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Ditching your debt and Controlling your Credit. Jennifer Abel 703-228-6417 jabel@vt.edu. What we’ll cover. The pitfalls of credit Credit reports and scores Correcting errors on reports Creating a debt repayment plan Communicating with creditors - PowerPoint PPT Presentation
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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
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