Choosing a credit card: Read the fine print

Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension

 

A credit card lets you buy things and pay for them over time. Using a credit card is like any borrowing — you have to pay the money back. 

 

Credit card features vary from card to card and there are several types of cards to choose from. To get the best deal, compare fees, charges, interest rates and benefits. Some credit cards that look like a great deal at first may really be a bad deal when you read the terms and conditions of use and see how the fees could affect your available credit.

 

Credit card terms

 

Important terms of use must be disclosed in any credit card application or for cards that don't require an application. Here are the terms to ask about when you consider credit offers. 
 

 

Many credit cards charge membership or participation fees. These fees have a variety of names, like "annual," "activation," "acceptance," "participation" and "monthly maintenance" fees. Fees may appear monthly, periodically or as one-time charges. They can have an immediate effect on your available credit.

 

In 2010, rules from the Credit Card Accountability Responsibility and Disclosure Act (Credit Card Act), as well as additional Federal Reserve regulations, went into effect to create new credit card consumer protections and disclosure requirements. These rules were further strengthened by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act). For example, these rules specify that fees, such as an annual fee or application fee, cannot total more than 25 percent of the initial credit limit.
 

 

Some credit cards add transaction fees and other charges if you use them to get a cash advance, if you make a late payment or if you go over your credit limit. The rule mentioned above regarding fees being less than 25 percent of the credit limit does not apply to these type of penalty fees.
 

 

Annual percentage rate (APR) is a measure of the cost of credit, expressed as a yearly rate. It must be disclosed before your account can be activated, and it must appear on your account statements.
 

 

The card issuer also must disclose the periodic rate. That's the rate the issuer applies to your balance to determine the finance charge for each billing period.
 

 

Some credit card plans let the issuer change the APR when interest rates or other economic indicators — called indexes — change. The rate change is linked to the index's performance and often varies. Rate changes can raise or lower the finance charge on your account. Before your account is activated, you must also be given information about any limits on how much and how often your rate may change.

 

If your card does not have a variable interest rate tied to an index, the credit card companies generally cannot raise your APR for the first 12 months after you open your account, and if the rate is going to be raised after that point, you should be given 45 days notice and the opportunity to cancel the card before the new rate takes effect.

 

A grace period, also called a "free period," lets you avoid finance charges if you pay your balance in full before the date it is due. Knowing whether a card gives you a grace period is important if you plan to pay your account in full each month.
 

 

Balance computation method is how the card issuers calculate your finance charge. If you don't have a grace period, it's important to know this. Which balance computation method is used can make a big difference in how much of a finance charge you pay — even if the APR and your buying patterns stay the same. 
 

 

Many credit card companies offer incentives for balance transfer offers — moving your debt from one credit card to another. All offers are not the same and the terms may be complicated. 
 

 

Many credit card issuers offer transfers with low introductory rates. Some issuers also charge balance transfer fees. In addition, if you pay late or fail to pay off your transferred balance before the introductory period ends, the issuer may raise the introductory rate and/or charge you interest retroactively. When you make payments, they are to be directed to highest interest balances first.

 

Balance computation methods

 

The average daily balance method credits your account from the day the issuer receives your payment. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made that day. Although new purchases may or may not be added to the balance, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is divided by the number of days in the billing cycle to get the average daily balance. 
 

 

Adjusted balance is usually the most advantageous method for cardholders. The issuer determines your balance by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period aren't included.
 

 

The previous balance is the amount owed at the end of the previous billing period. Payments, credits and purchases made during the current billing period are not included. Some creditors exclude unpaid finance charges. 
 

 

Credit card companies can only impose interest charges on balances in the current billing cycle (i.e., no two-cycle billing). If you don't understand how your balance is calculated, ask your card issuer. An explanation also must appear on your billing statements.

 

Other costs and features

 

Credit terms vary among issuers. When considering a credit card, think about how you plan to use it: 
 

        If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR.

        If you use the cash advance feature, pay attention to the APR and balance computation method.

        If you plan to pay for purchases over time, the APR and the balance computation method are major considerations.

 

You'll also want to consider if the credit limit is enough, how widely the card is accepted and the plan's services and features. 


 

Your credit card agreement explains what may happen if you default on your account. For example, if you are one day late with your payment, your issuer may be able to take certain actions, including raising the interest rate on your card. Some issuers' agreements even state that if you are in default on any financial account, those issuers' will consider you in default for them as well. This is known as universal default.
 

 

Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. This is a type of special delinquency rate.

 

Help and information

 

Questions about a particular issuer should be sent to the agency with jurisdiction.

 

Office of the Comptroller of the Currency regulates banks with "national" in the name or "N.A." after the name:
Office of the Ombudsman
Customer Assistance Group
1301 McKinney Street,
Suite 3450
Houston, TX 77010
toll-free 800-613-6743 
www.occ.treas.gov

 

Board of Governors of the Federal Reserve System regulates state-chartered banks that are members of the Federal Reserve System, bank holding companies, and branches of foreign banks:
Federal Reserve Consumer Help
P.O. Box 1200
Minneapolis, MN 55480
toll-free 888-851-1920 
(TTY: 877-766-8533) 
ConsumerHelp@FederalReserve.gov

 

Federal Deposit Insurance Corporation regulates state-chartered banks that are not members of the Federal Reserve System:
Division of Supervision and Consumer Protection
550 17th Street, NW
Washington, DC 20429
toll-free 877-ASK-FDIC (275-3342)

www.fdic.gov

 

National Credit Union Administration regulates federally chartered credit unions:
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, VA 22314-3428
703-518-6330
www.ncua.gov

 

Office of Thrift Supervision regulates federal savings and loan associations and federal savings banks:
Consumer Programs
1700 G Street, NW
Washington, DC 20552
toll-free 800-842-6929
www.ots.treas.gov

 

Federal Trade Commission regulates non-bank lenders:
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
toll-free 877-FTC-HELP (382-4357)

www.ftc.gov

 

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

 

Source: Procter, B., & McCaulley, G. (2010). Choosing a credit card: Read the fine print (Research Brief). Columbia: University of Missouri, Human Environmental Sciences Extension.

http://missourifamilies.org/features/consumerarticles/choosecreditcard.htm 

 

A Strategy for Getting Out of Debt

Ryan H. Law, AFC

In response to the Credit Card Act of 2009 (most of which went into effect February 22) credit card issuers have raised rates, raised minimum payments, lowered credit limits and added on extra fees.  Here are some statistics:

·         53% of 2000 people surveyed reported an increase in their credit card interest rate in the past year.  One card jacked its rate up to 79.9%.  That’s not a typo – 79.9%!

·         26% reported reduced credit limits

·         21% reported increased fees

Source: Credit Card Tricks and Traps http://www.rd.com/advice-and-know-how/credit-card-tricks-and-traps/article175291.html

Note:  To learn more about the Credit Card Act of 2009 please see Dr. Rob Weagley’s article here: http://mufinancialtip.blogspot.com/search?q=credit+card+act.

So do you just have to put up with this from your credit card issuers?  Of course not!

If you are finished paying too much of your hard earned money to interest and fees then it’s time for you to develop a debt elimination plan.  Here’s what you need to do:

1.      Make a commitment to STOP charging things to your credit cards.  Cut the cards up, shred them or do whatever you need to do to stop using your cards.

2.      Build up an emergency fund.  If you use your credit card for emergencies you can avoid doing that in the future by building up an emergency fund.  Experts recommend you have 3-6 months of expenses saved up.  Make that your long-term goal.  For the time being, though, try to get one full paycheck in the bank as soon as possible.

3.      Gather up all of your recent statements and make a list that has the creditor name, amount owed, minimum payment and interest rate.  For our example let’s use the following numbers:

Creditor Name	Amount Owed	Minimum Payment	Interest Rate
Citicard	$14,567	$230	18%
Discover	$994	$60	12%
Visa	$7729	$262	29%
Student Loans	$19,334	$223	6.8%
Auto Loan	$21,000	$406	6%

 

4.      Pay the minimum on each card and any extra towards your highest interest loan.  A common mistake people make if they have an extra $50 is to put $20 on this card, $10 on another, etc.  If you concentrate any extra money on one debt, though, you will get it paid off much faster.

5.      Make Power Payments.  When you have paid off your first debt, roll that amount over to start paying on your next highest interest rate debt.  It would look like this:

Visa	Citicard	Discover	Student Loan	Auto Loan
$262	$230	$60	$223	$406
$262	$230	$60	$223	$406
-	$492	$60	$223	$406
-	$492	$60	$223	$406
-	-	$552	$223	$406
-	-	-	$775	$406

 

Can you see how powerful this technique is?  Using this technique can save you thousands of dollars in interest and shave years off your repayment time.

There is software available that will help you set this up and give you detailed payment calendars.  It was developed by Utah State University Extension and is available online, for free.  The software is called Power Pay and you can access it at http://www.powerpay.org. 

I plugged the numbers above into the software and here are the results:

Paying the debts off without power payments will take you 16 years, 10 months to pay off.  The total you will pay back is $112,104.09, with $48,480.09 being interest!

If you pay using power payments, though, it will take you 6 years, 5 months to pay off with a total payoff of $90,891.04 ($27,267.04 being interest).

Power payments save you 10 years and 5 months and $21,213.05 in interest!

There is also a feature on Power Pay where you can add extra payments, so if you are getting a tax refund you can plug that in there, or if you can devote an extra $100 to debt you can plug that in there.

I encourage you to take some time to plug your own information in the software to see how power payments will benefit you.  If you are a teacher I encourage you to use this software for an in-class demonstration and assignment.  Make some numbers up then ask your students to plug them in and come up with the answers to a series of questions (i.e. how much will the payment be to Visa in September of 2011?).

Credit, Congress, and You

This week, the US Senate passed (by a vote of 90 to 5) sweeping credit reform legislation that will alter consumer credit markets. As I am writing this on Wednesday, the US House just passed the bill (by a vote of 361-64) and President Obama is fully expected to sign the bill into law. What is in the law and what does it mean to you?

The Law:

· Promotional rates of interest must last for six months and increases in the rate charged for new purchases cannot occur until after the contract has existed for a year. Rates can, however, still be increased and credit lines can be withheld from consumers deemed to represent excessive risks.

· Interest rates cannot be raised on existing balances, unless the borrower is at least 60 days delinquent on the account.

· If you are under-21 years old, you will either need you parent’s signature to obtain a credit card, thus making your parents responsible for the payments, or prove that you are able to repay the credit on your own.

· Over limit fees are not allowed, unless the borrower has signed a contract to allow such fees.

· The credit card companies will be required to allow 21 days of notification of the payment due date. Also, the credit card statement must tell the consumer how long it will take to repay the loan and the total interest to be paid, if the consumer only makes the minimum payment. (We always pay more than the minimum, don’t we?)

· If the consumer pays above the minimum payment, the excess payment must first be applied to the balance with the highest interest rate.

What it means to you:

· If you carry a credit card balance – Credit card issuers will be unable to raise the interest rate on your existing balances, unless payments are more than 60 days late. They may, however, raise rates on your future purchases.

· If you don’t carry a credit card balance – Expect annual fees to rise and promotions/rewards to be less valuable, as companies attempt to balance risk and profitability.

· If you don’t have a credit card – It will likely be harder to get a credit card, as standards are tightened as a result of the new law. You’ll also need to be 21, unless you have your parents cosign the contract.

· If you care – Banks and other credit card issuers will be much more transparent in their practices and people will be better able to understand the costs of their credit use. If Congress is making the correct move, financial success should be more easily attainable, as the act should both reduce consumer indebtedness and the abusive practices of lenders.

- Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

As Promised

You may have received a credit card statement indicating that your minimum payment has increased, although your balance has not.  If so, you are not alone.  As the new rules being imposed on credit card companies appear on the company’s planning horizon, the companies are reacting by making changes to the contracts they have with existing customers.  Why?  They want to remove customers that do not add to their profits, by making credit terms more difficult, prior to the changes which take effect on February 22, 2010.

 

What are the most significant benefits for consumers that are intended in the Credit Card Accountability, Responsibility and Disclosure Act?

·         Rate increases cannot be applied to exiting balances.  If you are 60-days delinquent (technically in default) they can raise the debiting rate.  They must, however, restore the older rate on the prior existing balances, after you’ve been current for six months.

·         You must be given advance notice of an increase in your interest rate, at least 45 days prior to the rate increase.  The new law does not cap interest rates.

·         Issuers cannot charge overlimit fees more than once per billing cycle and you must have approved the lender to allow charges over the limit.  That is, you will not be allowed to charge over your limit, unless you’ve agreed to a fee once per billing cycle

·         If you are under that age of 21, without proof of income independence or a cosigner over the age of 21, you cannot receive a credit card.  (Do not borrow from pawnshops or payday lenders, if you cannot be approved for a credit card!  Also, do not cosign for your younger friends.)

·         No more double-cycle billing, where finance charges were levied against both the current and previous balance.  The prior practice allowed lenders to charge interest on the amount that was repaid, in addition to what is still owed.

·         You now have a minimum of 21 days to before a payment is due, in contrast to the current practice of 14 days.

·         If you make a payment that exceeds the interest owed for the month and you have balances owed under several different interest rates, the excess must be first applied to the balances with the greatest APR.

 

To counteract these changes, besides an increase in your minimum payment, what other changes in your credit relationship should you look for? 

·         Higher interest rates (APR) being used to debit your account.

·         Fixed interest rates being changed to variable interest rates.

·         New or higher fees.

·         A reduction in frills (I mean “benefits”) that have little to do with your credit; like bonuses, rebates and new offers.

 

Some complain that these changes, particularly the increase in your minimum payment, are unfair and state the consumer would be better off saving the money (DUH!) or spending the money that is going to the credit card companies to stimulate our lagging economy (think ME FIRST!).  On the other hand, the industry has been losing money in the midst of the current recession as borrowers have lost the ability to repay, following job losses or slowdowns.  For example, Bank of America’s credit card defaults accelerated sharply to $9.6 billion, from $4.4 billion a year ago, as defaults rose. Moreover, Bank of America added $2.1 billion to its reserves for bad debts, between July through September, in the event that rising unemployment increases the bank’s losses.  Yet, for those that are current but deemed to be risky, the changes can be onerous.  What should you do?

·         Ask for an explanation.  You must always be proactive to try to understand any changes and, in the process, you might find that the person at the credit card company might be empowered to overrule the change – for “credit-dissidents”.

·         If they don’t offer to make the change, fight for it.  You can fight with more success if you are a good borrower - you don’t have a history of late payments, charging more than your credit limit, or use the charge card often (they make money each time you use the card through merchant fees). 

·         Help them get to know you.  You may be in very secure industry and not likely to lose your job.  If there has been a positive change in your income make sure they have that information.

·         Think about what you want before you call.  You cannot successfully negotiate, if you don’t know what you want and why you deserve to get it.  What is most important to you, a lower minimum payment (you must be a new reader of the Tip) or a higher credit balance to provide you access to fund to support your business or other productive venture?

·         Never be afraid to ask for the person’s boss.  Sometime that tactic can move a consumer affairs employee to take action or, perhaps, the “higher-up” will be able to make a deal and be willing to do so quickly, as they’ve other more pressing issues than you.

 

As I indicated last week, consumer credit use is down from last year and many card holders have closed their accounts or paid off their balance.  Truly the banks are in financial difficulty – mostly their fault – and consumers are in difficulty – mostly their fault if they have over borrowed for unnecessary purchases and not their fault, if they have been caught in the backdraft of the current economic inferno.  Taken together, we’re all in a difficult situation, where we are working hard to restore the financial success of our economy.  This week, Warren Buffett’s company, Berkshire Hathaway purchased the remaining 78% of Burlington Northern Railroad that Berkshire did not already own.  When explaining his $34 billion dollar investment, Mr. Buffett, consider by many to be the world’s leading investor, replied, “Berkshire's $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry.  Most important of all, however, it's an all-in wager on the economic future of the United States. I love these bets."  What else can we do, but agree?

 

Credit Cards ('Risk-Based Re-Pricing')

Congress has been talking about revising current regulations surrounding credit cards for several months now. Some members of Congress are being very vocal about current practices in the credit card industry (practices described by one critic as “abusive and confusing”). You’re likely aware of one common practice referred to as ‘universal default clause’ – a provision in a card agreement that enables the cardholder to raise your rate if you miss a payment to anyone [doesn’t need to be that particular card]. Universal Default is a concept I’ve outlined in prior tips on card management.

Earlier this week I read about a Senate subcommittee scrutinizing a newer practice that was being called “risk-based re-pricing.” Ultimately, this takes universal default one step further. The idea behind universal default was to raise the interest rate because of the increased risk placed on the card company; with risk-based re-pricing, rather than raising rates due to missed payments, rates can be raised in any circumstance where your credit score is lower than it was when they initially gave you the card. Keep in mind that 30% is commonly the rate charged when one’s rate is raised! Obviously the high rates were of concern to the subcommittee, but they were also concerned about consumers having little notice of the increased rate [often automatically triggered by unexplained declines in ones credit score]. In some cases, merely opening another account (i.e., dept store card) triggered the downgrade in credit score … One of the curious cases cited was a consumer that had four credit cards from the same company (the argument is that she should have similar rates based upon this type of model); her current interest rates: 8%, 14%, 19%, and 27%.

My opinion – legislative change often never occurs; I wonder how much of this “conversation” is in hopes that the credit card companies will change questionable practices on their own prior to changes in law. Not a bad start. Citigroup and Chase recently have said they will discontinue the practice (Citigroup has already stopped) and Chase will take effect in March. We’ll see if others follow suit.

What are legislators seeking? Ultimately, everything I’ve read really boils down to two requests:
(1) Clarity for Consumers. The Truth in Lending Act [specifically Regulation Z] is designed to promote consumer awareness of loan terms. The argument on the part of consumer advocates is that credit card billing and interest rate practices are much too complex for an “average” person to understand. The proposed rule change would require card issuers to ultimately redesign card applications and solicitations [enhancing disclosures] providing clearer [more easily understandable] information on fees.

(2) Mandatory Notification. The second item currently being requested would require card companies to give its customers at least 45 days notice before ‘penalty pricing’ (raising rates).

Additional Resources.
- AP Article: Credit Card Execs Defend Rate Policies
- Truth in Lending Act

What to do about billing errors?

I-Ting Lu, MS[i]

Mary Ann Rotert

December is here and that means the holidays are upon us! Many stores are promoting great values and attractive discounts to stimulate their sales. We’ve talk about the need for consumers to be cautious in their consumer behavior and to make sure their choices are consistent with their goals. We also need to be cautious about the behavior of others. One way to do the latter is to check your credit card bill for errors during this busy buying season. If you are unlucky enough to discover billing errors on your credit card statement, don’t panic. You can correct errors before it’s too late.

First, you need to know what qualifies as a billing error and what you should do, if an error exists. The federal Fair Credit Billing Act (FCBA) was passed precisely to help protect consumers against unfair practices and errors by credit card companies. The FCBA gives specific examples of billing errors. They are:

· A charge for something you did not buy.

· A bill for an amount different from the actual amount you charged.

· A charge for something that you did not accept when it was delivered.

· A charge for something that was not delivered according to agreement.

· Math errors.

· Payments not credited to your account.

· A charge by someone who does not have permission to use your credit card.

If the error you find on your bill is one of the above, take the following steps to dispute the charge:

1. Write to the credit card company within 60 days after the statement date printed on the erroneous statement. Use the address listed on the bill for billing inquiries and tell the company the following four items:
(a) Your name
(b) Account number
(c) Clarify why you believe the bill contains an error, and the reason why it is wrong. Provide copies of supportive documentation if you have any.
(d) The date and amount of the error.

2. Be sure to pay all other parts of the bill that you do not dispute. You do not have to pay the disputed amount immediately.

3. Your account must be corrected by the credit card company, if there is an error. You will not have to pay any finance charges on the disputed amount, if you are found to be correct in your dispute.

4. If there is no error, you will receive an explanation and a statement of the amount you owe from your credit card company. Unfortunately, the amount you will owe will include any finance charges or other charges that accumulated while you were questioning the bill.

Pay attention to your bill every month and, if you find an erroneous charge to your credit card, dispute the charge. Paying money to others that you do not owe to them is not a destination on the road to financial success. Happy Holidays!

For additional information on disputing errors and your rights as a consumer, visit the Federal Trade Commission’s website at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre16.shtm.

- Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

Your Credit -- Your Rights

Numerous agencies (lenders, insurers, employers, landlords, etc.) view your credit when making decisions about you – how familiar are you with your credit and your rights? The Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA) are legislation designed to protect you and your credit.

FAIR CREDIT REPORTING ACT.
This act is designed to promote accuracy, fairness, and privacy of information in the files of every consumer’s credit report.

FCRA PROVISIONS:

• You must be told if information in your file has been used against you (denial of employment, credit, insurance, etc.)


• You have a right to know what is in your file.


• You are entitled to a free report at any time if: You are unemployed and plan to seek employment within 60 days; you are currently on welfare; you are a fraud victim or you are denied credit, employment, insurance, etc. based on report info.


• All consumers are entitled to one free report (per credit reporting agency) every 12 months upon request - http://annualcreditreport.com/


• You have the right to ask for a credit score (a numerical summary of your creditworthiness). You will have to pay for the score, but you now have access to it.
  
• You have a right to dispute inaccurate information.


• Inaccurate or unverifiable information must be corrected or deleted.


• Outdated information may not be reported (FCRA specifies duration). 2 years for inquiries; 7 years for 'most' negative information; 10 years for judgment liens and most bankruptcies; 10 years [or more] for 'positive' information.


• Access to your file is limited - may be used for consideration of applications such as employment, insurance, credit and landlords.


• Forces identification of individuals inspecting your file.


• Consent is required for reports provided to employers or reports containing medical information. An estimated 70% of employers examine credit reports prior to hiring.


• You have a right to file a lawsuit against collector if FCRA has been violated.


• You may limit 'pre-approved' offers for credit and insurance. You may opt-out by calling toll free (1-888-5-OPTOUT). Additional information is available at: http://financialsuccess.missouri.edu/tipoftheweek/optoutcc.pdf and http://financialsuccess.missouri.edu/tipoftheweek/optout.pdf.

Maintaining the accuracy of your credit report is YOUR responsibility. To read the entire FCRA, go to http://www.ftc.gov/os/statutes/fcra.htm.


FAIR AND ACCURATE CREDIT TRANSACTIONS ACT.
Signed into law by Pres. Bush in December of 2003, the Fact Act [as it’s often called] was designed to ensure that all citizens are treated fairly when applying for credit. Specifically, the bill was designed to significantly increase consumer protections against the growing problem of identity theft. FACTA also extends the current provisions (mentioned above) of the Fair Credit Reporting Act.

Some of the major provisions of FACTA:

• Provide consumers with a free credit report every year.


• Give consumers the right to see their credit scores (for a fee).


• Provide consumers with the ability to opt-out of information sharing between affiliated companies for marketing purposes.


• Ensure that consumers are notified if merchants are going to report negative information to the credit bureaus about them.


• Allow consumers to place "fraud alerts" in their credit reports to prevent identity thieves from opening accounts in their names (includes special provisions to active duty military).


• Allow consumers to block information from being given to a credit bureau and from being reported by a credit bureau if such information results from identity theft.


• Restrict access to consumers' sensitive health information.


• Provide consumers with one-call-for-all protection by requiring credit bureaus to share consumer calls on identity theft, including requested fraud alert blocking.


• Require creditors to take certain precautions before extending credit to consumers who have placed "fraud alerts" in their files.

Stop merchants from printing more than the last five digits of a payment card on an electronic receipt.

Consumer credit is a vital thing for many – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical.

Improving Your Credit

It is no secret that having good credit can pay large dividends. Consider the following that I pulled from the Federal Reserve Board website: “People with a good credit rating will pay approximately $250,000 less in interest throughout their working lives than those without. The impact of credit on financial well-being goes beyond access to credit and debt. Credit not only helps families buy a home, a business, or an education, but impacts opportunities for rental housing, transportation, employment, and access to checking, savings, and investment accounts.” Pretty large dividends indeed ...

Although some steps you can take are very simple and immediate, the bottom line is that building credit takes time. There is no overnight solution available and you should avoid resources that would suggest otherwise.

1. Review Your Credit. A very easy [but essential] first step – you won’t be able to move forward very well without knowing where you currently stand. Remember that you can do this for free under federal law. You are entitled to one report per agency per year for free.

2. Consistency. Pay your bills on time. The best way for someone to determine if you are a good “credit risk” is to look at how you have handled credit in the past … many banks offer bill-pay and other forms of auto pay (for little if any cost) to assist you in performing this task. Paying on time is the single most important thing you can do to build/maintain good credit.

3. Know How the Game Works. Companies will evaluate your creditworthiness based upon your credit score. Understanding how a score is calculated and the criteria involved is critical to improving one’s credit. The most common scoring model, Fair Isaac, considers five general areas:
--> Payment History (35%)
--> Amounts Owed (30%)
--> Length of Credit History (15%)
--> New Credit/Inquiries (10%)
--> Types of Credit Used (10%)

You can learn more about credit scoring at the MYFICO site. Also, Fair Isaac offers specific suggestions for improving your score.

4. Fix Mistakes. Some studies suggest that as many as 70% of credit reports have errors on them. Mistakes will count against you the same way that correct information will … make sure you take the time when reviewing your report (step 1) to correct inaccurate info.

5. Avoid Scams. Well-intentioned consumers are easy targets for scamsters offering to ‘fix’ one’s credit. These “credit repair” agencies offer [for a fee] to clean up your credit report so that you can enjoy the benefits of good credit (as outlined above). The reality? These companies don’t have the ability to do anything [legally] that you can’t do on your own behalf for free … STAY AWAY! The Federal Trade Commission offers helpful information to avoid scams.

Common warning signs of credit repair scams:
- Request payment prior to performing any services.
- Companies not informing you of your rights.
- Suggesting to not contact the credit reporting agencies.
- Companies offering to create a new identity for you.

6. Avoid Credit Myths. The world of credit is mired in misinformation. Avoid making mistakes out of ignorance.

7. Know the Law. Take time to familiarize yourself with the laws associated with credit. The Fair and Accurate Credit Transactions Act (FACTA) and Fair Credit Reporting Act are the primary ones.

8. Know Yourself. Building a positive credit history has value; however, understand yourself [and your personal vulnerabilities]. I would argue that the positive benefit of building credit isn’t worth the cost if it leads one to credit card or other financial problems … One recommendation for avoiding the potential financial problems that exposure to credit creates is to start small. Start with one account [with a specific purpose; like fuel purchases] and a small credit limit. A credit card is the easiest tool available to build credit, although any open-ended account (like a store card) reporting your payment history to the credit bureaus will work. An unsecured card with a low credit limit is a reasonable way to get started … you can also use a cosigner [who has good credit] to ‘lean’ on to open your first account if necessary.

9. Avoid Having Too Many Accounts. As you begin building credit, it is easy to quickly find yourself in a situation where you have more accounts than you know what to do with (let alone manage). Keep your situation simple – don’t burden yourself [or tempt yourself] with having too many credit accounts.

10. Be the Tortoise. People with poor [or no] credit are often impatient and wanting to quickly improve their credit and overall financial situation. Unfortunately, the only way out is a slow process. Although 7 years of information [for most items] will be visible on your credit report, the most recent 2 years are typically deemed to be the most important. So even if you’ve made mistakes in the past, you can resolve the problems but it will take time. Any invitation to fix it quickly is likely a scam.