Credit

The In's and Out's of Credit
Stop Credit Offers
Beware of Credit Scams
What if I'm in Over my Head
Rent-to-Own
Would You Use Credit?

If you are interested in learning more check for upcoming classes or call Sheri at 315-536-5123.

The In’s and Out’s

of Credit

Here are some things to consider when considering using credit for a purchase.

The Cost of Credit Depends on:

• Who you borrow from
• Your credit rating
• How much you borrow
• How long you take to repay
• Adds to the actual cost of the item purchased

Credit cards are very costly when:

• Used to buy things you cannot afford
• Only the minimum payment is made on the account each month
• Payments are late – late fees add to the amount owed and damage your credit record
• Charges exceed the card limit – over limit charges will be added to the balance
• Frequent cash advances – no grace period on amount withdrawn and a higher interest rate may be charged
• Credit card numbers are given to con artists
• Cards are lost or stolen

Tips for Using Credit Wisely:

• Borrow only what you can afford to pay back
• Borrow for the shortest time possible
• Shop for the lowest interest rate offered
• Use credit for one item at a time
• Pay it off as soon as possible
• Use credit only when it is really necessary.  Whenever possible, save part or all of the cost of a purchase before buying.
• Shop for a credit card that most closely meets your needs

All credit is not bad.  There are some real benefits to using credit when it is used wisely.  It can:

• Cover large, unexpected expenses, such as a car repair
• Provide consumer protection when product doesn’t work
• Build a good credit history
• Provide an easy way to pay for purchases
• Be safer than carrying cash
• Provide monthly itemized statements

Stop Credit Offers

You can stop pre-approved credit offers from being mailed to you.  Call 1-888-5-OPT OUT (1-888-567-8688).  This means that instead of having your name and credit information available when credit card companies ask credit reporting agencies to “screen” for people who meet the company’s criteria, your name will not be shared.

You can stop telemarketers from calling you by adding your name and number to the National Do Not Call Registry.  Reach the Registry by calling 1-888-382-1222 from the phone whose number you wish to register or online go to www.donotcall.gov.

Beware of Credit Scams

There are 2 different types of scams that offer to help when consumers are having credit problems.  Both cost lots of money and do not solve the problem.  Watch for these:

• Advance-Fee Loan Scams

These are offers that guarantee you a loan or other type of credit – but you must pay before you apply.  Legitimate lenders never “guarantee” you a loan or credit card, especially if you have a poor credit history.

• Credit Repair Scams

These are offers to “clean up” your credit – for a fee.  No one can fix or remove items from your credit report that are accurate.  If there are mistakes on the report, you can write to the Credit Bureaus to correct them yourself at no cost.

If you think you are a victim of one of those scams, contact the New York State Attorney General’s Office at1-800-771-7755.

What if I’m in

Over My Head?

Sometimes things change and it becomes hard to make all our payments.

If you know a payment will be late:

• Don’t ignore the problem.  Contact creditors right away.
• Tell them why you fell behind and what your plans are for the future.
• Make a realistic repayment plan.  Ask your creditors if they will agree to it.
• Get the name and title of the person you talk to.  Make notes which include the date and time of the conversation.
• Put changes in writing.  Mail a copy to your creditor and keep a copy for your records.
• Follow through on any agreement.

The important thing to remember when there is a problem Talk to Your Creditors.  Don’t avoid them

If a payment is difficult to pay on time because of the time of month when it is due, ask that the due date be changed to a more convenient date.

Rent-to-Own

Offers for rent-to-own often seem like a good idea because of the low payments.  Some of the things you can rent-to-own are TV’s, stereos, refrigerators, washing machines, dryers, and furniture.  You pay by the week or month for a certain number of weeks or months and then the item is yours to keep. 

When checking these out be aware that you can buy something with a small payment but

• It takes a long time to pay it off
• You pay a lot of interest

If you are considering rent-to-own, ask these questions:

• What is the total cost?  Add all payments and fees for insurance and delivery.
• When do you own it?  Will you lose the item and the money paid if you miss a payment?
• What if you pay late?
• Do you pay for repairs?  If it stops working, you may have to keep paying while it’s being fixed.
• Is it new or used?  Do you get the warranty and owner’s manual?

Before signing the contract, read it carefully and be sure this is what you want to do.  Once it is signed you must follow the terms of the contract. 

The contract must include:

• Cost of the item
• Cost to rent it
• Number of payments and amount of each
• Total cost
• The most amount of money you could pay to rent or own
• Date you must make your payment

Before you use rent-to-own, ask yourself:

• Do I really need this item
• Do I have the money to pay for it?
• Is it really worth the final cost?
• How does the cost compare if I used an installment or lay-away plan at another store?
• Can I buy this item used or borrow it from a friend?
• Can I delay this purchase until I can pay cash?

Let’s look at two ways to buy a $300 television:

Rent-to-own

$12.49/week
x    72 weeks

Total cost $899.28

Over 18 months

Interest paid $600

Use Credit (18% APR)
$27.50/month
x    12 months

Total cost $330.00

Over 12 months

Interest paid $30

(Adapted from CE U of Wisconsin Money… When You Work, 9/97)

Would You Use Credit?