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Chapter Three: Understanding Credit

What is credit, exactly? How do you get it? And what does it mean to you?

Credit means, "buy now, and pay later." It involves a complex system of checks and balances, pros and cons, and points and scores that impact your financial capabilities and life on many levels -- particularly when you wish to buy or lease space.

In this chapter we will discuss the following:

  • Credit and credit scores
  • The financial impact of credit
  • Differences between personal and business credit
  • How to repair your credit
  • How credit affects your ability to secure space
  • How to protect your credit rating.

What is Credit

Student loans, utility bills, mortgages, your rent, your tab at the local pub: These are all forms of credit. In essence, credit involves using someone else's money to pay for things. When you purchase items with someone else's money, you enter into a financial agreement stipulating that you will repay the entire balance of the original amount owed, plus additional fees and interest.

The party that loans you money is called a creditor. This can be a family member, friend, nonprofit organization, bank, business, the government, or another party. Creditors are willing to give you money because they make money when you repay your loan -- through fees and interest. Be aware that credit is a serious matter for businesses, nonprofits and individuals, and impacts you on many, many levels

Establishing Credit

Credit can either positively or negatively affect your personal life and/or business; much depends on how you use it. Potential creditors can review your credit history by looking at your credit report, which details your credit use and payments collected from all of your past creditors. These reports are generated by credit bureaus, which act as the gatekeepers to the world of credit.

Most creditors use information from three credit bureaus: Equifax,Experian and TransUnion Corporation. Each bureau is responsible for a particular region of the country.

While most creditors report information about you to each of the three primary bureaus, some choose to send data only to the bureau collecting in your area, or to smaller credit bureaus. Dun and Bradstreet is the primary source for credit information on businesses and nonprofits.

What do credit reports, credit bureaus and credit history mean to you? New creditors, as well as potential landlords and business partners, use these reports to help determine whether they will trust you to repay them.

A credit report tells potential creditors:

  • How much money you already owe to other creditors. If you owe more money than you earn, you might not be able to keep up with payments for a new account.
  • How often you borrow. Borrowing frequently might suggest to creditors that you can not meet your present debt responsibilities, or consistently seek new funding sources to cover your debts. Some creditors regard opening new credit cards as borrowing.
  • How many open accounts you have. Even if accounts have a zero balance, if you have "too much" available credit, creditors might view this as a risk that you can max out these accounts and go into debt.
  • If you pay your bills on time. Even occasional late payments might be a sign of cash flow problems.
  • If you operate or live within your means. Credit cards and lines of credit that are maxed-out are a definite sign that you have problems meeting your debts.

Credit reports do not tell creditors the reasons why you can not pay your bills, or why you have defaulted on a loan. They just present the facts and figures in black and white.

Credit Reports

Although each credit bureau organizes its reports differently, all credit reports contain the following information:

  • Your name
  • Current address (provided by creditors)
  • Your social security number
  • Creditor's name and contact information
  • Account number
  • Type of account (auto loan, credit card, student loan, etc.)
  • Date account was opened
  • Credit limit or loan amount
  • Account balance
  • Information detailing the status of the account (i.e. pays on time, past due, closed, etc.)
  • Number and type of your inquiries
  • Number and type of inquiries by others such as auto companies, credit cards, employers, and insurance companies
  • Public record accounts such as collections, bankruptcies, liens, etc.

Credit reports do not provide information on:

  • Age
  • Race
  • Religion
  • Gender
  • National origin
  • Marital status
  • Income
  • Employment

The following links will provide examples of a credit report:

In addition to the above information, your report includes a credit score generated by the credit bureau. For more information about credit scores, view the next section, Credit Scores.

Credit Scores

Besides providing a detailed record of your debt management practices, credit reports also include your credit score: a snapshot of your credit risk at a given moment. Your score indicates the likelihood that you will pay off a debt as compared to other borrowers nationwide. You receive or lose points for certain types of credit items and practices. For example:

  • Have your creditors given you high ratings?
  • How many accounts are 30 days or more past due?
  • Do you have unpaid accounts and collections?
  • Have you recently paid off any loans or other debts?
  • Do you have low balances on your open accounts?
  • Are there liens against your property?
  • Have you filed for bankruptcy?

The list goes on and on. Added together, these points generate your credit score.

It can take three months or more to see a rise in your credit score after you have taken a positive action, while negative practices can impact your score immediately. Scores are affected by late payments, paying off of collection accounts, and closing or opening of new accounts. Depending on the scoring method used, scores range from 0-999 points. The most popular systems use scores that fall between 300-900 points.

Creditors typically view higher scores as evidence of the borrower's stability and reliability. Scores of 620 or higher are considered "good" -- i.e., creditors believe that you will repay them. Scores lower than 620 are considered riskier. We discuss "good" scores in the section, Good vs. Bad Credit.

Creditors have their own levels of risk they will accept. Keep in mind that your score is not the sole component of your application that a lender will use when determining whether or not to extend credit to you.

In addition to the credit bureaus' scores is the FICO score. Developed by the Fair Issac Corporation, it is the most widely used credit score, and is different from other scoring methods in that it factors in all the information contained in your entire credit record: information from the "big three" credit bureaus, as well as information from smaller bureaus that the "big three" might not report.

FICO scores are based on five factors, weighted in importance accordingly:

  • 35% - Payment history
  • 30% - Amount of debt owed
  • 15% - Length of time you have had open accounts with creditors
  • 10% - Inquiries into your report
  • 10% - Types of credit accounts you have open

The credit score you receive in credit reports issued by a "big three" bureau will not be a bona fide FICO Score, which will range from 0-850. To receive a copy of your FICO score, contact Fair Issac directly through its Website.

The Fair Issac Website offers a simulation game that enables you to learn more about how certain actions -- for example, paying a past due debt, or being late with a payment -- affect your credit score

Your Credit Report and Score

By law, you have the right to obtain a copy of your credit report and dispute any inaccurate information it contains. Reports cost between $9 and $12, and include a detailed history of your credit practices for the last 7-10 years and a credit score. Reports also include information and tips on how to improve your credit rating.

Legally, you are allowed to have a free copy of your report if you have been denied credit, a job, insurance, etc. within the last 30 days due to information your report contains. Directly contact the credit bureau that issued the erroneous report.

You are also legally allowed to obtain a free copy of your report from each of the "big three" reporting agencies each year. Contact one or all of the following primary credit bureaus:

Equifax
P.O. Box 740241
Atlanta, GA 30374
800-685-1111

Experian
955 American Lane
Schaumburg, IL 60173
847-517-5600
888-397-3742

TransUnion
P.O. Box 2000
Chester, PA 19022
800-916-8800

Dun and Bradstreet
The D&B Corporation
103 JFK Parkway
Short Hills, NJ 07078
800-234-3867
Provides business and nonprofit credit reports only.

Or, you can visit www.annualcreditreport.com to easily apply for your free annual report.

Because your creditors might not report information to each "big three" bureau, obtain reports from all of them in order to get the most accurate assessment of your credit rating.

Your report will explain how to interpret its contents. For additional assistance, call the issuing credit bureau, or a nonprofit organization that specializes in credit counseling/debt management or home-buying, or offers accounting services.

Good vs. Bad Credit

Creditors categorize certain practices and items on your report as either "good" or "bad," then rank them from "good" to "great," or "bad" to "worse." For creditors, the ratio of positive to negative practices listed on your report paints a picture of you as either a good credit risk or a bad credit risk. Having "good" credit means that creditors believe they can count on you to repay them. Creditors hesitate in lending to individuals or organizations with bad credit records out of concern that they will not be repaid in a consistent and timely fashion.

Good credit often translates into lower interest rates, fewer fees and more options. Bad credit means high interest rates, more fees, and greater restrictions on lending options, employment opportunities and other life necessities. Bad credit can close the door to banks and other lending institutions.

The two main methods of establishing good credit are:

  1. To pay your bills on time; and
  2. Keep your debt to a minimum.

Some practices and items that creditors view as negative marks on your report (rated from "bad" to "worst") include:

  • Credit inquiries
  • Credit rejections
  • Late payments
  • Past due and unpaid accounts/payments
  • Court judgments
  • Collections
  • Loan defaults (includes student loans)
  • Repossessions
  • Foreclosures
  • Bankruptcy

Alternative Credit

Using and obtaining credit is a necessary evil in today's marketplace. If you normally pay cash for most things, and do not use credit cards, then your credit history is probably quite limited. Not using credit might seem like a good thing, as it limits your risk of falling into debt. However, it can become problematic when you apply for a loan or other type of credit to purchase a big-ticket item such as a house or vehicle, or even try to rent a car (most rental companies require borrowers to make reservations using a credit card).

If your credit history is limited, you can start building a record by creating your own alternative credit history. Items to include:

  • Statements from utility bills. These statements show how long you have had accounts, and how you have handled paying your bills. You can also ask your utility providers to write recommendation letters for you.
  • A recommendation letter from your landlord. If you have been a good tenant, and have paid rent on time, this will indicate that you will also pay your new landlord or mortgage on time.
  • Bank statements. Monthly checking and saving statements reveal how you handle your money. Bounced checks indicate cash flow problems, while bills paid on time show sound debt management.
  • Copies of cancelled checks or money orders. These show how you have handled paying your bills.

Some lenders and creditors will also provide you with a list of additional information they are willing to accept in lieu of a traditional credit report. You might also want to consider opening a credit card account to begin establishing a credit history.

If you choose to open a credit card, do some research to find one that best fits your needs, and maintain a low balance. Using a credit card wisely will help put you on the credit map with creditors. Consumer information websites such as e-wizdom.com can provide information and interest rate comparisons on credit cards

If Credit Problems Arise

There might come a day when you can not pay your bills. Unemployment, illness, a denied grant, low ticket sales or any number of unexpected events can force you into debt, which could drag down your credit score.

No one intentionally establishes bad credit. Reestablishing a good credit rating is an arduous task, but not an impossible one. Helpful options include entering a debt management/credit counseling program and filing for bankruptcy.

Debt Management and Credit Counseling

Some nonprofit organizations offer Debt Management or Credit Counseling programs to help reestablish you in good standing with creditors and to develop positive financial management skills. These programs speak with creditors on your behalf, and help you to create a budget and to set up repayment arrangements. Programs often charge a small fee, but many organizations will provide a free analysis of your financial situation.

If you enter these programs, many creditors will eliminate late fees and other penalties, lower your monthly payments, and lower your interest rates - especially on credit cards. Unfortunately, participation usually requires closing all of your open accounts, which could negatively impact your credit rating. In addition, participation is voluntary by both you and your creditors; all of your creditors might not participate or agree to the program's guidelines. These programs can take up to 5-7 years to complete, after which your debt balance will be zero.

To find a credible debt management/credit counseling program, look for an affiliate of the National Foundation for Credit Counseling. In addition, you should also check with the Washington State Department of Financial Institutions, the government agency that regulates these organizations in the State of Washington. DFI can provide you with a list of debt management/credit counseling agencies approved to practice in the state. For more information, contact DFI at 877-746-4334 or through their website: www.dfi.wa.gov.

If you are considering debt management assistance, steer clear of "credit repair" companies, which charge inflated fees for help that you can get elsewhere for a nominal price or for free. Also, if you predict trouble, you can contact your creditors directly and attempt to make your own debt management arrangements.

Bankruptcy

Bankruptcy Disclaimer: This chapter includes information about the law. This is general information and is not legal advice that applies to your specific situation. Additionally, laws change, and the City of Seattle and contributors to this manual do not guarantee that representations of the law are complete and up-to-date. If you need legal advice - information that applies to your specific situation - you should consult a lawyer. See Chapter 4 for information additional information on when to hire a lawyer.

Bankruptcy is a legal process that allows you to pay off your debts at a rate significantly reduced from what you would normally pay. Unlike debt management programs, bankruptcy is a legal decision, and both you and the creditors must abide by the court's ruling. Bankruptcy can seriously damage your credit, and will appear on your credit report for up to 10 years after it is reported. It is also a complex legal matter that an attorney must handle for you. For more information on Bankruptcy you can access free legal information through the University of Washington School of Law library website at: lib.law.washington.edu/ref/legalinfo

Individuals and businesses use two primary forms of bankruptcy: Chapter 13 and Chapter 7. Chapter 13 allows you to pay off your creditors over a set period of time (usually 3-5 years), while Chapter 7 requires you to liquidate your assets such as your house, car, bank accounts, etc. to pay off your debts.
Although you will start with a clean slate after filing for bankruptcy, the consequences can tarnish your financial opportunities for many years. However, if you truly cannot pay off your debts and feel that bankruptcy is the correct route, secure counsel from a bankruptcy attorney. See Chapter 4: Professional Services for information and resources on locating an attorney.

Federal bankruptcy laws in effect since October 2005 have limited the number of individuals who can file for Chapter 7 bankruptcy. Under the 2005 laws, individual filers must pass an income-based test in order to qualify. The court will consider whether:

  1. You can pay 25% of your income to debt after subtracting food, rent, utilities, etc.
  2. Your income is below the state median income.

If you meet these burdens, the court still has discretionary power to require you to file under Chapter 13, in which case it will set-up a payment plan based on living standards guidelines established by the IRS.

The following links provide more in-depth explanations of the 2005 bankruptcy laws:
http://www.npr.org/templates/story/story.php?storyId=4600645
http://www.personal-bankruptcy-chapters-7-13-filing-laws.com
http://money.cnn.com/2005/04/20/pf/bankruptcy_bill/

Rebuilding Credit

Rebuilding your credit requires time and patience. Once you are in a financially secure and stable position, take the following steps:

  • Start paying your bills on time. This includes utility bills, credit cards, car payments, rent -- basically, anyone to whom you owe a monthly payment.
  • Pay off any past due accounts and delinquent debts.
  • Open a checking or savings account. Lenders and some landlords review your bank statements when making credit decisions.
  • Open a credit card account. You do not have to use the card, but having one does put you back on the credit map. If you have problems obtaining a conventional credit card, try to obtain a secured credit card, under which you deposit a certain amount of funds that are used to set the limit on your credit card. For example, if the bank gives you a $300 limit for a secured credit card, you must provide a $300 security deposit.
  • Save. A rainy day fund will come in handy when unexpected expenses and costs arise.
  • Give yourself time. Once you've gotten back on track, allow three months to a year to pass before expecting any increases in your credit score and rating. As your score increases, so will your ability to access more credit opportunities.

Once you develop a reliable payment history and undergo constructive debt management, bad credit items will diminish in importance. Positive practices such as paying off student loans and paying your car payment or other bills on time stay on your report indefinitely.

Most bad items can legally remain on your report only seven years after the creditor reports them; the credit bureau must then remove the item from your report. When these items come off, your credit score will typically increase in a few months. However, some credit items (bankruptcies, for instance) can stay on your report for up to 10 years. If an outdated item is not removed from your report, contact the credit bureau immediately for an explanation and/or to get the item removed.

Avoiding Predatory Practices

Steer clear of "creditor predators": organizations, companies and practices that charge high fees and rates. Participating in these programs will cost you more money in the long run, and could even contribute to your cash flow problems. The remainder of this section will discuss common predatory practices

Bank Fees

Overdraft protection plans and bounced check fees can be very, very expensive. Avoid bouncing checks. If you don't have sufficient funds to cover a check, secure the funds you need by selling your art, borrowing from family and friends, or putting the amount on a credit card. Fees range between $20-40 per incident, and some institutions even impose daily charges until the amount is paid in full.

In addition, a vendor might run the check several times before returning it to you, which means that a $20 bounced check for a new leotard can quickly turn into $70 worth of bounced check fees, which in turn could negatively affect other checks you have written. Delayed gratification and a late charge might be a more suitable option than lots of bounced check fees.

Mistakes do happen. When you are looking to open a bank account, choose the bank that charges the fewest fees.

Check Cashing Companies

These companies make money by charging extremely high fees (sometimes in the triple digits) for providing bank-like services. Avoid them by having your own checking and/or savings account. Many banks, trusts and credit unions offer a variety of account options. If past credit issues make opening your own account difficult, then try to cash your check at the bank where the account originates, or try local grocery stores or pharmacies that provide affordable check-cashing services.

Past credit problems do not automatically exclude you from opening your own savings or checking account with a local bank. Meet with a banking representative and explain your circumstances. Also, try smaller community banks and credit unions, which often have less stringent requirements than larger institutions. Organizations and lending institutions with a community-based initiative might also help you.

Credit Cards

As you build or rebuild your financial history, do your research and choose wisely when opening new credit card accounts. Steer clear of high-interest credit cards, programs with high fees, low introductory offers that balloon into double-digit interest rates after a few months, and other catches. Find a card with low interest rates, and look for the hidden costs of escalation charges -- for example, interest rate increases that kick into action after just one late payment.

Also, be mindful of companies that check your credit report periodically and that reserve the right to raise your interest rates based solely on your report.

If you are considering getting a credit card, review Websites such as e-wizdom.com that provides information and interest rate comparisons on credit cards.

Pay Day Loans

These companies offer advances on a certain amount of money until you get paid, and charge fees associated with particular amounts. You secure this loan by writing a post-dated check drawn off a checking account, which is deposited on the said date. A typical $250 loan can include a fee as high as $45. So, you end up writing a $295 check to cover a $250 loan. Normally, the loan matures in two weeks, at which time you are expected to pay the loan and fee in full.

If you cannot pay the required amount, then you can pay the fee ($45) and roll the original loan amount ($250) over for another two weeks. Then, again you can either pay the entire $295, or just the fee, and roll the loan for another two weeks. If you roll the loan over just once, you pay a $90 fee to borrow $250!

Borrow from friends and family, or even a bank or credit union, if you are strapped for cash. Or better yet, sell your art! Whatever you do, stay away from these organizations.

Predatory Lenders

Predatory lenders come in all shapes and sizes. They sell mortgages, cars, loans, and many other items. Predatory lending practices include offering loans with extremely high interest rates, charging high pre-payment penalties, and slipping in hidden clauses that can rob you of your assets. Stay away from lenders who practice such tactics, and seek out other alternatives such as family and friends, nonprofit programs and traditional lending institutions like banks or credit unions. If it sounds too good to be true, then it probably is.

Rapid Refund Tax Returns

Similar to "pay day loan" companies, these businesses charge a fee to provide your tax refund faster and up-front. The fee comes out of your refund, and can run as much as 20-30% of the total amount. If you file your taxes correctly and on time through traditional routes, you will receive your refund in just a few weeks. Be patient and wait: The money is coming! By staying away from these companies, your return will be greater.

Rent-to-Own Companies

These institutions charge high fees and interest rates, and their contracts often include alarming loopholes. Some customers end up paying nearly double an item's worth after renting from these organizations. If you are in a bind and need furniture, thrift and resale shops offer an inexpensive alternative to rent-to-own companies. You can also do without and save until you can purchase the desired items.

Credit and Your Space Hunt

Now that you understand how credit works, it is time to explore the role it plays in your ability to secure space.

Money is only one part of the equation when leasing or financing the purchase of a property. As mentioned previously, your credit history can dramatically affect your options. If you are buying, good credit can mean lower interest rates, fewer fees and more choices between lenders, while bad credit can translate into high interest rates, more fees, greater restrictions on your options and closed doors. High scores mean you pay less over the life of the loan, while low scores mean you might pay premium rates. High scores might also qualify you for special programs and incentives closed to those with lower scores. If you are leasing, good credit can mean favorable lease terms and conditions, and determine whether you get a space at all.

Personal credit is not always separate from your business credit -- especially when creditors deal with start-up businesses or fledgling nonprofits. In these situations, until the business or organization has existed long enough to establish a solid financial track record and its own credit history (which could take years), your personal credit history and score might be the only basis for creditors' decisions regarding your new enterprise.

If more than one person owns the company or sits on the board of directors, then the credit and finances of everyone involved might be considered. This can be advantageous in securing more opportunities (unless, of course, the co-owners or board members have bad credit and finances) because creditors will regard the risk as shared -- i.e., they will have more people from whom to request repayment if problems ensue.

The next section, lending criteria discusses in greater detail the credit items and issues lenders and creditors consider when providing loans and other types of credit.

Lending

Lenders typically use five criteria when evaluating your credit history to determine whether they will lend to you. The "Five C's of Credit" are: Capacity, Capital, Collateral Credit, and Character.

Capacity

According to the creditor's standards, are you qualified to receive the line of credit or loan that you want? Do you have the background, history, experience and expertise to continue with the project? Does your track record in business or in paying your bills indicate that you will come through?

Your employment also plays a factor. How long have you been employed at your job, and what type of job do you have? For creditors, certain types of employment are viewed more favorably than others. Most occupations fall into these categories, and are viewed from most desirable to least:

  • Professional (doctor, lawyer, tenured college professor, head of company)
  • Managerial
  • Self-employed (artists)
  • Clerical
  • Manual labor.

Capital

Have you contributed or committed enough of your own resources to the venture to ensure you will see the endeavor through? Have you put down a sufficient down payment on the property? Are you willing to put up the equity in your own home to cover a business loan?

Collateral

Lenders want to know what tangible assets you have (job, money in the bank, house, car, etc.). If you receive a loan, these assets will secure the loan. In other words, the lender can claim ownership of your assets in the event that you default on the loan. Your home or building becomes the collateral, with mortgages, and will be sold if you default. For other types of credit, such as credit cards or auto loans, your job is used to indicate your ability to pay back the lender.

Credit

Here, the lender reviews your credit reports and track record in borrowing and repaying debts. If you have had problems, be upfront about them, and prepare explanations. Creditors might request a letter and supporting documentation that explains how you have remedied credit issues.

Character

This is where the creditor's subjectivity plays a role in their decision-making, and where you must sell yourself. Impress the lender, and you might receive more than your credit, collateral and capital would otherwise warrant. If the lender finds you questionable, you might lose the loan altogether.

Creditors will evaluate your present situation and decide if you can make mortgage payments on a timely basis, even if you've got a history of financial instability. The creditor's confidence in your organization's ability to sell your products (sculptures, musical scores, theater tickets, etc.) and/or accomplish its mission is very important. Can you demonstrate that, despite past hardships, you have always handled yourself responsibly, and with integrity and professionalism?

Getting Credit Ready

If you hope to purchase a property or obtain a new lease, start reviewing your credit at least six months to a year in advance. Start by pulling a credit report from the three primary bureaus, which will give you sufficient time to correct mistakes and to rectify any problems. Being proactive and "cleaning" up your report will also help to increase your score.

Credit and Insurance

In Washington State, it is illegal for insurance providers to base their decisions on whether to provide insurance to you, or renew and/or cancel an already existing policy, solely on your credit history. Additionally, insurers are not allowed to cancel or non-renew policies based upon:

  • The absence of credit history
  • The number of credit inquiries
  • Collection accounts identified as medical bills
  • The initial purchase or finance of a vehicle or house that adds a new loan to the consumer's existing credit history
  • The use of a particular type of credit card, debit card or charge card
  • The total available line of credit held by the consumer


For detailed information about laws concerning insurance and credit, contact the Washington State Office of the Insurance Commissioner at www.insurance.wa.gov or 1-800-562-6900 or for more information about insurance visit the website of insurance for small business and non-profits at www.insureuonline.org.

Credit and Identity Protection

In today's "Information Age," personal information is often just one mouse-click away. The upshot: We're all becoming increasingly interconnected. The downside: an increase in Identity Theft.

Identity Theft occurs when someone uses your persona to gain access to your personal information. These thieves often destroy your finances and credit rating by opening new accounts and making purchases under your name. No one is completely immune to such criminals. However, you can take steps to protect your personal information, identity, finances and credit rating. Organizations such as theElectronic Privacy Information Center and the Privacy Clearinghouse help protect your privacy and personal information.

The remainder of this section discusses how you can protect yourself from Identity Theft.

Managing Personal Information

When handling your identity and credit:

  • Check your credit report at least once a year to make sure that no one has opened a new account in your name, and that no unusual inquiries or other activities have occurred. This helps you to spot problems early.
  • Keep in mind that, although any creditor can put information on your credit report as long as it is considered valid and they have your social security number, only legitimate businesses can actually access your report -- and they must receive your permission to do so. Only existing creditors can access your records without your permission. If an unauthorized inquiry appears on your report, follow up with the credit bureau immediately to find out who has accessed your information.
  • Look for inaccurate information on your report. The Fair Credit Reporting Act, which regulates creditors and credit bureaus, requires the bureau to investigate your claim. If your claim is found to be valid, the information on your report must either be removed or corrected.
  • You can install a fraud alert system on your credit report for a period of seven years. This means that any time someone (including you!) tries to open up an account in your name (mortgage, car loan, credit card, etc.), you will immediately receive notification for verification to approve the application. It will require effort on your part to keep your contact information updated with the credit bureaus, but the reward of added safety may be worth it. Contact the three primary credit bureaus to add this request to your reports.
  • Credit bureaus often sell pre-screened lists to potential creditors. These lists only contain your name and address, but result in tons of junk mail with offers for new credit cards, home or car refinancing, and other services. You can request removal from the pre-approved offers list for a period of five years by contacting the credit bureaus directly. You might also want to shred all pre-approval forms, as some identity thieves have used them to open new accounts

Protecting Personal Information

Steps to protect your credit:

  • Check your credit report at least once a year to make sure that no new accounts have been opened in your name. Also, check to see if any unusual inquiries or other activities have occurred. Spot problems early.
  • Just as you would with your credit report, check your savings and checking accounts for unusual activity each month.
  • Avoid unwanted phone calls and mailings. Recent federal legislation has made it easy for you to stop unwanted phone calls and tons of junk mail. By signing up on the National Do Not Call Registry, telemarketers must stop contacting you by law. Your registration lasts for five years, after which you must reapply. Sign-up on the list here, or call 888-382-1222.


For additional information, contact the Washington State Office of the Attorney General at 800-551-4636 or www.atg.wa.gov

When telemarketers call your home, it is your right to tell them to immediately stop calling and remove your name from their lists. They must comply. If you continue to receive calls, you can file a complaint with the Federal Trade Commission. To stop unwanted solicitations via the mail, send your name and address with a note to remove your name from the list to:

Mail Preference Service
P.O. Box 9008
Farmingdale, NY 11735-9008

For both services, any time you change your mailing address or phone number, you will need to update your information with the appropriate organization.

When your creditors send you Privacy Notices, read them thoroughly to understand how they will use your sensitive information. Opt-out to prevent them from sharing your information with other organizations.

Shred vital information that contains your social security number (SS) or Tax I.D. number (for businesses and nonprofits) and other sensitive information. Your SS and I.D. numbers are direct gateways to all of your vital records and credit information.

Make sure you know how businesses, banks, organizations and others use your personal/business information. Do they sell your information to other organizations? Are they destroying sensitive material? While you are being careful, others might be careless. Request that businesses and organizations do not use your Social Security or Tax I.D. number as your customer identification number.

Again, the Information Age has made getting into your house and information easier via the web and email systems. Install firewalls on your computer.

Do not store sensitive personal or financial information on your cell phone or pager. If you lose these items, someone can gain instant access to your sensitive information. Keep this type of information privately secured in your home.

Keep abreast of new legislation and business practices that attack your right to privacy and/or make access to your personal information easier. Many nonprofit organizations such as the DMA Consumer Assistance Center,Electronic Privacy Information Center,Privacy Clearinghouse and Identity Theft.org provide information and resources to help you maintain and protect your sensitive information and privacy, which in effect protects your credit.

TIP: If you are planning to purchase or obtain a new lease, pull a credit report from the three primary bureaus ( Equifax , Experian and TransUnion ) at least six months to a year beforehand. This will allow you adequate time to correct any mistakes on the report and to clear up any blemishes.

TIP: Shred or remove your name from pre-approval credit card and loan applications. Some identity thieves have gained access to individuals' information by changing the return address on these forms and then opening the new account in the individual's name.

TIP: Steer clear of "credit repair" companies, which charge astronomical fees for help that is often available for free.


Resources

Center for Responsible Lending
Educates the public about predatory lending practices and prevents this type of financial abuse.

Credit Smart
A service of Freddie Mac, Credit Smart is a consumer guide to rebuilding credit.

DebtAdvice.Org
Designed to help consumers understand the wise use of credit and locate a caring, certified counselor if they are in need of assistance.

DMA Consumer Assistance Site
Offers information and resources on how to protect your rights as a consumer, and your private information.

Dun and Bradstreet
Provides global business information, business tools, and business and nonprofit credit reports.

Electronic Privacy Information Center (EPIC)
A public interest research center in Washington, D.C. that focuses on civil liberties issues and how to protect one's privacy.

Equifax
Credit counseling and other resources for those interested in maintaining good credit or repairing credit.

FCC: Federal Communications Commission
Regulates interstate and international communications by radio, television, wire, satellite, and cable.

Federal Trade Commission (FTC)
Monitors credit bureaus and telemarketers, enforces credit-related laws, and offers free information about credit organizations.

Federal Trade Commission (FTC) Consumer Protection Information
This section of the FTC's Website provides publications that feature advice on avoiding scams and rip-offs, as well as tips on other consumer topics.

National Credit Union Administration (NCUA)
The federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions.

National Foundation for Credit Counseling
Provides credit counseling and debt management services. Member organizations work with consumers to settle debts with their creditors and provide information on debt management issues.

Office of the Comptroller of the Currency (OCC)
Charters, regulates, and supervises national banks. (National banks contain the word national or N.A. in their title -- i.e., National City Bank or First National.)

Office of Thrift Supervision
The primary regulator of all federally chartered and many state-chartered thrift institutions, which include savings banks and savings and loan associations. These banks have FSB or FA as part of their name.

Privacy Clearing House
Dedicated to raising the public's awareness about technology's impact on personal privacy.

Suze Orman's Financial Planning and Management Resources
Offers links and information on financial and personal planning resources such as debt management and insurance quotes.

Computershare
Offers corporate issuer and retail shareholder services, employee plan administration and access to direct stock purchase plan investing.

TransUnion Credit counseling and other resources for those interested in maintaining good credit or repairing their credit.

UP Bankruptcy
Offers articles about bankruptcy issues.



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