CHAPTER 6 BUILDING AND MAINTAINING GOOD CREDIT Fin

Transcript:CHAPTER 6 BUILDING AND MAINTAINING GOOD CREDIT Fin:
CHAPTER 6 BUILDING AND MAINTAINING GOOD CREDIT Fin 235 Spring 2013 BUILDING AND MAINTAINING GOOD CREDIT LEARNING OBJECTIVES Explain reasons for and against using credit. Establish your own debt limit. Achieve a good credit reputation. Describe common sources of consumer credit. Identify signs of over-indebtedness and describe options available for debt relief. BUILDING AND MAINTAINING GOOD CREDIT using credit pros and cons Positives Convenience Emergencies Making reservations Own expensive products sooner Take advantage of free credit Protections against fraud Obtain and education BUILDING AND MAINTAINING GOOD CREDIT Negatives Credit reduces financial responsibility It is tempting to spend more Easy to become financially overstretched Interest is costly Potential for bankruptcy increases BUILDING AND MAINTAINING GOOD CREDIT Privacy / Security Issues Offer no other personal information when using a credit card Check receipts against credit card statements (online access to account) Only give your card numbers when you initiate the contact Review your credit reports regularly Report lost or stolen cards or suspicious activity immediately ”Opt out” of account information sharing Do not respond to e-mail requests for account verification Place a security freeze on your credit bureau files BUILDING AND MAINTAINING GOOD CREDIT managing debt Debt payments-to-disposable income should not exceed 14% (see Table 6-1 page 175) Debt-to-Equity ratio should not exceed 33% (see Table 6-2 page 176) You should be able to eradicate non-mortgage debt in 4 years. BUILDING AND MAINTAINING GOOD CREDIT Student debt Choose the most advantageous repayment pattern allowed. Repay electronically. Make payments on-time, every time. Consolidate your student loans. BUILDING AND MAINTAINING GOOD CREDIT obtaining credit Application to credit card / bank / finance company Federal law imposes new standards on creditworthiness Three Credit Bureaus (free every 4 months) Trans Union (1-800-680-7289) Equifax (1-800-525-6285) Experian (1-800-397-3742) BUILDING AND MAINTAINING GOOD CREDIT Building a Good Credit History Have a checking and savings account Have telephone and utilities bill in your name Acquire and use a oil-company credit card Apply for bank credit card (at your bank is best) Get a small short-term cash loan and put it in savings account Pay-off student loans as quickly as possible Regularly monitor credit report Don’t cancel unused credit cards BUILDING AND MAINTAINING GOOD CREDIT Sources of consumer loans Banks, Savings and Loan, Credit Unions (least expensive) Finance Companies (most expensive) Life Insurance companies against cash values of whole life policies VI. Dealing with Excessive Indebtedness Ten Danger Signs Not knowing