personal finance

Options for consumers having trouble paying bills and in need of help

*Contact your creditors and try to work out a repayment plan. *Contact a non-profit financial counseling program such as the Consumer Credit Counseling Service, which operates nationwide.

Steps to protect your credit information on the Internet

*Use a secure browser. *Keep records of your online transactions. *Review your monthly bank and credit card statements. *Read the privacy and security policies of Web sites you visit. *Keep your personal information private. *Never give your password to anyone online. *Do not download files sent to you by strangers.

Advantages of credit

Enjoy goods and services now and pay later, combine several purchases making one monthly payment, provides a record of your expenses, don't have to carry a lot of cash, other lenders with view you as a responsible person if you use it wisely.

Equal Credit Opportunity Act (ECOA)

Gives all credit applicants the same basic rights. A lender may not use race, nationality, age, sex, marital status, and certain other factors to discriminate against you.

U.S. Secret Service

Has jurisdiction over financial fraud cases.

Equal Credit Opportunity Act (ECOA)

States that you may sue for actual damages up to $10,000 if you can prove that a creditor has discriminated against you for any reason prohibited.

Warning signs that you are in financial trouble

*You make only the minimum payment on credit cards. *You are having trouble making even the minimum monthly payment on your bills. *The total balance on your credit cards increases every month. *You miss loan payments or often pay late. *You use savings to pay for necessities such as food and utilities. *You receive second or third payment due notices from creditors. *You borrow money to pay off old debts. *You exceed the credit limits on your credit cards. *You have been denied credit because of a bad credit report.

collateral

A form of security to help guarantee that the creditor will be repaid.

Bankruptcy

A legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts. This may also include a plan for the debtor to repay creditors on an installment basis. This is a last resort as it severely damages your credit rating.

Home equity loans

A loan based on your home equity--the difference between the current market value of your home and the amount you still owe on the mortgage.

Credit rating

A measure of a person's ability and willingness to make credit payments on time.

Closed-end credit

A one-time loan that you will pay back over a specified period of time in payments of equal amounts.

Smart cards

A plastic card equipped with a computer chip that can store 500 times as much data as a normal credit card.

Chapter 7

A straight bankruptcy in which many, but not all, debts are forgiven. Most of the debtor's assets are sold to pay off creditors.

Grace period

A time period during which no finance charges will be added to your account.

Credit bueaus

Agencies that collect information on how promptly people and businesses pay their bills. Experian, Trans Union, and Equifax.

Debit card

Allows you to withdraw money from your savings or checking account from an ATM or when purchasing goods and services.

Credit

An arrangement to receive cash, goods, or services now and pay for them in the future.

Creditor

An entity that lends money.

Chapter 13

Bankruptcy in which a debtor with a regular income proposes a plan to the court for using future earnings or assets to eliminate his or her debts over a specific period of time. The debtor normally keeps all or most of his or her property.

Actions to protect yourself from credit card theft or loss

Be sure that your card is returned to you after you make a purchase. *Keep a record of your credit card number separate from your credit card. *Notify the credit card company immediately if your card is lost or stolen.

Capacity

Can you repay the loan?

Travel and entertainment (T&E) cards

Cards on which the balance is due in full at the end of each month. These are not true credit cards.

5 Cs of credit

Character, capacity, capital collateral, credit history.

Sources of consumer credit

Commercial banks, finance companies, credit unions, life insurance companies, savings and loan associations.

Federal Trade Commission (FTC) recommends taking these three actions immediately if your identity has been stolen

Contact the Credit Bureaus *Contact your creditors *File a police report

Disadvantages of credit

Costs money, temptation to buy more than you can afford, can lose your good credit rating and reputation if not repaid, may lose income and property to repay debts.

Open-end credit

Credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services.

Credit history

Credit report shows record of bill paying history, credit cards, loans, bad checks if any, etc.

Fair Credit Reporting Act

States that you may sue any credit bureau or creditor that violates the rules regarding access to your credit records or that fails to correct errors in your credit file.

Consumer Credit Reporting Reform Act

Law that places the burden of proof for accurate credit information on the credit bureau rather than on you. If a creditor or the credit bureau verifies incorrect data, you can sue for damages.

Fair Debt Collection Practices Act (FDCPA)

Law that prohibits certain practices by debt collectors--businesses that collect debts for creditors.

Expensive loans

Loans with high interest rates that are easier to get. These loans are made from finance companies.

Inexpensive loans

Loans with low interest--often given by parents or other family members

Medium-priced loans

Loans with moderate interest made from commercial banks, savings and loan associations, and credit unions.

Loan

Money that you borrow and must repay.

Time limits on unfavorable data

Most of the information in your credit file may be reported for only 7-10 years. The exception is if you are applying for credit of $75,000 or more.

Other Counseling Services available

Non-profit credit counseling from universities, credit unions, military bases and federal housing authorities. These organizations usually charge little to nothing for their assistance. Listings of these services may be available at a local bank or consumer protection office.

Fair Credit Reporting Act 1971

Regulates the use of credit reports. Requires the deletion of out-of-date information and gives consumers access to their files as well as the right to correct any misinformation that the files may include. Also places limits on who can obtain your credit report.

P X R X T

Simple interest formula.

Fair Credit Billing Act

States that if you purchase a defective item and the store will not accept a return, you may tell your credit card company to stop payment because you made a sincere attempt to resolve the problem.

Consumer Credit Protection Act

States that the maximum amount that you must pay if someone uses your card illegally is $50. If you notify the company before the card is used illegally, you have no obligation to pay at all. However, many credit card companies do not require the cardholder to pay even the maximum amount if the card is used.

Truth in Lending and Consumer Leasing Acts

States that you can sue a creditor if the creditor fails to disclose information as required or gives inaccurate information. You can sue for any money loss you suffer. You can also sue a creditor that does not follow rules regarding credit cards. This act also allows for class-action lawsuits, legal action on behalf of all of the people who have suffered the same injustice.

Fair Credit Opportunity Act

States that you may sue a creditor that fails to follow the rules that apply to correcting any billing errors for actual damages plus twice the amount of any finance charges. The creditor will automatically give up the amount owed on the item in question and any finance charges on it, up to a combined total of $50.

cosigning

agreeing to take responsibility for loan payments if the other person fails to make them

30 days

The amount of time in which a creditor must acknowledge a consumer's written communication that an error appears on the billing statement.

Two billing periods but not longer than 90 days

The amount of time in which a creditor must either adjust a consumer's account or tell him or her why the bill is correct following communication of an error by the consumer.

notification in writing

The correct type of communication that a consumer needs to make to a creditor if he or she feels that there is an error on their billing statement.

Annual Percentage Rate (APR)

The cost of credit on a yearly basis expressed as a percentage.

Net income

The income you receive (take-home pay, allowance, gifts, and interest)

Simple interest

The interest computed only on the principal, the amount you borrow.

Variable interest rate.

The interest rate you pay on your loan will vary from time to time

Line of credit

The maximum amount of money a creditor will allow a credit user to borrow.

Minimum monthly payment trap

The smallest amount you can pay and remain a borrower in good standing.

20%

The suggested limit of your debt payments to income ratio.

Finance charge

The total dollar amount you pay to use credit.

Consumer credit

The use of credit for personal needs.

Capital

What are your assets and net worth?

Character

Will you repay the loan?