The Credit
411
Contents
What’s in My Credit Report?.............................................................................. 1
Taking Care of Your Score................................................................................... 3
How Do I Get Credit?.......................................................................................... 4
Understanding Credit Cards............................................................................... 5
Protecting Your Credit......................................................................................... 7
Thinking About Filing Bankruptcy?................................................................... 9
Anatomy of a Credit Card Disclosure............................................................... 10
Create a budget. You should know how much you can afford to spend on credit card
payments.
It is a good idea to always pay more than the minimum payment required to reduce
your balance at a faster pace.
Don’t spend more than you can afford; spend less than you earn and save the rest
for another goal.
What’s in My
Credit Report?
Identifying Info — Your name, address, Social Security number,
date of birth and employment information. This information is
updated when you apply for credit.
Understanding the facts about credit scores and credit reports
will help you make choices that will protect your credit in the
long run.
Your Credit Accounts — Lenders report on each account you
have — the type of account, the date it was opened, your credit
limit or original loan amount, the account balance and your payment history.
Your score is a mathematical risk assessment based on the information listed in your credit report. Credit scores range from
300 to 850. The higher the score, the better. Eighty percent of
Americans have a credit score of 620 or higher.
Inquiries — A list of everyone who has looked at your credit report within the last two years. The report lists “soft” inquiries
(inquiries that do not change your credit score; example: requesting your own report) and “hard” inquiries (inquiries that may
change your score; example: requests for such things as auto or
home loans). Inquiries and requests by consumers, employers
and insurance companies are also shown.
You can get a free copy of your credit report and score at any
Educators location.
Public Record — This includes bankruptcies, foreclosures, wage
garnishments, tax liens and civil judgments ­— each remaining on
your credit report for 7-10 years, even after being paid.
Payment History — The number of accounts you have paid on
time, any past due items, how far accounts are past due and when
delinquencies or collections happened.
Amounts Owed — Amounts owed on specific accounts, the number of accounts with balances, the ratio of balances to credit limits
on revolving accounts, such as credit cards, and the ratio of balance
to original loan amount on installment loans, such as a car loan.
Length of History — The amount of time since the accounts
were opened and the amount of time since there has been account activity.
In the United States there are three major credit reporting agencies: TransUnion,
Experian and Equifax. A credit agency is a company that acquires and maintains files
on almost every U.S. adult.
These credit agencies acquire information about you and your accounts from creditors
such as banks, credit unions, mortgage lenders and retail establishments. They search
court records for lawsuits, judgements and bankruptcy filings. Also, agencies review
county records for tax, judgement, collection items or other liens (legal claims).
New Credit — Recently opened accounts; amounts owed and
when they were opened; and the number of recent credit inquiries.
Types of Credit Used — How many types of credit have been
used, such as revolving, installment, home, auto and unsecured.
It is possible not to have a credit score. This will appear as “N/A” on
your credit report. This means that you do not have enough credit history to generate a score.
300
620
Credit Score Range
850
1
Taking Care of Your Score
Payment History — Pay your bills on time. If you have missed
payments, get current and stay current. Contact your creditors
to see if they will set up a new payment schedule that you can
maintain. Don’t let a bill go to collection; these items stay on
your report for 7 years even after they are paid!
on’t expect miracles from companies that promise to fix a poor
D
credit rating quickly and painlessly for a fee. The only way to
improve a credit record is to let time pass and establish a record
of on-time payments.
Amounts Owed — Keep balances low on credit cards and other
“revolving credit”; being at or near credit card limits can hurt your
score. Pay off debt rather than moving it around. If done too often,
shifting from one lender to another may lower your score. Don’t
apply for new credit cards that you don’t need, just to increase your
available credit. This also may lower your score. Remember that
closing an account does not remove it from your report.
Length of Credit History — If you have had credit for only a
short time, don’t apply for too much too quickly. Someone with
no credit is seen as a higher risk than someone with good credit
history and long relationships with creditors. This can be a challenge to consumers who take advantage of “teaser rate” accounts
to repay/refinance debt, which again may lower your score.
New Credit — When rate shopping for a new loan, visit each
lender within a few days — not weeks. Lenders can adjust their
rates at any time. In addition to rate, it is important to compare
any fees and repayment terms. Some lenders may charge different
rates based on your score.
It’s a lot easier to ruin your credit than it is to fix it. Don’t get carried away. If
you stay aware of your debt, and live within your means, you’ll be fine.
If your score falls below where you want it to be, you can take steps to improve it;
however, raising your credit score takes time. In fact, quick-fix efforts often backfire.
Repair Your Credit — Seek help to re-establish your credit history if you have had problems.
Types of Credit Use — Apply for credit only as needed and use
your credit cards responsibly. Credit cards and installment loans
that are managed responsibly, by making timely payments, raise
your score.
If you see that you are overextended, immediately stop purchasing with credit! Take your credit cards out of your wallet and
store them in a spot that is hard to reach, or cut them up. You
may want to consider consolidating debts. A single monthly payment may be easier to make than several separate ones and might
also get you a lower interest rate. Debt consolidation is not a
cure-all; you have to learn to control your spending to avoid future debt.
3
How Do I Get Credit?
The Credit CARD Act of 2009 has placed limitations on marketing and issuing credit cards to anyone under the age of 21. Here
are the details:
 Consumers under the age of 21 must either show proof that
they can repay the debt, or they need to have an adult cosigner with good credit.
 The law bans offers of freebies (pizzas and t-shirts, for example)
if students sign up for credit cards on or near campus (within
1,000 feet) or at college-sponsored events.
 Pre-screened credit card offers cannot be sent to anyone under
the age of 21.
 The law also urges colleges to adopt policies limiting the number of campus locations where card marketing events can take
place and requiring credit card marketers to alert the school
when they are conducting on-campus marketing events.
 Card companies must now follow specific rules when it comes
to card disclosures, making it easier for you to understand the
terms and conditions (see page 10 for an example).
Although this new law may make it harder for you to get a credit card and start establishing your credit history, it is meant to
protect you. So many young people have gotten into trouble by
racking up credit card debt without having the means to repay it.
Now, companies have to make sure you can repay it and that you
are a better informed consumer.
Here are some other ways for you to start establishing credit:
Take care of your bills — The utility company, doctors, cell
phone companies, landlords and some others can report late
payments to the credit bureaus. This can show up on your report and lower your credit score. Pay your bills on time so
you don't start off with a bad score. Some lenders also review
checking histories before offering loans, so make sure to be
careful with your checking account.
 Apply for a loan — Have someone with good credit ready to cosign a loan for you; remember he or she then shares liability for
the loan with you. If you make late payments, they will reflect
poorly on your credit as well as your co-signer’s. After a year of
timely payments, reapply for the loan in your own name.
 Have patience — It takes time to establish credit. Remember,
you are building a record of consistency in making payments
on time, which demonstrates your creditworthiness. Go slowly — be cautious, keep track of your overall debt, and pay on
time. It is much better to develop a strong credit record than
to apply for too many credit cards or a loan that is larger than
you can handle.
4
Understanding Credit Cards
Shop around. There are many credit card companies that want
your business. Look closely at the terms; they’ll help you figure out
who the bad guys are:
 Regular (non-introductory APR) — Look for cards with an
APR under 15%.
There is a Better Way to Pay Off Your
Credit Card Debt
Amount of Debt
G
race Period — How long your purchase is interest-free. Look
for at least 25 days.
$1,000
L
ate Payment Fee — Know what the company will tack on if
you make a late payment and if there is any grace period before
a fee is assessed. Look for late payment fees below $20.
$2,000
 Annual Fee — Look for cards with no annual fee.
P
enalty APR — Often called the Default Rate or Non-Preferred
Pricing. Some credit card companies charge a higher interest rate
if you go over your limit or make a late payment or two. This
Penalty APR replaces your current interest rate. Look for cards
with no penalty APR or one below 18% and in effect for a specified time frame.
U
niversal Default Clause — Some card companies are adding a
clause that states that they can raise the interest rate on your card
to the penalty or default rate if you make a late payment to any
of your creditors, not just your credit card company. Look for
cards that don’t have this clause.
R
ead the Fine Print — Always make sure to thoroughly read
the disclosure before accepting the offer. You’ll find that some
companies will hide their fees and other important information
in the small print.
C
arry Only One or Two Major Credit Cards — Avoid using
your entire available credit limit and having several department
or store cards. Try to use cards only when you can pay off the
balance each month.
A
lways Pay More Than the Minimum — If you can’t pay your
balance in full, always pay more than the minimum. Credit
card companies set their minimum payments so low (usually
2% of balance) that it takes forever to pay them off. Card companies are now required to tell you how long it will take to pay
off your balance if you only pay the minimum amount. Check
your card statement each month for this information.
$3,000
$4,000
$5,000
$10,000
$15,000
Payment Amount
Years in
Debt
$20
$40
Min. Amount* $40
Double $80
Min. Amount* $60
Double $120
Min. Amount* $80
Double $160
Min. Amount* $100
Double $200
Min. Amount* $200
Double $400
Min. Amount* $300
Double $600
Min. Amount*
Double
Total Interest Paid
7
3
7
3
7
3
7
3
7
3
7
3
7
3
$1,765
$1,300
$3,531
$2,603
$5,297
$3,905
$7,062
$5,206
$8,828
$6,508
$17,655
$13,015
$26,482
$19,522
The following assumptions apply to this chart:
 18% nominal interest rate (payment is 2% of the original balance).
 Dollars and years have been rounded to the nearest whole number.
 Payment indicated on the chart is made monthly.
 No additional fees or charges are incurred during the repayment period.
In the real world, minimum monthly payments will decrease if you do not charge any
more. Credit Card companies do this to stretch out the amount of time it will take to
pay off your debt, meaning you pay more in interest.
*This is your first monthly payment.
Here’s an example: You have a $2,500 balance and your credit card
interest rate is 18% APR. If you make only the minimum payment,
which is 2% of your balance, it will take over 34 years and almost
$6,500 in interest to pay off this balance! Total cost to you: $9,000!
If you make monthly payments of $50, it will take 4.4 years and $987
in interest to pay it off. Total cost to you: $3,487.
5
Protecting Your Credit
nce you have credit, it is necessary to protect it. Be careful with
O
your credit, debit and ATM cards, as well as your account and
personal identification numbers (PINs). Carry only the cards you
expect to use. Keep a list of account and telephone numbers of
the companies that issued your cards. Photocopy the contents of
your wallet, so if your cards are lost or stolen you can notify the
companies quickly. If your notification is received before the cards
are used, you have no legal responsibility for unauthorized charges;
if it is received after the cards are used, you’re responsible for $50
per card.
Never give out your credit card, checking or savings account information to a telephone solicitor. Save sales receipts to compare
with your bill, and shred any documents containing account
numbers before you discard them.
If you disagree with an item on a bill, you are responsible for
notifying the creditor in writing within 60 days of receiving the
bill. Include your name, account number, the item in error and
the reasons why you believe it is wrong.
If you feel that your personal information may have been compromised, act quickly to minimize the potential for identity theft. Report identity theft to local law officials, provide all documentation
available and ask for a copy of the police report. Keep it on hand for
creditors. Immediately contact the fraud units of the three major
credit reporting agencies listed on the back cover and ask that a fraud
alert be added to your account.
Educators offers “Identity Theft 911,” a free service for members
with an Educators checking account or credit card. This service
gives you additional resources and tools to safeguard your information. If you become a victim of identity theft, this service
will help you prepare affidavits, write letters, contact creditors,
assist in restoring your credit, and more. In addition, you’ll have
access to consumer education and the latest information on this
complex topic. For more information on Identity Theft 911, visit
www.ecu.com/vip/theft/theft.
Financial Accounts: Close compromised credit card accounts
immediately. Ask your financial institution about whether you
should close bank accounts immediately or change your passwords. Have the institution monitor for possible fraud. Place
passwords on any new accounts that you open. Avoid using
common passwords, such as your mother’s maiden name, your
birth date, the last four digits of your Social Security number,
your phone number or a series of consecutive numbers. If your
checking account information is used to set up a fraudulent
account or checks are stolen, report the crime to the police and
the check verification agencies: ChexSystems (800) 428-9623
and Equifax (800) 437-5120. Stop payment on all questionable outstanding checks. If your ATM card has been stolen, get
a new card and change the PIN.
Social Security Number: Call the fraud number for the Social Security Administration (800) 269-0271 and their Earnings and Benefits Department (800) 772-1213. Also call the
toll-free number of any one of the three nationwide consumer
reporting agencies on the back cover and place an initial fraud
alert on your credit reports. This alert can help stop someone
from opening new credit accounts in your name.
 Driver’s License: Contact the Department of Motor Vehicles
(608) 266-2353 and follow their procedures to cancel your license
or ID and get a replacement. Ask them to “flag” your file to keep
anyone else from getting a license or another ID in your name. Do
the same for all other government-issued identification.
nce you’ve taken these steps, watch for signs that your inforO
mation is being misused. Follow up with creditors if your bills
don’t arrive on time. A missing bill could mean an identity thief
has taken over your account and changed your billing address
to cover his tracks. Other signs include: receiving credit cards
that you didn’t apply for, being denied credit or being offered
less favorable credit terms, like a high interest rate for no apparent reason and calls or letters from debt collectors or businesses
about merchandise or services you didn’t buy.
A good way to protect your credit is to check your credit report each year (it’s free!)
at www.annualcreditreport.com. Because you are entitled to one free report from each
of the three credit reporting agencies every year, you can rotate agencies and receive
one free report every four months.
You can also come into Educators and get a free copy of your report and score with
the What's Your Score? program.
Lenders, employers, insurance companies and other agencies may use your credit score
when considering your application. Consequently, it makes sense to check your report
for accuracy — it can affect more than just your ability to obtain a credit card.
7
Thinking About Filing
Bankruptcy?
This legal process allows someone deeply in debt to create a plan
to get out of debt. Be careful; this should only be considered after
consulting an attorney, as this will appear on your credit report for
10 years!
Although bankruptcy will clear most of your debts, it may not
eliminate spousal and child support payments, some student
loans, taxes or fines; and it can be expensive — court costs and attorney’s fees add up. Depending on your situation, this is money
that potentially could be used bringing past due accounts current,
or making payment arrangements.
You won’t be allowed to file Chapter 7 if your income is above the
state’s median and you can afford to pay 25% of your unsecured
debt. The court will also apply living standards, derived by the
IRS, to determine reasonable living expenses to figure what you
have left to pay your debts.
Under these provisions you are required to meet with a credit
counselor six months prior to applying for bankruptcy. Before any
debts are discharged, money management classes must be attended
at your expense.
Two basic types of bankruptcy are:

Chapter 13: This puts you on a debt repayment plan up to 5
years. In this case debtors won’t lose any property or possessions.

Chapter 7: This involves the liquidation of all your assets, except
those exempt by law, to pay your debts.
With the new bankruptcy laws in effect, fewer individuals will
be allowed to file Chapter 7 and will be forced into Chapter 13.
O
F
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R
O
M $400 pizzas!
Dirt bike disaster!
Free credit cards!
Okay, it’s all waiting on you at the
Head to www.ecu.com and click on
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Laptop losers!
website.
See you there!!
9
Anatomy of a Credit Card Disclosure
Penalty Interest Rate — This rate
replaces your standard rate if you
make a late payment, go over your
credit limit. The info included in
the chart will tell you when this
rate could go into effect.
Standard Rate — This rate is
charged after your introductory period (if you have one)
has expired.
Introductory Rate — This rate is
charged for purchases and/or balance transfers (like in this example)
for a limited time only.
Interest Rates and Interest Charges
Also called Grace
Period —This is how
long your purchase is
interest free. In this
example, a purchase
would be charged interest, if it is not paid
for by the 25th day.
Annual Percentage Rate (APR)
for Purchases and Cash Advances
18.9%
APR for Balance Transfers
0% introductory APR for the first six billing cycles after account opening.
After that, your APR will be 18.9%.
Balance transfer fees will also apply (see Fees section below)
28.99%
Penalty APR and When it Applies
This APR may be applied to the entire balance of your account if you:
1) Make a late payment twice in a six-month period;
2) Go over your credit limit twice in a six-month period;
3) Make a paymnt that is returned; or
4) Do any of the above on another account you have with us.
How long will the Penalty Rate Apply? If your APRs are increased for any of
these reasons, the Penalty APR will apply until you have made six consecutive minimum payments
when due and do not exceed your credit limit during that time period.
How to Avoid Paying Interest
on Purchases
If you pay your entire balance in full each month, you have at least 25 days after the close of each
period to pay your balance on purchases without being charged interest. Cash advances are charged
interest from the date of the advance, as required by law.
Website for Additional Information
To learn more about factors to consider when applying for or using a credit card, visit the website
of the Federal Reserve Board at www.federalreserve.gov/consumerinfo/consumercredit.htm
Fees
Annual Fee —
You pay this fee
each year, just to
have the card.
Annual Fee
$39
Transaction Fees
 Balance Transfers
 Cash Advances
Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100).
Either $5 or 3% of the amount of each transfer, whichever is greater.
Penalty Fees
 Late Payment Fee
 Over-the-Credit Limit
$29 (Your APRs may also increase; see Penalty APR section above)
$29 (Your APRs may also increase; see Penalty APR section above)
How We Will Calculate Your Balance: We use a method called “Average Daily Balance (including new purchases).”
Late Payment and Over-the-Credit
Limit Fees — This is charged if you
make a late payment or if your balance exceeds your credit limit.
10
How Balances are Calculated— Average Daily Balance
Method: Based on the average balance that existed each day.
Adjusted Balance Method: Based on the account balance remaining after adjustments are made for payments and credits during the billing period. Previous Balance Method: Takes
the outstanding balance at the end of the previous billing
period and applies the interest rate to that total. Charges in
the current billing period are not included.
APR — Annual Percentage Rate. The rate of interest (in terms
of a percent, such as 8.75%) being charged for a loan over a
year’s time. The APR includes interest, transaction fees and service fees.
ATM — These letters stand for Automatic Teller Machine. Take
care of your finances 24/7. You can deposit or withdraw money
or even pay loans.
Balance — 1) Loans; the balance is the difference between the
amount owed and the principal amount paid.
2) Checkbooks; balancing means to account for all
money that came into and went out of your account, so that at the end of the month you and
your monthly statement agree.
3) Savings; your balance is what is left in your savings
account after you deposit or withdraw money.
Budget — A plan you create for controlling spending and encouraging saving.
Share Certificate — A type of investment that requires you to
invest money for a certain length of time and guarantees the
same rate of return (interest) for that entire time. Also known
as a Certificate of Deposit, or CD. Usually a minimum deposit
is required.
Charge — To borrow money (from a store, service provider, or
credit card company) to make a purchase. If you do not pay the
debt off in full within the card issuer’s grace period (usually 2528 days), you will pay interest on the amount you owe.
Co-sign — To co-sign a loan means to guarantee the payment
terms for another person and to become personally liable for
those terms.
Credit — Loan that enables people to buy something now and
to pay for it in the future.
Credit Limit — The highest amount you may charge on a credit
card. Your limit is set by your card company’s opinion of your
ability to handle debt.
Credit Agency — Credit agencies are companies that keep track
of how you pay your debts (bills). When you borrow money
from a credit union or apply for a credit card, the credit union
or the credit card company will ask a credit agency to rate you.
Lenders want to know if you are a reliable bill payer before they
approve your loan or credit card.
Debit Card — This plastic card looks like a credit card, but it is
used to withdraw money from a savings or checking account.
When you use a debit card at Automatic Teller Machines or
in stores to make purchases, money may be immediately withdrawn from your account. In most cases, you cannot withdraw
more money than you have in the account.
Finance Charge — A fee you must pay when you do not pay off
the entire credit card debt within a single payment period, usually about 25-28 days. This charge is determined by the interest
rate (APR) you agreed to pay when you applied for the card.
Insufficient Funds — A phrase that means you do not have
enough money in your account to cover an expense.
Minimum Payment — The smallest amount you are required to
pay a lender each month on a debt.
Variable Rate — A rate that may change over time. If the rate is
subject to change, this must be disclosed in writing before the
loan is taken.
What’s Your Score?
To remove your address from mailing lists or your
Get your free credit report and score by visiting any Educators location.
name and number from telephone solicitation lists:
https://www.ecu.com/inside/locations
Go to www.donotcall.gov, call (888) 567-8688 or write to: Mail Preference Services,
P.O. Box 9008, Farmingdale, NY 11735-9008
Telephone Preference Service, P.O. Box 9014, Farmingdale, NY 11735-9014
Educators Credit Union
P.O. Box 081040, Racine, WI 53408
www.ecu.com