Pesonal finance 6th madura chapter 07 assessing and securing your credit

• Credit rights– Equal Credit Opportunity Act helps protect debtors from unethical creditors – Financial Reform Act of 2010 established the Consumer Financial Protection Bureau  Regulat

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SIXTH EDITION

Chapter 7

Assessing and Securing Your Credit

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7.1 Provide a background on credit

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the future with interest

– Non-installment credit: credit provided for a short period, such as department store credit

– Installment credit: credit provided for specific purchases, with interest charged on the amount borrowed

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– Revolving open-end credit: credit provided up to a specified maximum amount based on income and credit history; interest is charged each month on the remaining balance

– Helps build a good credit score

– Eliminates the need for carrying cash or writing checks

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• Credit rights

– Equal Credit Opportunity Act helps protect debtors from unethical creditors

– Financial Reform Act of 2010 established the Consumer Financial Protection Bureau

 Regulates online checking accounts, credit cards, and student loan

 To ensure accurate consumer information and prevent deceptive practices

 May also regulate credit rating bureaus

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• Credit bureaus provide credit reports documenting your credit payment history

payment history

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1. Report number, date, and name to distinguish this report from others

2. Identifying information such as name, spouse’s name, birthdate, Social Security number,

addresses, occupation, etc

3. Potentially negative information from public records such as bankruptcy and tax liens

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4. Accounts turned over to collection agencies, as well as resolution of these accounts

5. All account information, both open and closed accounts are included

6. List of companies that have requested your credit report

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Report Number 716-80

08/28/13

Credit Bureau P.O Box 0000 City, State, Zip Code (888) 000–0000

Public Record Information

Bankruptcy filed 04/12; Durham District Court; Case Number 873JM34; Liabilities: $56,987; Assets: $672

Collection Agency Account Information

North Shore Collection Agency (888) 000–0000

Collection Reported 11/12; Assigned 1/12 to North Shore Collection Agency; Client: Gilbert Medical Center; Amount: $1,267; Paid Collection Account

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EXHIBIT 7.2 A Sample Credit Report

Credit Account Information

Company Name

Reported

Account Number

Date Opened Individual or Joint Months

Review

Date of Last Activity

High Credit Terms Balance Past

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– Numerical rating indicating creditworthiness

– Creditors rely on this score to help determine whether or not to extend a loan– Can affect the interest rate received on loans

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– Score affected by many factors

 Credit payment history

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– Bureaus don’t always have access to the same information

– Range from 350–850, with 600 being considered a good score– Correcting credit score mistakes

 Contact credit bureau that issued the inaccurate report

 Credit bureau required to investigate within 30 days

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• Improving your credit score

– Catch up on late payments and reduce debt

– Review household budget and cut back on necessary expenses– Destroy credit cards, but keep accounts open

– Call creditors if unable to make payments on time

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– At least twice a year for accuracy, to correct errors, to identify deficiencies

 Make sure report is accurate

 Review the types of information used by lenders

 See what kind of information lowers credit rating and try to eliminate deficiencies

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devise a plan to improve it

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• Identity theft: theft that occurs when an individual, without permission, uses your identifying information for his or her personal gain

purposes

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– Personal costs

 Feeling of violation and insecurity

 Problems getting a job

 Being hounded for debt that isn’t yours

 Turned down for credit– Financial costs

 Average individual loss is $1,500

 Time and money to repair the damage

 Individuals will spend an average of 600 hours dealing with damage control necessitated by identity theft

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• Identity theft tactics

– Shoulder surfing: Tactic used when an identity thief stands close to you in a public place and reads the number of your credit card as you conduct business

– Dumpster diving: Tactic used when an identity thief goes through your trash for discarded items that reveal personal information that can be used for fraudulent purposes

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– Skimming: Tactic used when a store employee steals your credit card number by copying the information contained in the magnetic strip on the card

– Pretexting: Tactic used when an identity thief poses as an employee of a company with which you conduct business, to solicit your personal information

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– Phishing: Tactic used when pretexting happens online

– Pharming: Similar to phishing, but targeted to larger audiences; tactic that directs users to bogus Web sites to collect their personal information

– Abusing legitimate access to records

– Crime rings

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– Violating your mailbox

 Both incoming and outgoing mail can provide personal information

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• Protecting against identity theft

– Shielding personal information at home

 Remove items containing SSN from purse/wallet

 Document your accounts

 Buy a shredder and use it

 Do not have SSN printed on your checks

 Remove your name and address from phone directories

 Install a locked mailbox or rent a P.O box

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 Shop online only on secured sites

 Be suspicious of phone callers seeking personal information

 Mail all bills with account information in a U.S Postal Service depository box

 Scrutinize bank and credit card statements

 Be careful using hand-held or cell phones when ordering merchandise

 Be aware of delivery schedules

 Never have personal checks delivered to your home

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 Protect home computer from hackers

 Have mail held at the post office when on vacation– Protecting your personal information at work

 Be sure photo IDs do not display SSN

 Examine paycheck and stub for SSN

 Examine health insurance card for SSN

 Have a discussion with your human resource department

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– Identity-theft insurance

 Available as part of homeowner or renter policies or as a stand-alone policy

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• Response to identity theft

– Take immediate action

– Maintain a record of all phone calls and correspondence– Contact the police

– Contact Federal Trade Commission

– Contact credit reporting companies

– Contact creditors and others who may be impacted

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EXHIBIT 7.4 Useful Sources of Information to Protect Against Identity Theft

Check Verification Companies

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Federal Trade Commission

Web site Address: http://www.ftc.gov

Complaint About a Company or Business Practice: 877-382-4357

Identity theft: 877-438-4338

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Equifax

Web site Address: http://www.equifax.com/

Credit Fraud Info: Insert the search term "credit fraud" at the Equifax Web site Credit Report Information: 800-685-1111

Fraud Alert: 888-766-0088

Credit Reports and Scores: 866-493-9788

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Experian

Web site Address: http://www.experian.com/

Credit Fraud Info: Insert the search term "credit fraud" at the Experian Web site Credit Report Information: 888-397-3742

Credit Monitoring: 877-284-7942

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TransUnion

Web site Address: http://www.transunion.com/

Credit Fraud Info: Insert the search term "credit fraud" at the TransUnion Web site Credit Report Information: 800-888-4213

Credit Monitoring: 800-493-2392

Fraud Alert: 800-680-7289

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Internal Revenue Service

Web site Address: http://www.irs.gov

Social Security Administration

Web site Address: http://www.ssa.gov

U.S State Department

Passport Fraud: Go to http://www.state.gov and insert the search term "passport fraud"

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• The following are the key credit assessment and security decisions that should be

included within your financial plan:

– Is your credit standing adequate so that you can use credit?

– Is your credit and personal identity information secure?

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EXHIBIT 7.5 How Credit Standing and Security Fit Within Stephanie Spratt’s

Financial Plan

GOALS

1 Ensure that I always have easy access to credit, so that I can obtain personal loans or use credit cards whenever I desire.

2 Ensure that my credit and identity information is secure.

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EXHIBIT 7.5 How Credit Standing and Security Fit Within Stephanie Spratt’s

Financial Plan

DECISIONS

Decision Regarding My Credit Report

Contact the credit bureaus to request a copy of my credit report and ensure that my credit report is accurate If there are any deficiencies listed on my report, correct them so that I can ensure easy access to credit in the future.

Decision Regarding the Security of My Credit and Identity

Leave most of my personal information at home Carry only my Visa and MasterCard, and driver’s license with me Shred any documents I plan to discard that contain personal information.

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