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Ditching your debt and Controlling your Credit

Ditching your debt and Controlling your Credit. Jennifer Abel 703-228-6417 jabel@vt.edu. What we’ll cover. The pitfalls of credit Credit reports and scores Correcting errors on reports Creating a debt repayment plan Communicating with creditors

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Ditching your debt and Controlling your Credit

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  1. Ditching your debt and Controlling your Credit Jennifer Abel 703-228-6417 jabel@vt.edu

  2. What we’ll cover • The pitfalls of credit • Credit reports and scores • Correcting errors on reports • Creating a debt repayment plan • Communicating with creditors • Credit counseling services: getting help and spotting the scams

  3. Pitfalls of credit • Not managing your credit wisely can lead to: • Increased annual percentage rates (APRs) • Unnecessary fees • A decline in your credit score • Denials of future credit requests

  4. Credit reports and scores • Lenders report your credit usage to Credit Reporting Bureaus. The three largest are: • Equifax • Experian • TransUnion

  5. What is in a credit report? • Identifying Information • Credit History • Public Record Information • Inquiries

  6. What is not in a credit report? • Income • Length at Job or Residence • Amount of Savings • Job Title • References • Age

  7. Fair and Accurate Credit Transactions Act • Allows you to get a free copy of credit report annually from each bureau (does not include score) • Limits who can look at your report • Limits how long negative info can stay there (generally 7 years) • Positive info stays for ten years • Keeps inaccurate info from staying in your file

  8. Methods of checking your report • On-line: www.annualcreditreport.com • By phone: 1-877-322-8228 • By mail: • Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

  9. YES!

  10. Says Who?

  11. Credit Score: FICO • A number between 350 and 850 that reflects your creditworthiness • Not provided with your free report; must pay fee of $7.95 per report to obtain score • Mortgage and auto lenders now required to divulge your score when evaluating your credit

  12. Credit Scoring Factors

  13. Correcting errors on your report • Contact the fraud department of each bureau • They must investigate and provide answer within 45 days • You can place fraud alert on your report and include 100 word statement

  14. How to opt out of pre-approved credit card offers The national credit bureaus offer a toll-free number that enables consumers to opt-out of all pre-approved credit offers with just one phone call. Call 1-888-5-OPTOUT (1-888-567-8688) for more information.

  15. Creating a debt repayment plan • Stop incurring new debt • List whom you owe, total balances, monthly payments, APR • Develop a spending and saving plan to determine how much you have available for debt payments • Make a schedule of monthly payments • Go to www.powerpay.org for help

  16. Communicating with creditors • Ask for reductions in APR, credit limit increases, fees waived • If going to miss a payment, contact creditor ahead of time to explain situation • Get the name and employee ID or badge number of the person you talk • Document date, time, and result of all calls in writing

  17. Communicating, cont. • If not satisfied, ask to speak to manager • State clearly what you are asking for (e.g. new payment plan, reverse fees, lower interest rate) • Be polite but persistent • If you are being harassed by collectors, can ask them to stop calling you • Provision of the Fair Debt Collection Practices Act

  18. Credit counseling • Avoid scams: choose a reputable agency • Many services charge fees; consider if what they are asking for is reasonable • Many things they charge money for you can do yourself • Find a reputable agency through the National Foundation for Credit Counseling: http://www.nfcc.org/

  19. The truth about credit repair • No one can have accurate information removed from your credit report. • If you have had credit problems in the past, it can take years to repair your credit legitimately. • No one can create a new identity for you. • You can order your credit report yourself. If you see errors on your report, you can also request that the credit reporting agencies make appropriate changes.

  20. RULES OF THUMB • DO NOT BUY WHAT YOU CANNOT AFFORD • ITEMS SHOULD LAST LONGER THAN PAYMENTS • DON’T THINK MINIMUM PAYMENT • USING CREDIT COMMITS FUTURE INCOME

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