively

managing credit requires a solid

understanding of some key credit

“Rules of the Road.” Borrowers

must understand the agreements

that they enter with lenders.

They must have a healthy dose

of personal responsibility, and

should establish patterns that

will keep them in good standing

with their creditors.

Most credit users understand the need

to manage credit effectively, but they

are not a “One Size Fits All” group. The

needs and perspectives of credit users

differ, based on their level of experience

with credit and how large their out-

standing balances are.

BBB created Managing Credit – Made

Simpler to give customized credit man-

agement guidance to different types of

credit users, based on their specific

needs and perspectives. Each of three

customized versions give credit users

the strategies and guidelines they need

to take charge of their specific financial

situation.

Select and open the version of

Managing Credit - Made Simpler that

best offers guidance to fit your needs:

“NEW TO CREDIT”

Here are clear guidelines that will be

helpful to consumers interested in

securing their first credit card and man-

aging a personal credit line for the first

time. Having a good credit record may

help you qualify for lower interest rates,

and your credit record may also affect

your ability to get a job, an apartment

or affordable car insurance, among

other things.

“BALANCING ACT”

If you have generally tried to manage

your money well, but your financial situ-

ation changed over the past year or

two, this version may be for you. You

may have been able to manage your

new financial situation for a while, but

mounting bills and limited resources

have made you aware that you need to

develop a new plan before your finan-

cial situation gets worse.

“OVERWHELMING OBLIGATIONS”

This version offers advice that can help

someone who needs to pay down high

balances.

Credit can be a great

financial tool to help

you manage your

money. It also requires

a solid understanding

of the agreements

you’re entering into

and what’s expected

of you, a healthy

dose of personal

responsibility, and

establishing patterns

that will keep you

in good standing

with your creditors.

When you’re new to

the world of credit –

especially in today’s

changing credit

marketplace –

it can be a little

overwhelming.


We’re here to help. BBB’s Managing Credit – Made

Simpler provides a set of clear guidelines that will

be helpful to most consumers interested in securing their

first credit card and managing a personal credit line for

the first time. Having a good credit record can help you

qualify for low rates if you’re about to apply for a credit

card, buy a car or are planning to buy a home in the

future. Your credit record can also affect your ability to

get a job, rent an apartment, get a cell phone, and even

find affordable car insurance. It’s important to build a

positive financial profile for yourself, whether or not

you’re planning to apply for a big loan in the near term.

Now is the perfect time to learn from this guide.

Banking regulations provide valuable protections to help

cardholders more effectively manage their outstanding

balances. We’ll show you how to take proactive charge of

your financial life so you can avoid credit problems.


I. Your Credit Report –

What Lenders are Looking For . . . . . . . . . . . . . . . . . . 2

II. Your Credit Score & How It Can Affect You . . . . . . . 3

III. How to Build a Good Credit Record . . . . . . . . . . . . . . 4

• Keeping an eye on your credit report

• More suggestions

IV. Credit 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

• APR – Explained

• How to minimize your APR payments

• Deciphering your monthly statement

• Choosing the right kind of card for you

V. Smart Steps to Avoid Credit Trouble . . . . . . . . . . . . 10

VI. Protect Yourself from Fraud . . . . . . . . . . . . . . . . . . . . 11

Addendum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Frequently Asked Questions. . . . . . . . . . . . . . . . . . . . . . . . 13

Topics We’ll Cover:


I. Your Credit Report –What Lenders LookFor

Your credit report and credit

score are key tools that meas-

ure your financial risk, giving

lenders a way to predict how likely

you are to pay your bills on time.

Many lenders — and others — use

your credit score to help determine

whether or not to give you a line

of credit. Creditors don’t just look

at one or two things — they look

at several things that ultimately

come together to build a financial

profile of you, such as:

o Your monthly and annual income.

o Your monthly payment obligations —

Includes rent, student loans, medical

bills, car payments, utilities, tele-

phone/cell phone/cable, etc.

o Are your financial obligations in line

with your total income?

o Are your monthly payments in line with

your monthly income?

o Do you pay your bills on time? Late

payments, defaults and other repay-

ment issues can remain on your credit

report for up to seven years.

o Do you have outstanding traffic or

parking tickets or other government-

issued citations?

o Do you have any kind of credit history?

o How many credit cards have you

applied for in the last few months?

o Is there a record of a collections

agency being hired to pursue you for

outstanding payments to creditors?

Potential lenders find this information in

your credit report, which is updated on

an ongoing basis with new information.

A third party — such as a credit issuer,

prospective landlord or prospective

employer — can secure your credit report

when they have a “permissible purpose”

under the law. They will find your credit

report by going to one — or all — of the

three major credit reporting agencies:

www.equifax.com

www.experian.com

www.transunion.com

2


II. Your Credit Score & How It Can Affect You

Your credit score is based on

key types of information in

your credit report, which come

together and generate a compos-

ite credit score. The key thing to

remember — the higher the score,

the better. There are several types

of credit scores, but lenders often

use the FICO score.

The score ranges from 300 to 850 and

can vary slightly based on which credit

agency issues the score.

Your FICO score generally measures five

key criteria:

o Length of credit history

o Types of credit lines

o Payment history on those credit lines

o Amounts owed on those credit lines

o New credit lines — how many and over

what period of time

3


III. How to Build a Good CreditRecord

If you’re new to credit, many of

these criteria may not yet apply

to you. Even if that’s the case, it’s

important to keep them in mind

as your build your credit history.

Here are some suggestions to

get started:

o Apply for your first credit card. This

might be a general bank card, a

department store card, or a gasoline

station card.

� However, don’t apply for too

many credit cards in a short time

period (6-12 months). The number

of credit applications you submit —

even for retail store cards — may

show up on your credit report and

can be a red flag to potential cred-

itors. Any red flag may cause

them to deny your application or

charge you a higher interest rate

on your credit line.

� Opening several lines of credit may

also lower your credit score,

because may reduce the “average

age” of your accounts — a key

criteria in determining your credit

score.

o If you have trouble qualifying for a

credit card:

� Contact your bank and ask what

you can do to get a credit card.

One possible option the bank

might suggest is to issue you a

card with a low credit limit that

you can gradually increase as you

show that you can pay your bills

on time.

� Another possible option the bank

might suggest is to apply for a

Secured Card. This product

requires you to deposit a certain

amount of money into a savings

account before you can use the

credit card [it’s basically like a

security deposit].

Most banks that offer secured

cards match your credit limit

with the amount of money you’ve

deposited into the account. As

you build a strong track record

with your bank over time, you

can request an application for

a general purpose credit card.

4

BBB Tips

Getting Your First Credit Card

Shop around before applying for

a new credit card. Different banks,

department stores, gas stations,

etc. offer different interest rates and

different payment terms. Choose

a card that offers the best interest

rate and payment terms you can

find.

‘Secured Cards’

A bank-issued “Secured Card’ can

be a great way for a new borrower

to start building your new credit

profile. But you need to be mindful

of potential fees some banks charge

for this product — such as an appli-

cation fee, a processing fee, and an

annual fee.

Stick with lenders that charge low

fees and give you the option to

upgrade to a non-secured card.


5

Keep an Eye on Your CreditReport

As you take some specific steps to

build a positive credit track record for

yourself, you also need to keep a

watchful eye on your credit report from

each of the three major credit report-

ing agencies, and examine the elements

within each of the reports. This is the

best way to make sure that it’s accu-

rate. Catch — and correct — any poten-

tial errors, and be on the look out for

fraudsters who open accounts in your

name, and then don’t pay the charges

they accumulate.

o A federal law allows you to request

a FREE COPY of your credit report

from each of the credit bureaus

once every 12 months at this website

www.annualcreditreport.com. This is

the only free resource to get a copy

of your credit report from each of the

three credit reporting agencies once

a year.

o If you find any mistakes on your

credit report, you should contact

each of the three credit reporting

agencies to report the errors, and

start the process to correct them.

www.equifax.com

www.experian.com

www.transunion.com

Additional Suggestions

o Pay your bills on time. The later you

are, the more points you may lose on

your credit score.

o Keep your credit card balances low –

ideally less than 25% of your credit

limit at any time, even if you pay off

your bill in full every month. If you

start getting near your credit limit,

this can be a flag to potential lenders,

suggesting you’re maxing out your

cards.

o Promptly pay any traffic or parking

tickets or library fines (and keep

records of the payments). If the bill

ends up going to a collection agency,

your credit score could drop by as

much as 100 points.

BBB Tip

Automatic Payments

Consider activating an automatic

electronic payment schedule with

your bank, so you’ll never be late for

a payment.

NOTE – Minimum payments may

vary, so look for the minimum

payment percentage for each of

your lines of credit.

It’s always a good idea to have the

automatic payment pay much more

than the minimum. You’ll owe less

in interest and can pay down your

balance much faster.

!BBB Alert

BBB urges caution about any company that advertises a “free” creditreport.

Generally, these offers aren’t truly ‘free,’ because you need to sign upand pay for other services in order to get your ‘free’ credit report.


IV. Credit 101 Put simply, a credit card

provides a short-term loan

from a bank that you are expect-

ed to repay quickly. In exchange

for giving you a short-term loan,

the bank will charge you interest

– often referred to as an Annual

Percentage Rate or APR. An

issuing bank will evaluate your

credit-worthiness and determine

if you are a low risk candidate

(likely to repay) or a high risk

candidate (unlikely to repay)

for a line of credit, and will offer

you an APR based on your credit

report and how it profiles you

financially. Some banks will offer

you a “Teaser” APR — essentially

a low introductory rate that

will change to a higher APR six

or more months later. We’ll

provide some guidance about

this concept below.

APR – Explained

APR works in lock-step with the trans-

actions you make on the credit card…

if you don’t pay off your balance each

month.

o If you don’t pay your balance in full

every month, and carry some of that

balance forward to the next month,

you will be charged interest on the

unpaid balance. The amount of

money you pay in interest is directly

tied to your APR.

� You’ll pay less money in interest

if you have a lower APR and keep

a low outstanding balance.

� You’ll pay more money in interest

if you have a higher APR and carry

a high outstanding balance.

o APR can be ‘variable’ {subject to

change on a monthly or quarterly

basis} or ‘non-variable’ (may change

with prior notice from the issuing

bank; issuers can increase rates on

future transactions with 45 days

notice). Be sure to understand if the

issuing bank is offering you a variable

or non-variable APR, as it will directly

affect your interest payments each

month.

o A card offering an introductory

“Teaser” rate can be an attractive

option…as long as you fully under-

stand what the higher APR will

become and when it will activate.

Teaser rates must last at least six

months before the introductory offer

expires.

6

BBB Tip

Teaser Rates

Mark on a calendar when the

APR rate is due to increase and be

mindful of your balances after that

date.


7

o The APR can also be different on

different transactions. For example,

the APR will be higher on a Cash

Advance than on a regular purchase.

o Generally, issuers can only increase

your APR on existing balances if your

payment is more than 60 days late;

however, your original rate must be

restored if you make the next six

consecutive payments on time.

Note: lenders are required to apply your

payment to the highest rate first — so if

you have a $5,000 balance and $1,000 is

at 18% and $4,000 is at 10%, for example,

if you make a $1,000 payment, it must

first be applied to the 18%..

How to Minimize the Amount ofInterest You Pay

Here are some strategies that can help

you reduce your APR interest payments,

so you can pay off your balance faster.

o Find a lender that will give you the

lowest possible APR on an ongoing

basis. A lower APR translates into

lower interest charges as a percentage

of your outstanding balance.

o Make the highest possible payment

you can against your balance each

month. The lower the unpaid balance

you carry forward, the less you’ll pay in

interest payments…and the faster you

pay off your balance (if you don’t

make additional purchases).

Deciphering Your Monthly Statement

Knowing how to read your monthly credit card statement – and understanding the key terms you will find on it — will help

you responsibly manage your account. Here are the key things you need to know.

terms WhAt it meAns smArt Advice

APR (Annual Percentage Rate) The annual interest rate you are charged on Keep an eye on the APR each month. If it

your unpaid balance. You may have several goes up, ask your bank why….and

different rates; for example, one rate for new consider shopping around to see if you

purchases and another rate for balance can get a better APR offer.

transfers.

Available Credit Line The amount of unused credit available. • Do not view this as a license to go spend

more. Remember, you need to pay for

what you buy.

• Try to keep your purchases below 25% of

your total credit limit.

Cash Advance Limit The amount of cash your card issuer is • Do not view this as a “CASH AVAILABLE

making available for withdrawal against your TO SPEND” sign. The APR on Cash

credit line. Advances is generally higher than on

purchases.

• View it as an “Emergency Fund.”

Finance Charge The interest and other fees assessed by the Whenever possible, pay the entire balance

bank to finance your unpaid balance. This due every month to avoid finance charges.

charge is directly tied to your APR. If you can’t pay off your balance each

month, pay as much as you can to minimize

the finance charge assessed on your out-

standing balance.

cont.


terms WhAt it meAns smArt Advice

Minimum Amount Due The smallest payment you can make (by the Get in the habit of paying off your balances

due date) to meet the terms of your card every month…or at the very least paying as

agreement. much as you possibly can. This will

minimize your interest payments.

New Balance Total amount you owe, based on when the Whenever possible, pay off the entire

current Statement Period closed. balance every month. If you can’t, make the

largest payment you possibly can.

Past Due Status of your account when the minimum o Don’t miss a payment deadline. This

payment is not received by its due date. could result in a:

� Increase to your APR and

� Negative entry on your Credit Report.

oConsider activating an electronic payment

schedule with your bank.

Payment Due Date Date your payment is due. o Mark your calendar to pay your bill at

least 5 days before the due date, to be

sure the payment is processed by the

deadline.

oOr consider activating an electronic

payment schedule with your bank.

Periodic Rate The interest rate for a particular subdivision Calculate the monthly interest rate against

of the year (a monthly periodic rate is 1/12th your total monthly purchases. This will

of your annual interest rate). show you how much you will pay in interest

charges that month…which can be a

powerful incentive to pay off as much of

your balance as possible.

Post Date Date that a purchase, cash advance, fee or Track your purchases and their posting date

payment is recorded by the card issuer. against your purchase receipts to make sure

they match.

o If you see a purchase you don’t recall

making on that date, investigate it

further. This is one way to catch

potential fraud.

oYou may find out that you just forgot

making that purchase on that date…

but you won’t know that unless you

investigate it.

Total Credit Line/Limit The total amount of credit and the limit your Try to keep your purchases below 25% of

card issuer has given you. your total credit limit, which can help

improve your credit score. (FICO)

BBB Tip Protecting Yourself from Unauthorized Charges

o First, check your own records. If you are sure you did not make the charge, call the merchant to request a credit, nomatter how small the charge. Some identity thieves ‘experiment’ with a small, unauthorized charge to see if you’ll noticebefore they take the next step.

o If the merchant does not respond to you or reverse the charge, call the Customer Service number at your issuing bank,and find out what their process is to dispute a charge with a merchant.

8


9

Choosing the Right Kind of Card for You

Understanding credit card features, benefits and tradeoffs will help you choose the right kind of credit card program for your

needs. Here are some of the most common features and benefits.

credit card Feature Key Benefit things to consider Before choosing this type of card

Secured Card Small credit line that requires an up- o May have Fees – possibly an Application Fee and/or an

front cash deposit from you, which Annual Fee. Inquire.

will be matched by the bank. o APR might be higher than a traditional card. Inquire.

o Requires a minimum cash deposit from you

Reward Card Can accumulate points or miles — o May have an Annual Fee. Inquire.

which can be redeemed for o APR might be higher than other types of cards.

merchandise, airline tickets, cash, Inquire.

charitable donations, and many � If you plan to carry a balance, you’ll generally pay

other items — based on the total more in interest costs.

dollar value of the transactions � If you plan to pay off your balance every month, a

on that card. higher APR may not be a concern to you relative to

the potential rewards.

Shop around for the best deal. Consider both the

number of miles/points you’ll earn per dollar spent and

the redemption requirements and match against your

shopping behaviors to make sure you find a rewards

card that works for you.

Co-branded or Offer two types of benefits: o May have an Annual Fee. Inquire.

Affinity Card o Customer-focused Benefits o APR may be higher than other types of cards. Inquire.

Offers special rewards to card � If you plan to carry a balance, you’ll generally pay

holders, which can be redeemed more in interest costs.

with the partnering organization. � If you plan to pay off your balance every month, a

Rewards are based on higher APR may not be a concern to you relative to

accumulated points from dollar the potential rewards.

transactions.

o Partner Organization-focused

Benefits

Offers cash to the partnering

organization — generally a non

profit — based on a percentage

of your total annual transactions.

Cash Back / Rebate Card Offers cash-back rewards based on o May have an Annual Fee. Inquire.

the total accumulated dollar o APR may be higher than other types of cards. Inquire.

transactions on that card. o Cash back offers can help offset your APR (if you carry

a balance) and other fees that may be associated with

the use of that credit card.

Introductory or Offers a very low APR for a defined Read the card issuer’s terms carefully to know exactly

“Teaser Rate” APR Card period of time when the card is first how long your introductory APR will last, and what it will

issued. APR then increases at the increase to when the introductory period expires.

predetermined time.


V. Smart Steps to Avoid Credit Trouble

o Set up a household budget to monitor

and guide your spending patterns.

Look at your total monthly income and

expenses. If your expenses are too

high compared to your income, it’s

time to find new sources of income,

cut your expenses…and sometimes

both.

o Build an emergency fund. Keep three

to six months’ worth of expenses in

a money-market or savings account

that you can access easily. Having

that extra money available can help

you avoid building up high-interest

credit-card debt if you end up with

unexpected expenses. Keep this

money separate form your checking

account so you don’t raid it for your

regular bills.

o Correctly prioritize your payments.

Pay your rent or mortgage and high

interest rate balances first. If possible,

transfer a balance from one credit card

to another card with a lower interest

rate.

o Make extra payments whenever

possible. Extra payments can

dramatically shorten the time it takes

to pay down a balance, and will save

you money on interest charges.

o Cut back extra expenses. Be honest

with yourself and identify the things

you are buying that might really be

‘discretionary,’ and then commit to a

personal plan to eliminate them or trim

them back. Over a span of weeks and

months, those amounts can add up to

a considerable amount.

o Automate your payments and/or

set up monthly reminders. Consider

activating an automatic electronic

payment schedule with your bank, so

you’ll never be late for a payment.

NOTE – Minimum payments may vary,

so look for the minimum payment

percentage for each of your lines of

credit.

It’s always a good idea to have the

automatic payment pay much more

than the minimum. You’ll owe less

in interest and can pay down your

balance much faster.

10


VI. Protect Yourselffrom Fraud You are your own best line of

defense to protect yourself

from credit card fraud. Here’s

how.

o Sign your card immediately when you

receive it in the mail.

o Carry only the cards you expect to

use, and keep them secure.

o Secure — in your home — other cards

you may not regularly use.

o Keep a list of account and telephone

numbers for your card issuers in case

your cards are lost or stolen. Once you

report the loss or theft, you will not be

liable for unauthorized charges.

o Keep a copy of this list both at

home and at your work.

o Notify your card issuer/s in advance if

you have a change of address.

o Notify your card issuer/s in advance if

you plan to travel outside the US and

use the credit card.

o Be very cautious about giving anyone

your account number.

o Do not give your cards to anyone.

o Keep your pass code and personal

pin number secure. Do not put it

in writing…and do not share it with

anyone.

o Use only reputable companies with

secure websites for online shopping.

o Email is not secure. Never include

your credit card number (or Social

Security Number) in an email.

o Shred all paper documents contain-

ing your personal identifiers (account

number, name, address) before

disposing.

o When you are expecting a new or

replacement credit card or debit card,

look for it in the mail.

o Report a lost or stolen credit card or

debit card immediately.

11

BBB Tip

Indicators of a Secure Web Site

Look for well-known seals…and then

roll your cursor over the seal to see

if it’s active and clicks through to

the seal-issuer.

Common online seals of authenticity

or security include (among others)

o BBB Accredited Business

o Yahoo Merchant

o Verisign-secured

o TRUSTe

o McAfee-secured

!BBB Alert

Card-issuers will never call or

email you, asking you to ‘verify’

your account information.

They already have it.

Ignore any threats or expression

of urgency you receive by phone

or email, indicating that your

account will be de-activated if

you do not respond immediately

and ‘verify’ your information.


Addendum CREDIT CARD ACCOUNTABILITY,RESPONSIBILITY AND DISCLOSURE ACT OF 2009 – (“Credit CARD Act”).

The Credit CARD Act represents a fun-

damental change for the credit card

industry, marking the beginning of a new

era of consumer empowerment. Signed

into law in May 2009, the Credit CARD

Act provides consumers with protec-

tions from unfair practices such as unex-

pected interest rate increases and

ensures better disclosure of credit card

terms and fees. Understanding these dis-

closures can make it easier for you to

manage your credit wisely – helping you

to meet your payment deadlines, avoid

late fees, and know in advance if your

interest rate will be increasing giving

you plenty of time to plan ahead and

make an extra effort to use cash and/or

opt-out of certain terms.

What the Credit CARD Act Meansfor Consumers:

o Your interest rate will be honored for

one year after you open an account.

However your rate can be increased:

� if your card has a variable interest

rate (if the index goes up, so can

your rate)

� if you are more than 60 days late in

paying your bill

� if you are in a workout agreement

and you don’t make your payments

as agreed

o Introductory rates will be honored for

at least six months, after that your

rate can revert to the "go-to" rate (the

rate must be clearly disclosed when

you first get the card).

o Banks will not charge you a fee if you

exceed your credit limit…unless you

agree in advance to “opt-in” and pay

the fee in return for the flexibility to

exceed that limit.

o Banks will provide at least 45 days

notice before increasing your interest

rate, changing certain fees or making

any other significant changes to the

terms on fixed-rate cards.

o Banks will honor your interest rate

on an existing balance, unless your

minimum payment is at least 60 days

overdue. If this occurs — and you

pay on time for six months in a row —

your previous rate will be restored.

o Banks will no longer charge interest

on balances you paid on time the

previous month. (No double-cycle

billing)

o Banks will no longer raise your

interest rate just because you missed

a payment deadline with another

lender. (No universal default.)

o Bills will be sent at least 21 days

before the due date.

12


13

Frequently AskedQuestions

How does a potential credit issuer

use a credit score?

Many lenders — and others — use your

credit score to help determine whether

or not to give you a line of credit. Your

credit score can also affect your ability

to get a job, rent an apartment, get a

cell phone, and even find affordable car

insurance.

What goes into creating a credit

score?

The most commonly used score, called

the FICO score, generally measures five

key criteria:

o Length of credit history

o Types of credit lines

o Payment history on those credit lines

o Amounts owed on those credit lines

o New credit lines – how many and over

what period of time

In addition to looking at a credit

score, what do creditors look for

on a credit report?

They look at several things, which

ultimately come together to build

a financial profile of you. This can

include:

o Your monthly and annual income.

o Your monthly payment

obligations…including rent, student

loans, medical bills, car payments, util-

ities, telephone/cell/cable bills, etc.

o Are your financial obligations in line

with your total income?

o Are your monthly payments in line

with your monthly income?

o Do you pay your bills on time?

o Do you have outstanding traffic or

parking tickets or other government-

issued citations?

o Do you have any kind of credit

history?

o How many credit cards have you

applied for in the last few months?

How do I know if what’s on my credit

report is accurate? And what do I do

if I find out there’s a mistake on it?

A federal law allows you to request a

FREE COPY of your credit report from

EACH of the three major credit bureaus

once every 12 months. The only free

resource to get a copy of it is at

www.annualcreditreport.com.

If you find mistakes on your credit

report, you should contact each of the

three credit reporting agencies to report

the error/s, and start the process to cor-

rect them.

www.equifax.com

www.experian.com

www.transunion.com

I like having several credit cards to

choose from – especially retail store

cards. Is there anything I should be

aware of with that?

Yes – two things to be aware of.

a) The number of credit applications you

submit – even for retail store cards –

may show up on your credit report

and can be a “red flag” to potential

creditors. Any red flag may cause

them to deny your application or

charge you a higher interest rate on

your credit line.

b) Opening several lines of credit may

also lower your credit score, because

it will reduce the “average age” of

your accounts — a key criteria in

determining your credit score.


14

What can I do if I have trouble

qualifying for a credit card?

There are two possible things you

can do:

a) Contact your bank and ask what you

can do to get a credit card. One pos-

sible option the bank might suggest is

to issue you a card with a low credit

limit that you can gradually increase

as you show that you can pay your

bills on time.

b) Another possible option the bank

might suggest it to apply for a

Secured Card. This product requires

you to deposit a certain amount of

money into a savings account before

you can use the credit card. Most

banks who offer secured cards will

then match your credit limit with the

amount of money you’ve deposited

into the account. As you build a

strong track record with your bank

over time, you can request an applica-

tion for a general purpose credit card.

What can trigger the bank to

increase my APR?

There are a number of things that can

trigger an increase in the APR, but the

most important one that you should

guard against is missing a payment

deadline.

What is a “Teaser” rate on a credit

card?

A Teaser rate is the same thing as an

“Introductory” rate, which is a lower APR

designed to attract credit applicants.

Teaser rates last for a set period of time

(all must be honored for a minimum of

six months), and then the rate will

increase. Read the rules closely so you

understand the agreement you are mak-

ing with the credit issuer.

How can I protect myself from fraud-

sters attempting to trick me into

divulging my bank or credit account

information?

Your bank will never call or email you for

the purpose of “verifing” your account

information. They already have it.

Also…ignore any threats or expression of

urgency you receive by phone or email,

indicating that your account will be

de-activated if you do not respond

immediately and “verify” your informa-

tion.

I’m behind on my payments, and I’m

uncertain if I can catch up on my

own. What do you suggest?

o First, call your lender/s directly, by

calling the issuing bank’s customer

service line. Ask to speak to someone

who can explore some repayment

options with you. When you get the

right kind of banking representative

on the line:

� Focus on what you can do. Be

prepared to share some ideas.

Sometimes a small change can

make a big difference, such as

asking to shift your due date to a

better time of the month if you’re

frequently struggling to make your

payments just before your payday.

� If your issuing bank tries to contact

you – respond, and have this type of

conversation. Don’t be afraid to

talk with the bank, which may be

able to make some changes that

could make it easier to pay off the

debt.

o Make an appointment with a rep-

utable credit counseling agency, if

your attempts to negotiate with your

lenders have not been successful.

There’s additional advice on this step

in the next Q&A, immediately below.

How do I find and work with a

reputable credit counseling agency?

Interview several agencies.

If you know someone who has used

such an agency in the past, ask them

for a recommendation. Or, ask friends

relatives who they would consider if

they needed budgeting advice. You can

also find credit counselors in the Yellow

Pages, by contacting the National

Foundation for Credit Counseling

(http://www.nfcc.org) or the Association

of Independent Consumer Credit

Counseling Agencies (http://www.

aiccca.org) for a list of members or

by using an Internet search engine.

Further, The CARD Act mandates that

issuers provide three licensed and

Government approved credit counseling

agencies or a toll-free phone number

that provides that information on each

statement.

What are some good signs of a

reputable credit counseling agency?

Here’s a list of seven (7) criteria to look

for / ask about.

1. Recognized as a non-profit by the IRS.

2. Required to maintain all proper

licenses.

3. Provides review of customers’ income

and debts, along with a written plan

for reducing and eliminating debt.

4. Disperses the proper payments to

creditors at the proper times —

typically twice a month.

5. Provides clients with written

statements at certain intervals.

6. Offers various educational programs

and other ways to help consumers

overcome debt.

7. Audits accounts.

New to Credit - Better Business Bureau...use the FICO score. Th esc or ang f m 3 0t 85 d can vary...

Documents

Transcript of New to Credit - Better Business Bureau...use the FICO score. Th esc or ang f m 3 0t 85 d can vary...