What s in My Credit Report? Taking Care of Your Score How Do I Get Credit? Understanding Credit Cards... 5

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1 The Credit 411

2 Contents What s in My Credit Report?... 1 Taking Care of Your Score... How Do I Get Credit?... 4 Understanding Credit Cards... 5 Protecting Your Credit... Thinking About Filing Bankruptcy?... 9 Anatomy of a Credit Card Disclosure Create a budget. You should know how much you can afford to spend on credit card payments. It is a good idea to always pay more than the minimum payment required to reduce your balance at a faster pace. Don t spend more than you can afford; spend less than you earn and save the rest for another goal.

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4 What s in My Credit Report? Identifying Info Your name, address, Social Security number, date of birth and employment information. This information is updated when you apply for credit. Your Credit Accounts Lenders report on each account you have the type of account, the date it was opened, your credit limit or original loan amount, the account balance and your payment history. Inquiries A list of everyone who has looked at your credit report within the last two years. The report lists soft inquiries (inquiries that do not change your credit score; example: requesting your own report) and hard inquiries (inquiries that may change your score; example: requests for such things as auto or home loans). Inquiries and requests by consumers, employers and insurance companies are also shown. Public Record This includes bankruptcies, foreclosures, wage garnishments, tax liens and civil judgments each remaining on your credit report for -10 years, even after being paid. Payment History The number of accounts you have paid on time, any past due items, how far accounts are past due and when delinquencies or collections happened. Amounts Owed Amounts owed on specific accounts, the number of accounts with balances, the ratio of balances to credit limits on revolving accounts, such as credit cards, and the ratio of balance to original loan amount on installment loans, such as a car loan. Length of History The amount of time since the accounts were opened and the amount of time since there has been account activity. Understanding the facts about credit scores and credit reports will help you make choices that will protect your credit in the long run. Your score is a mathematical risk assessment based on the information listed in your credit report. Credit scores range from 00 to 850. The higher the score, the better. Eighty percent of Americans have a credit score of 620 or higher. You can get a free copy of your credit report and score at any Educators location. In the United States there are three major credit reporting agencies: TransUnion, Experian and Equifax. A credit agency is a company that acquires and maintains files on almost every U.S. adult. These credit agencies acquire information about you and your accounts from creditors such as banks, credit unions, mortgage lenders and retail establishments. They search court records for lawsuits, judgements and bankruptcy filings. Also, agencies review county records for tax, judgement, collection items or other liens (legal claims). New Credit Recently opened accounts; amounts owed and when they were opened; and the number of recent credit inquiries. Types of Credit Used How many types of credit have been used, such as revolving, installment, home, auto and unsecured. It is possible not to have a credit score. This will appear as N/A on your credit report. This means that you do not have enough credit history to generate a score Credit Score Range 1

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6 Taking Care of Your Score Payment History Pay your bills on time. If you have missed payments, get current and stay current. Contact your creditors to see if they will set up a new payment schedule that you can maintain. Don t let a bill go to collection; these items stay on your report for years even after they are paid! Don t expect miracles from companies that promise to fix a poor credit rating quickly and painlessly for a fee. The only way to improve a credit record is to let time pass and establish a record of on-time payments. Amounts Owed Keep balances low on credit cards and other revolving credit ; being at or near credit card limits can hurt your score. Pay off debt rather than moving it around. If done too often, shifting from one lender to another may lower your score. Don t apply for new credit cards that you don t need, just to increase your available credit. This also may lower your score. Remember that closing an account does not remove it from your report. Length of Credit History If you have had credit for only a short time, don t apply for too much too quickly. Someone with no credit is seen as a higher risk than someone with good credit history and long relationships with creditors. This can be a challenge to consumers who take advantage of teaser rate accounts to repay/refinance debt, which again may lower your score. New Credit When rate shopping for a new loan, visit each lender within a few days not weeks. Lenders can adjust their rates at any time. In addition to rate, it is important to compare any fees and repayment terms. Some lenders may charge different rates based on your score. It s a lot easier to ruin your credit than it is to fix it. Don t get carried away. If you stay aware of your debt, and live within your means, you ll be fine. If your score falls below where you want it to be, you can take steps to improve it; however, raising your credit score takes time. In fact, quick-fix efforts often backfire. Repair Your Credit Seek help to re-establish your credit history if you have had problems. Types of Credit Use Apply for credit only as needed and use your credit cards responsibly. Credit cards and installment loans that are managed responsibly, by making timely payments, raise your score. If you see that you are overextended, immediately stop purchasing with credit! Take your credit cards out of your wallet and store them in a spot that is hard to reach, or cut them up. You may want to consider consolidating debts. A single monthly payment may be easier to make than several separate ones and might also get you a lower interest rate. Debt consolidation is not a cure-all; you have to learn to control your spending to avoid future debt.

7 How Do I Get Credit? The Credit CARD Act of 2009 has placed limitations on marketing and issuing credit cards to anyone under the age of 21. Here are the details: Consumers under the age of 21 must either show proof that they can repay the debt, or they need to have an adult cosigner with good credit. The law bans offers of freebies (pizzas and t-shirts, for example) if students sign up for credit cards on or near campus (within 1,000 feet) or at college-sponsored events. Pre-screened credit card offers cannot be sent to anyone under the age of 21. The law also urges colleges to adopt policies limiting the number of campus locations where card marketing events can take place and requiring credit card marketers to alert the school when they are conducting on-campus marketing events. Card companies must now follow specific rules when it comes to card disclosures, making it easier for you to understand the terms and conditions (see page 10 for an example). Although this new law may make it harder for you to get a credit card and start establishing your credit history, it is meant to protect you. So many young people have gotten into trouble by racking up credit card debt without having the means to repay it. Now, companies have to make sure you can repay it and that you are a better informed consumer. Here are some other ways for you to start establishing credit: Take care of your bills The utility company, doctors, cell phone companies, landlords and some others can report late payments to the credit bureaus. This can show up on your report and lower your credit score. Pay your bills on time so you don't start off with a bad score. Some lenders also review checking histories before offering loans, so make sure to be careful with your checking account. Apply for a loan Have someone with good credit ready to cosign a loan for you; remember he or she then shares liability for the loan with you. If you make late payments, they will reflect poorly on your credit as well as your co-signer s. After a year of timely payments, reapply for the loan in your own name. Have patience It takes time to establish credit. Remember, you are building a record of consistency in making payments on time, which demonstrates your creditworthiness. Go slowly be cautious, keep track of your overall debt, and pay on time. It is much better to develop a strong credit record than to apply for too many credit cards or a loan that is larger than you can handle. 4

8 Understanding Credit Cards Shop around. There are many credit card companies that want your business. Look closely at the terms; they ll help you figure out who the bad guys are: Regular (non-introductory APR) Look for cards with an APR under 15%. Grace Period How long your purchase is interest-free. Look for at least 25 days. Late Payment Fee Know what the company will tack on if you make a late payment and if there is any grace period before a fee is assessed. Look for late payment fees below $20. Annual Fee Look for cards with no annual fee. Penalty APR Often called the Default Rate or Non-Preferred Pricing. Some credit card companies charge a higher interest rate if you go over your limit or make a late payment or two. This Penalty APR replaces your current interest rate. Look for cards with no penalty APR or one below 18% and in effect for a specified time frame. Universal Default Clause Some card companies are adding a clause that states that they can raise the interest rate on your card to the penalty or default rate if you make a late payment to any of your creditors, not just your credit card company. Look for cards that don t have this clause. Read the Fine Print Always make sure to thoroughly read the disclosure before accepting the offer. You ll find that some companies will hide their fees and other important information in the small print. Carry Only One or Two Major Credit Cards Avoid using your entire available credit limit and having several department or store cards. Try to use cards only when you can pay off the balance each month. Always Pay More Than the Minimum If you can t pay your balance in full, always pay more than the minimum. Credit card companies set their minimum payments so low (usually 2% of balance) that it takes forever to pay them off. Card companies are now required to tell you how long it will take to pay off your balance if you only pay the minimum amount. Check your card statement each month for this information. There is a Better Way to Pay Off Your Credit Card Debt Amount of Debt Payment Amount Years in Debt $1,000 Min. Amount* $20 Double $40 $2,000 Min. Amount* $40 Double $80 $,000 Min. Amount* $60 Double $120 $4,000 Min. Amount* $80 Double $160 $5,000 Min. Amount* $100 Double $200 $10,000 Min. Amount* $200 Double $400 $15,000 Min. Amount* $00 Double $600 The following assumptions apply to this chart: 18% nominal interest rate (payment is 2% of the original balance). Dollars and years have been rounded to the nearest whole number. Payment indicated on the chart is made monthly. No additional fees or charges are incurred during the repayment period. In the real world, minimum monthly payments will decrease if you do not charge any more. Credit Card companies do this to stretch out the amount of time it will take to pay off your debt, meaning you pay more in interest. *This is your first monthly payment. Total Interest Paid $1,65 $1,00 $,51 $2,60 $5,29 $,905 $,062 $5,206 $8,828 $6,508 $1,655 $1,015 $26,482 $19,522 Here s an example: You have a $2,500 balance and your credit card interest rate is 18% APR. If you make only the minimum payment, which is 2% of your balance, it will take over 4 years and almost $6,500 in interest to pay off this balance! Total cost to you: $9,000! If you make monthly payments of $50, it will take 4.4 years and $98 in interest to pay it off. Total cost to you: $,48. 5

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10 Protecting Your Credit Once you have credit, it is necessary to protect it. Be careful with your credit, debit and ATM cards, as well as your account and personal identification numbers (PINs). Carry only the cards you expect to use. Keep a list of account and telephone numbers of the companies that issued your cards. Photocopy the contents of your wallet, so if your cards are lost or stolen you can notify the companies quickly. If your notification is received before the cards are used, you have no legal responsibility for unauthorized charges; if it is received after the cards are used, you re responsible for $50 per card. Never give out your credit card, checking or savings account information to a telephone solicitor. Save sales receipts to compare with your bill, and shred any documents containing account numbers before you discard them. If you disagree with an item on a bill, you are responsible for notifying the creditor in writing within 60 days of receiving the bill. Include your name, account number, the item in error and the reasons why you believe it is wrong. If you feel that your personal information may have been compromised, act quickly to minimize the potential for identity theft. Report identity theft to local law officials, provide all documentation available and ask for a copy of the police report. Keep it on hand for creditors. Immediately contact the fraud units of the three major credit reporting agencies listed on the back cover and ask that a fraud alert be added to your account. Educators offers Identity Theft 911, a free service for members with an Educators checking account or credit card. This service gives you additional resources and tools to safeguard your information. If you become a victim of identity theft, this service will help you prepare affidavits, write letters, contact creditors, assist in restoring your credit, and more. In addition, you ll have access to consumer education and the latest information on this complex topic. For more information on Identity Theft 911, visit Financial Accounts: Close compromised credit card accounts immediately. Ask your financial institution about whether you should close bank accounts immediately or change your passwords. Have the institution monitor for possible fraud. Place passwords on any new accounts that you open. Avoid using common passwords, such as your mother s maiden name, your birth date, the last four digits of your Social Security number, your phone number or a series of consecutive numbers. If your checking account information is used to set up a fraudulent account or checks are stolen, report the crime to the police and the check verification agencies: ChexSystems (800) and Equifax (800) Stop payment on all questionable outstanding checks. If your ATM card has been stolen, get a new card and change the PIN. Social Security Number: Call the fraud number for the Social Security Administration (800) and their Earnings and Benefits Department (800) Also call the toll-free number of any one of the three nationwide consumer reporting agencies on the back cover and place an initial fraud alert on your credit reports. This alert can help stop someone from opening new credit accounts in your name. Driver s License: Contact the Department of Motor Vehicles (608) and follow their procedures to cancel your license or ID and get a replacement. Ask them to flag your file to keep anyone else from getting a license or another ID in your name. Do the same for all other government-issued identification. Once you ve taken these steps, watch for signs that your information is being misused. Follow up with creditors if your bills don t arrive on time. A missing bill could mean an identity thief has taken over your account and changed your billing address to cover his tracks. Other signs include: receiving credit cards that you didn t apply for, being denied credit or being offered less favorable credit terms, like a high interest rate for no apparent reason and calls or letters from debt collectors or businesses about merchandise or services you didn t buy. A good way to protect your credit is to check your credit report each year (it s free!) at Because you are entitled to one free report from each of the three credit reporting agencies every year, you can rotate agencies and receive one free report every four months. You can also come into Educators and get a free copy of your report and score with the What's Your Score? program. Lenders, employers, insurance companies and other agencies may use your credit score when considering your application. Consequently, it makes sense to check your report for accuracy it can affect more than just your ability to obtain a credit card.

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12 Thinking About Filing Bankruptcy? This legal process allows someone deeply in debt to create a plan to get out of debt. Be careful; this should only be considered after consulting an attorney, as this will appear on your credit report for 10 years! Although bankruptcy will clear most of your debts, it may not eliminate spousal and child support payments, some student loans, taxes or fines; and it can be expensive court costs and attorney s fees add up. Depending on your situation, this is money that potentially could be used bringing past due accounts current, or making payment arrangements. You won t be allowed to file Chapter if your income is above the state s median and you can afford to pay 25% of your unsecured debt. The court will also apply living standards, derived by the IRS, to determine reasonable living expenses to figure what you have left to pay your debts. Under these provisions you are required to meet with a credit counselor six months prior to applying for bankruptcy. Before any debts are discharged, money management classes must be attended at your expense. Two basic types of bankruptcy are: Chapter 1: This puts you on a debt repayment plan up to 5 years. In this case debtors won t lose any property or possessions. Chapter : This involves the liquidation of all your assets, except those exempt by law, to pay your debts. With the new bankruptcy laws in effect, fewer individuals will be allowed to file Chapter and will be forced into Chapter 1. MORE INFO $400 pizzas! Dirt bike disaster! Free credit cards! Laptop losers! Okay, it s all waiting on you at the website. Head to and click on. See you there!! 9

13 Anatomy of a Credit Card Disclosure Penalty Interest Rate This rate replaces your standard rate if you make a late payment, go over your credit limit. The info included in the chart will tell you when this rate could go into effect. Standard Rate This rate is charged after your introductory period (if you have one) has expired. Introductory Rate This rate is charged for purchases and/or balance transfers (like in this example) for a limited time only. Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases and Cash Advances 18.9% Also called Grace Period This is how long your purchase is interest free. In this example, a purchase would be charged interest, if it is not paid for by the 25th day. APR for Balance Transfers Penalty APR and When it Applies How to Avoid Paying Interest on Purchases Website for Additional Information 0% introductory APR for the first six billing cycles after account opening. After that, your APR will be 18.9%. Balance transfer fees will also apply (see Fees section below) 28.99% This APR may be applied to the entire balance of your account if you: 1) Make a late payment twice in a six-month period; 2) Go over your credit limit twice in a six-month period; ) Make a paymnt that is returned; or 4) Do any of the above on another account you have with us. How long will the Penalty Rate Apply? If your APRs are increased for any of these reasons, the Penalty APR will apply until you have made six consecutive minimum payments when due and do not exceed your credit limit during that time period. If you pay your entire balance in full each month, you have at least 25 days after the close of each period to pay your balance on purchases without being charged interest. Cash advances are charged interest from the date of the advance, as required by law. To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at Annual Fee You pay this fee each year, just to have the card. Fees Annual Fee $9 Transaction Fees Balance Transfers Cash Advances Penalty Fees Late Payment Fee Over-the-Credit Limit Either $5 or % of the amount of each transfer, whichever is greater (maximum fee: $100). Either $5 or % of the amount of each transfer, whichever is greater. $29 (Your APRs may also increase; see Penalty APR section above) $29 (Your APRs may also increase; see Penalty APR section above) How We Will Calculate Your Balance: We use a method called Average Daily Balance (including new purchases). Late Payment and Over-the-Credit Limit Fees This is charged if you make a late payment or if your balance exceeds your credit limit. How Balances are Calculated Average Daily Balance Method: Based on the average balance that existed each day. Adjusted Balance Method: Based on the account balance remaining after adjustments are made for payments and credits during the billing period. Previous Balance Method: Takes the outstanding balance at the end of the previous billing period and applies the interest rate to that total. Charges in the current billing period are not included. 10

14 APR Annual Percentage Rate. The rate of interest (in terms of a percent, such as 8.5%) being charged for a loan over a year s time. The APR includes interest, transaction fees and service fees. ATM These letters stand for Automatic Teller Machine. Take care of your finances 24/. You can deposit or withdraw money or even pay loans. Balance 1) Loans; the balance is the difference between the amount owed and the principal amount paid. 2) Checkbooks; balancing means to account for all money that came into and went out of your account, so that at the end of the month you and your monthly statement agree. ) Savings; your balance is what is left in your savings account after you deposit or withdraw money. Budget A plan you create for controlling spending and encouraging saving. Share Certificate A type of investment that requires you to invest money for a certain length of time and guarantees the same rate of return (interest) for that entire time. Also known as a Certificate of Deposit, or CD. Usually a minimum deposit is required. Charge To borrow money (from a store, service provider, or credit card company) to make a purchase. If you do not pay the debt off in full within the card issuer s grace period (usually days), you will pay interest on the amount you owe. Co-sign To co-sign a loan means to guarantee the payment terms for another person and to become personally liable for those terms. Credit Loan that enables people to buy something now and to pay for it in the future. Credit Limit The highest amount you may charge on a credit card. Your limit is set by your card company s opinion of your ability to handle debt. Credit Agency Credit agencies are companies that keep track of how you pay your debts (bills). When you borrow money from a credit union or apply for a credit card, the credit union or the credit card company will ask a credit agency to rate you. Lenders want to know if you are a reliable bill payer before they approve your loan or credit card. Debit Card This plastic card looks like a credit card, but it is used to withdraw money from a savings or checking account. When you use a debit card at Automatic Teller Machines or in stores to make purchases, money may be immediately withdrawn from your account. In most cases, you cannot withdraw more money than you have in the account. Finance Charge A fee you must pay when you do not pay off the entire credit card debt within a single payment period, usually about days. This charge is determined by the interest rate (APR) you agreed to pay when you applied for the card. Insufficient Funds A phrase that means you do not have enough money in your account to cover an expense. Minimum Payment The smallest amount you are required to pay a lender each month on a debt. Variable Rate A rate that may change over time. If the rate is subject to change, this must be disclosed in writing before the loan is taken. What s Your Score? Get your free credit report and score by visiting any Educators location. To remove your address from mailing lists or your name and number from telephone solicitation lists: Go to call (888) or write to: Mail Preference Services, P.O. Box 9008, Farmingdale, NY Telephone Preference Service, P.O. Box 9014, Farmingdale, NY Educators Credit Union P.O. Box , Racine, WI