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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.
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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:
© 2010 Council of Better Business Bureaus.
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
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© 2010 Council of Better Business Bureaus.
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
© 2010 Council of Better Business Bureaus.
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.
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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.
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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
© 2010 Council of Better Business Bureaus.
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.
© 2010 Council of Better Business Bureaus.
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.