1. Chapter 17 Credit Records and Laws Credit Records and Laws

2. Lesson 17.1 Establishing Good Credit I.Credit Records A.Creditor—a person or company that gives you credit B.Credit History—the complete record of your borrowing and repayment performance

3. Ask Yourself... Did you pay your bills on time? Did you pay your bills on time? Did you pay your debts according to the loan agreement? Did you pay your debts according to the loan agreement? How much total credit did you receive? How much total credit did you receive? How much do you owe now and how large are your payments? How much do you owe now and how large are your payments?

4. C.Your Credit File 1.Credit Bureau—a company that gathers, stores, and sells credit information to business subscribers 2.Credit bureaus assemble and distribute detailed credit information on over 150 million consumers. 3.Three big National Credit Bureaus a. TransUnion b. Experian c. Equifax

5. 4.Your credit information is stored under your social security number 5.Credit Report—a written statement of a consumer’s credit history, issued by a credit bureau to its business subscribers 6.Credit report costs $5 to $15, or can get a free report yearly or within 30 days of being denied credit

6. D. How Information is Gathered and Used 1. Credit bureaus gather info from subscribers who pay a monthly fee to the credit bureau

7. 2.Credit bureaus also gather info from public records, newspaper articles 3.Information in the credit report is used as the basis for granting or denying credit. Business want evidence that the person is financially responsible

8. E.Types of Information Stored 1.Any public information—fail to pay property taxes, file for bankruptcy, file for divorce, apply for marriage license, birth announcements, job promotions, lawsuits 2.Occupation, spouse, residence, dependents

9. II.Creditworthiness—usually meets five basic qualifications (5 Cs of Credit) A.Character—Will you repay the debt? Responsible attitude toward living up to your agreements. You pay your bills on time. Stable. B. Capacity—Can you repay the debt? Financial ability to repay a loan with present income.

10. C.Capital—Is the creditor fully protected if you fail to repay? Your net worth should be sufficient to ensure payment of your debt. C.Capital—Is the creditor fully protected if you fail to repay? Your net worth should be sufficient to ensure payment of your debt. D.Conditions—What general economic conditions can affect your repayment of debt? How secure is your job and the firm you work for? D.Conditions—What general economic conditions can affect your repayment of debt? How secure is your job and the firm you work for? E.Collateral—What assets back up your promise to pay? Creditors can sell the collateral to collect on the debt. E.Collateral—What assets back up your promise to pay? Creditors can sell the collateral to collect on the debt.

11. II.Getting Started with Credit A.Begin with a savings account 1.No monthly fee for minors 2.Full services available as you prove yourself 3.Make a deposit regularly

12. B.Open a Checking Account 1.Choose the least expensive and most convenient for you 2.Manage account carefully and responsibly

13. C.Open a Store Credit Account 1.Co-signer—someone who promises to pay if the borrower fails to pay 2.Pay promptly 3.Allow sufficient time for your payment to arrive before the due date if you mail it.

14. D.Get a Small Loan 1.Use the bank where you have your savings and checking accounts 2.Make payments on time or even early. E.Apply for a Credit Card 1.Do not apply until you make enough money to qualify for the card—check the application carefully 2.Make payments without fail!!!!!!!!

15. Lesson 17.2 Credit Ratings and Legal Protection I.Credit Rating—a measure of creditworthiness based on an analysis of the consumer’s financial history A.Point system—the bureau assigns points based on certain factors (current debt, number of late payments, number and types of open accounts, current employment, amount of income)

16. B.Rating system 1.Excellent or A Rating—must pay bills before the due date, well established credit, no missed payments, paid off debts early 2.Good or B Rating—pay bills on the due date or within ten-day grace period, no missed payments

17. 3.Fair credit rating—usually pays all bills within the grace period, some late charges, slow in paying but usually dependable 4.Poor credit rating—usually denied credit because their payments are not regular. Miss some payments, failed to pay back a debt, filed for bankruptcy, not a good credit risk.

18. II.Credit Reports A.Updated continuously, info stays in file for seven years (10 for bankruptcy) 1.Summary of information—includes negative and positive items 2.Public record information—lawsuits, marriage, divorce

19. 3.Credit information—credit accounts, loans, payment status 4.Account detail—monthly balances of accounts and credit limits 5.Requests for credit history—lists businesses that has sought info from your credit file 6.Personal information—name, contact info, DOB, driver’s license#, spouse name, employer, salary, SS number The End!

20. III. Credit Laws—protect consumers from unfair credit practices A. Consumer Credit Protection Act of 1968— (Truth-in-Lending Law) 1. Requires lenders to fully inform consumers about all costs of a credit purchase before the agreement is signed. (Finance charge, APR, yearly %) 2.Requires a grace period of 3 business days to change their mind about a credit agreement 3.Limits liability to $50 after credit card is reported lost or stolen, no liability if card is reported lost prior to fraudulent use.

21. B.Fair Credit Reporting Act 1.You have a right to know what is in your file and who has seen it. 2.You have a right to see your file at no charge within 30 days of a credit denial 3.You have a right to have inaccurate info investigated, corrected, and deleted from your file, and add your statement to the file.

22. C.Fair Credit Billing Act 1.Creditors must resolve billing errors with a specified period of time. 2.If you believe your bill has an error—write a letter to the company immediately, give complete explanation, be specific, include acct number. 3.Complaint must be in writing and mailed within 60 days after you receive the statement. Creditor must acknowledge complaint within 30 days, must either correct or explain error within 90 days.

23. D. Equal Credit Opportunity Act of 1975 1.Designed to prevent discrimination in the judgment of creditworthiness. 2.Credit must not be denied because of sex, marriage history, religion, national origin, race, color, age; receive welfare, unemployment, SS or retirement benefits. 3.Applications may be oral or written. 4.Cannot ask certain questions (children, church) 5.May not discourage you from applying for credit because of any reason prohibited by the act (divorced)

24. E.Fair Debt Collection Practices Act 1.Designed to eliminate abusive collection practices by debt collectors. 2.Prohibits the use of threats, obscenities, restricts time and frequency of calls and contacts at place of employment.