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HSFPP Weekly Update # 171— Stay on Top of Your Credit Report
Message from Bob: Teenagers beginning college and other postsecondary education institutions, as well as high school seniors who have turned 18, are being bombarded with advertisements saying that, if you want to be happy, you need this or that product; and, if you don’t have the money now, just put it on your credit card. There is nothing wrong with using a credit card as long as you have the money to pay the bill. The problem is that far too many people no longer ask themselves whether they really need something or how the purchase will affect their budget and their saving and investment goals. We, as educators, have an uphill battle to compete with advertisers who have the funds to get their message out. Their message to “spend, spend, spend” is not good for consumers. Only by getting teens to think about saving and investing, rather than spending, can we help them reach their short- and long-term financial goals.
Those who have established credit in their own name, and even those who have not, need to keep on top of their credit reports. During an in-service training session last week, in which we went over the new HSFPP curriculum, a new Extension employee who helps teach the HSFPP in the schools told about her experience in learning that someone had opened accounts in her name when she was 15 years old; she never knew about it until she tried to get a credit card for the first time years later and was turned down because of her poor credit history.
Teaching tip:
She said teenagers really pay attention to her because she makes the program personal. I believe that, by telling her stories to kids, she makes the HSFPP come alive; all educators can benefit from her example. If you have teaching techniques that you would like to share with the group, please send them to me at rflashma@uky.edu. If you want me to use your name, that’s great; or you can remain anonymous.
Please share any tips you have, as well as topics you think we should cover. I hope to see more of you at the September 27 in-service at the Hardin County Extension Office in Elizabethtown.
Web Site Pick of the Week:
Bankrate.com compiles and presents financial rates and information in an objective manner, providing up-to-date rates and information on auto loans, credit cards, and other banking products. The site is full of helpful features, making it a great place to compare and contrast financial rates.
In the New$... Stay on Top of Your Credit
by Carol L. Spence, M.A., Agricultural Communications Specialist, UK College of Agriculture; and Alex Lesueur, Jr., M.S.L.S., University of Kentucky Cooperative Extension
Mark these reminders on your calendar. Once a year, a physical examination by your doctor. Twice a year, a dental check-up. Three times a year, a credit report review – because financial health needs to be maintained and monitored every bit as much as physical health.
Everyone has a credit history and that history is reflected in a credit report, one of the most important sources of information lenders use when evaluating credit applications. If you’ve ever had a credit card, a loan, rented an apartment, or any other type of credit, your information is stored in the databases of the three major credit reporting companies.
Those companies—Experian, Equifax, and TransUnion—collect personal and financial information from creditors, employers, and public records. The information is used to devise a credit score, which is a number from 300 to 850. Both the history and the score are made available to potential lenders and can affect everything from whether you are granted a loan to the amount of interest that is charged.
A credit report is composed of several parts. The first part contains personal identification information such as name, address, and Social Security number. Another section covers public records, including bankruptcies, foreclosures, tax liens, and court judgments. Credit accounts and payment history can be found in a third.
Finally, even inquiries into your credit history will show up on the report. These will appear for one year. Credit reporting companies also keep a two-year record of all those who requested your credit history for employment purposes.
Most of the information stays in the report for seven years, though bankruptcy information remains a part of the report for ten years. Some facts, such as criminal convictions, can be reported indefinitely. Whenever you apply for a job that pays more than $75,000 a year, apply for more than $150,000 worth of life insurance, or apply for credit in the amount of $150,000 or more, it will appear on your credit report as well. Every item listed has the potential to improve or diminish your credit score. Even the number of inquiries can affect it. More than three inquiries into your credit history in 90 days may affect your score adversely.
In 2003 Congress passed an amendment to the Fair Credit Reporting Act that requires each of the three national credit reporting agencies to provide one free copy of an individual’s credit report every 12 months. Consumers should see this as an opportunity to take charge of their financial health.
It’s important to check your credit history regularly for the simple reason that mistakes can be made and errors do occasionally show up in the reports. Identify theft is on the rise and keeping a close eye on your reports can also give you a much earlier indication of illegal activity under your name and guard against serious damage being done to your credit.
To order a free credit report, go to http://www.annualcreditreport.com and fill out the form. The form can either be submitted online or printed and mailed to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281. You can also order a report over the phone by calling toll free (877) 322-8228. Also keep an eye out for misleading “free credit report” services that are provided by lenders. It is likely that their request form may actually be an application for credit that will end up on your credit report as an inquiry, not to mention setting you up for a barrage of solicitations for credit. For your free report you must use the Annual Credit Report service.
Because each of the three credit reporting companies acquires information from a variety of sources, their reports may not be identical. For that reason, it is a good idea to check each company’s report. You can order all three reports at once; but, if you do, you will not be able to get another free report from these companies for one year. Therefore, it’s recommended that you order a report from a different company once every 4 months. Spreading out your requests in this manner will keep you abreast of any errors or suspicious activity that may appear and allow you to take the proper actions to remedy the problem before too much time passes.
Many young people will find that their credit report shows nothing in their credit history. There is nothing wrong with this. If you have not bought a car or applied for credit, there should be nothing in your credit history; if there is, and you have no idea what it is about, it could be a sign that someone has stolen your identity and applied for credit in your name. They could be making minimum monthly payments on a credit card account so you never receive a delinquency notice; or they might not be paying on the account, and the bills are being sent to a post office box that isn’t your current address, so you would never know without seeing your credit report. You also might find overdue library books, especially from a previous address; more and more, libraries are turning these over to collection agencies, who report the delinquency to all three major credit bureaus.
If, after checking your report, you find an error, contact the credit reporting company in writing, including copies of documents that support your position. The company must reinvestigate the questionable item within a reasonable timeframe – usually 30 days.
It doesn’t take much time, but checking your credit report on a regular basis can help you take care of problems before they affect your buying power or your employment status.
Source: “Stay on Top of Your Credit,” an Exclusive by Carol L. Spence, University of Kentucky College of Agriculture, 9/13/06.
Discussion Questions:
You might be surprised to learn that the following are all current and legal uses of your credit history:
1.) Do you think insurance companies should use your credit history in order to set the amount you pay in premiums for vehicle insurance? Why or why not?
2.) Do you think employers should know your credit history in deciding whether to hire you? Why or why not?
3.) Do you think apartment owners should have access to your credit history when you apply to rent an apartment? Why or why not?
Take-Home Assignment:
Go to the following Web site to find out your spending style.
http://www.bankrate.com/brm/news/financial-literacy/quiz/spending-style.aspThen answer the following questions:
1.) How would you characterize your spending style? Are you thrifty, rational, or a free spender?
2.) Did your quiz results match your image of your spending habits?
Yes ___ No ___ Explain why.
3.) Can you think of other spending styles besides the three shown in the quiz? What are they? Do any of the three styles shown in the quiz match your own?
4.) Do you think a person's spending style says something about their general personality? Yes ___ No ___ Explain why.
5.) Are spending habits inherited? Why or why not?
6.) Are your spending habits similar to those of your parents? Explain.
7.) What factors help shape a person's spending style?
8.) Is it possible to balance the rationality of reasonable spending with the excitement of impulse buying? Explain.
Kentucky High School Financial Planning Program
http://www.ca.uky.edu/fcs/hsfpThe purpose of the HSFPP weekly financial updates and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP and the weekly updates meet Kentucky core concepts. The Web site and weekly updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.
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