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Welcome to the Center for Financial and Consumer Outreach's first installment of Mindful Money for the 2011-2012 year! This month's article is brought to you by Jim Jackson, a business banker with Marquette Savings Bank in Erie, PA.
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Mindful Money | |
Getting Smart About Credit
When used properly, credit is a powerful financial tool, but there are many consequences to improper use. As we approach the holiday season, we need to remain mindful of our credit usage. According to recent Census data, the total amount of consumer debt in the United States is $2.6 trillion - that's $8,500 for every single person living in the country.
No matter your financial situation, your understanding of the essentials of credit and debt management is imperative and will ensure that you remain on solid financial ground. Provided below are some do's and don'ts on being "credit smart" provided by the American Bankers Association. http://www.aba.com/ABAEF/CreditDosDonts.htm
- DO know the power of credit. Banks look at your credit history as an indication of your future financial behavior. By using credit wisely, you can build a good credit history making it easier to get loans with low interest rates, rent an apartment, purchase a car or home, and may even help you get a job.
- DO be wary of anyone who claims they can "fix" your credit report. No one can legally remove negative accurate information from your credit history. The only thing that can fix a credit report is time and positive payment history.
- DO read the fine print on the credit application. The application is a contract, so read it carefully before signing. Credit card companies are very competitive so interest rates, credit limits, grace periods, annual fees, terms and conditions may vary.
- DO order a copy of your credit report annually. You have the right to know what is in your credit report. The Fair Credit Reporting Act requires each of the three major credit bureaus to provide you with a free copy of your credit report at your request each year. Your credit evaluates you as a borrower and needs to be accurate. To get a free copy of your credit report, visit www.annualcreditreport.com.
- DON'T feel pressure to get a credit card. If you don't want one, you have the right to say "no." Under the new CARD Act 2009 consumers aged 18-21 cannot be solicited for credit. If you no longer wish to receive prescreened offers, opt out by calling 1-888-5-OPTOUT (1-888-567-8688) or visit www.optoutprescreen.com.
- DON'T pay your bills late. Late payments can affect your credit rating and increase your balance. If you are unable to pay the minimum monthly payment, let your creditor know and they may be able to lower your payments.
- DON'T spend more than you can afford. Credit is a loan and has to be repaid. It is your responsibility to manage your debts and to keep your commitment with lenders. Avoid reaching your credit limit or "maxing out" your cards.
- DON'T ignore the warning signs of credit trouble. If you pay only the minimum balance, pay late, use cash-advances to fund daily living expenses or transfer a lot of balances you might be in the "credit" danger zone. Talk to a financial counseling organization to regain control of your finances.
- DON'T share your credit card number. Never give out credit card or personal information if you have not initiated the transaction. Be aware of identity theft and phishing scams that ask for credit card numbers. If you suspect that your identity has been compromised, file a complaint with the Federal Trade Commission by calling 1-877-ID-THEFT (1-877-438-4338); TDD: 202-326-2502, or visit www.ftc.gov/idtheft
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About the Expert | |
The above advice has been written by the Center for Financial and Consumer Outreach's financial expert, Jim Jackson, a business banker with Marquette Savings Bank. With over 13 years of retail and business banking experience, Jim joined Marquette Savings in May of 2011. Throughout his tenure, Jackson has worked with clients to help set and achieve their financial goals. He earned his degree in business administration with concentrations in both finance and management from Mercyhurst College. Jim currently serves on the Community Health Net and Habitat for Humanity Board of Directors, and is involved with many other community committees. At Marquette Savings Bank, Jackson is responsible for business development, relationship management, and credit support.
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