Contents
Your Credit Report and Your Score..................................................................... 1
Establishing/Re-establishing Your Credit............................................................ 2
Improving Your Score.......................................................................................... 3
Fraud, Identity Theft and Protecting Your Credit............................................... 4
Monitoring and Freezing..................................................................................... 5
Bankruptcy and Credit Counseling..................................................................... 7
Spending Plan...................................................................................................... 9
1
2
Your Credit
Report and Your Score
What’s in your credit report and why is it so important? Your credit
report contains your entire credit history from your very first loan
to the last store credit card you applied for. Your credit report contains the following information:
Length of Credit History
Identifying Information
New Credit
Your name, address, Social Security Number, date of birth and
employment information. These factors are not used in scoring,
nor is your income, race, color, religion, national origin, gender,
marital status or age. This information is updated when you apply
for credit, so do not worry if old addresses or employers appear on
your report.
Recently opened accounts; amounts owed and when they were
opened; and the number of recent credit inquiries.
Your Credit Accounts
The amount of time since your accounts were opened and the
amount of time since there has been account activity.
Types of Credit Used
Which types of credit have been used, such as revolving, installment, home, auto and unsecured.
Lenders report on each account you have — the type of account,
the date you opened the account, your credit limit or original loan
amount, the account balance and your payment history. This information is used in calculating your credit score.
Inquiries
A list of everyone who looked at your credit report within the last
two years. The list includes soft and hard inquries. Soft inquiries
are, for example, if you request your own credit score. Soft inquiries do not change your credit score. Hard inquiries may change
your score. An example of a hard inquiry would be if you apply
for a home or auto loan. Requests by lenders, employers and
insurance companies are also shown.
Public Record Information
In the United States there are three major credit bureaus, also called consumer credit
reporting agencies. Experian, TransUnion and Equifax. A credit bureau is a company
that acquires and maintains files on almost every U.S. adult. These credit bureaus
acquire data from creditors such as financial institutions, mortgage lenders and retail
establishments. They search court records for lawsuits, judgements and bankruptcy filings. Agencies also review county records for tax, judgement, mechanic’s liens or other
legal claims.
This includes bankruptcies, foreclosures, wage garnishments, tax
liens and civil judgments — each remains on your credit report for
seven to 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, and the ratio of balance to original loan amount on
installment loans.
Your Credit Score:
A system of statistically analyzing credit reports that provides a
simple three-digit score comparing past and current credit performance to that of similar consumers. This score provides lenders, or other potential creditors such as insurance companies or
landlords, a quick, fairly objective way to assess your creditworthiness — or likely ability to pay back a loan, mortgage or pay the
rent. Credit scores range from 300 to 850. The higher the score,
the better. Someone with credit score of 720 or better is considered a low-risk borrower — someone with a good credit score.
1
Establishing / Re-establishing Your Credit
Establishing Credit
 A
pply for a loan. Ask someone with good credit to co-sign a
loan for you, but remember your co-signer shares liability for the
loan with you. If you make late payments, it will reflect poorly
on your co-signer’s credit as well as yours. After six months to
a year of making payments, reapply for the loan on your own.
Are you trying to establish credit and finding it hard to get credit when you have
 A
pply for a credit card. Before you apply for any credit, make
sure you understand the terms. How long is the “grace period”
or the time you have to pay the balance in full before finance
charges are added? Is there an annual fee or other fees associated
with the card? Are there interest rate consequences if you make
a late payment?
no credit? As many before you can attest, it’s a lot easier to ruin your credit than it
 H
ave 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.
Working toward re-establishing good credit? If you’re falling behind in your payments,
is to fix it. If you are just establishing credit, don’t get carried away, mind your debt,
and live within your means and you’ll be fine.
take action immediately to keep damage to your credit to a minimum. Call your
creditors to make payment arrangements and cut costs where you can.
Re-establishing Credit
 R
ecognize that you are overextended. Stop purchasing with
credit. Contact your creditors to see if they will set up a new
payment schedule that you can maintain and take your credit
cards out of your wallet — store them in a spot that is hard to
reach or cut them up.
 C
onsider consolidating debts. You may find it easier to make a
single monthly payment instead of several. You might also get a
lower interest rate that will make it easier to keep up with your
payments. Debt consolidation is not a cure-all — you have to
learn to control your spending or you’ll end up deeper in debt.
 C
ontact a financial fitness organization. Educators has partnered
with GreenPath, which can be reached at (800) 550-1961 or online at www.greenpath.com. GreenPath has offices in Racine and
Milwaukee.
 D
on’t expect miracles. Don’t use companies that promise to fix
a poor credit rating quickly and painlessly, for a fee. The only
way to improve a credit record is to establish a record of on-time
payments and let time pass.
2
Divorce
Aside from its non-financial effects, divorce can cause problems with your credit record. The end of a marriage does not
erase the debts you and your former spouse took on as a couple. Even if your former spouse is ordered by the court to pay
debts from the marriage, you can become liable if they are
not paid.
 D
ecide how to divide or dispose of property. If necessary, you
can use a mediator to work through this with your former spouse.
 C
lose or separate joint accounts. Decide with your former
spouse who will be responsible for paying bills, and notify your
creditors of your divorce.
 E
stablish independent credit. If you do not already have credit,
make sure your existing bills are paid on time if your name is
still on the account or loan.
Improving Your Score
Whether your credit is already good or could use some improvement, managing your personal finances in ways that enhance
your creditworthiness is always smart. Adopting smart practices
is a good place to start. Raising your score takes time. In fact,
quick-fix efforts often backfire. Talk to an Educators representative about steps you can take to improve your score.
Payment History
 P
ay your bills on time. If you have missed payments, get
current and stay current. Don’t let a bill go to collection.
Collection items stay on your credit report for seven years,
even after they are paid off.
Amounts Owed
 K
eep 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 move 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 may also lower your score.
Remember that closing an account does not remove it from
your report, and can often hurt your credit score.
Length of Credit History
 D
on’t apply for too much credit too quickly. Someone with
little or no credit is seen as a higher risk than someone with good
credit history. Long relationships with creditors have a greater
effect on your credit score than newer relationships. This can be
a challenge for consumers who take advantage of accounts with
“teaser rates” to repay/refinance debt. Moves like that may lower
your score.
New Credit
 S
hopping for a new loan. Visit each lender within a few
days — not weeks. Re-establish your credit history if you have
had problems in the past.
Types of Credit Used
 A
pply for credit only as needed. Use your credit cards responsibly. Credit cards and installment loans that are managed responsibly will raise your score.
Educators Credit Union offers several ways to help you track your spending, learn about
personal finances and even teach your kids about money and spending.
SaveUp: A free program that rewards members for saving money and paying down debt.,
and makes saving fun. Join at www.saveup.com/educators.
My Money Tracker: Part of Home Banking, My Money Tracker categorizes your expenses
and income and helps you keep track of your spending and saving.
FoolProof: A financial education program designed for high school students, helping them
become savvy financial consumers.
Mission Money: An interactive, online simulation that helps educate middle schoolers
about the fundamentals of personal finance.
3
Fraud, Identity Theft and Protecting Your Credit
nce you have obtained credit, it is necessary to protect it. This
O
means being careful with your credit, debit and ATM cards, as
well as your account and personal identification numbers (PINs).
Carry only the cards you expect to use, and keep the others in a
safe place. Maintain a list of accounts and telephone numbers of
the companies that issued your cards. If the cards are lost or stolen,
notify the companies quickly. If your notification is received before
the cards are used, you have no legal responsibility for unauthorized charges. If notification is received after the cards are used, your
legal responsibility is limited to $50 for each card.
 N
ever give out your credit card, checking or savings account information to a telephone solicitor with whom you are not familiar.
Those numbers can be used to access your account and withdraw
money without your permission. Save sales receipts to compare
with your bill, and when you discard documents with account
numbers on them, be certain that the numbers can’t be read.
 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, unless otherwise stated in your account agreement. You
should include your name, account number, the item you believe is in error and the reasons why.
 If you get a notice or feel that your personal information may
have been compromised, take steps quickly to minimize the potential for the theft of your identity. 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 one or all of the three
major credit reporting agencies listed on the back of this booklet and ask that a fraud alert be added to your account. Add
a 100-word victim’s statement to your report indicating your
information was used to apply for credit fraudulently. Try to
include a phone number where you can be reached to verify any
credit applications.
 F
inancial Accounts: Block and have cards re-issued on compromised accounts immediately. Consult with your financial
institution about whether to close bank/brokerage accounts or
change your passwords and have the institution monitor for
possible fraud. Place passwords on any new accounts that you
open. Avoid using your mother’s maiden name, your birth date,
the last four digits of your Social Security Number (SSN), 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
local authorities, your financial institution and the check verification bureaus: ChexSystems at (800) 428-9623 or online at
www.consumerdebit.com and Certegy at (800) 437-5120 or
online at www.askcertegy.com. Remember to stop payment on
any individual checks that were stolen. If your ATM card has
been stolen, get a new card and change the PIN.
 S
ocial Security Number: Contact the Federal Trade
Commission to report possible identity theft at www.idtheft.
gov or call (877) IDTHEFT. You may want to contact the
Internal Revenue Service at www.irs.gov/uac/Identity-Protection
or call (800) 908-4490. You should also call the toll-free number of any or all of the three nationwide consumer reporting
companies listed on the back cover and place an initial fraud
alert on your credit reports.
 D
river’s License: Visit the state Department of Motor Vehicles
website at www.dot.wisconsin.gov to find the procedure to get
a duplicate driver’s license. You can also ask the DMV to place a
notation on your record to require additional proof of identity. Be
aware that this will require you to provide additional proof (birth
certificate, passport, etc.,) at the DMV or if you get pulled over
by law enforcement. You can call the DMV at (608) 264-7049.
 O
nce you’ve taken these steps, watch for signs that your information 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. Getting calls or letters from debt collectors or businesses
about merchandise or services you didn’t buy is another possible
sign that your identity may have been stolen.
4
Monitoring and Freezing
Credit Monitoring
Have you ever seen an online advertisement offering a “free credit
report?” Be careful. Many websites claim to offer “free credit reports,” “free credit scores” or “free credit monitoring.”
You can monitor your own report for free on a regular basis by:
 V
isiting Educators once a year to review your credit report and
score with an Educators representative, or review your report
any time you apply for an Educators loan.
 O
rdering a copy of your report from one of the three reporting
bureaus every four months at www.annualcreditreport.com.
Tips on Ordering Your Own Report
Knowing the information in your credit report and understanding what it means is an important step in using credit wisely and
protecting your identity. Checking your credit report on a regular
basis helps you ensure:
 All of the information reported is accurate and up to date.
 You are aware of your score and its purchasing power.
 No one else has used your personal information to establish credit.
If your files are frozen, even someone who has your name and
Social Security Number would not be able to obtain credit in your
name. A security freeze prohibits, with certain specific exceptions,
the credit reporting agency from releasing your credit report or any
information from it without your authorization.
How Do I Place a Security Freeze?
You must contact each of the three credit agencies and provide identifying information. If you are a victim of identity theft, you must
provide proof that you are a victim. Proof includes reports you have
made to law enforcement agencies. Without proof, there is a $10
charge. The agencies accept freeze requests online. You may have to
send a request or proof via mail if you are a victim of identity theft.
Experian Security Freeze
P.O. Box 9554, Allen, TX 75013
www.experian.com/freeze
TransUnion Security Freeze
P.O. Box 6790, Fullerton, CA 92834-6790
freeze.transunion.com
Equifax Security Freeze
P.O. Box 105788, Atlanta, GA 30348
www.freeze.equifax.com
If you want to order your free annual credit report online, go to:
www.annualcreditreport.com. Once you have filled in your personal information at www.annualcreditreport.com, you will be directed to individual websites operated by the three nationwide consumer reporting companies (Experian, TransUnion and Equifax).
Include:
To order your report at www.annualcreditreport.com, you must provide your name, address, Social Security Number and date of birth.
To further verify your identity, each company may also ask you for
information, like the amount of your monthly mortgage payment.
 Y
our full name (including middle initial, as well as Jr., Sr., II, III,
etc.), address, Social Security Number and date of birth.
You may also order your free report by calling (877) 322-8228 or mail
a completed Annual Credit Report Request Form (found at www.annualcreditreport.com) to: Annual Credit Report Request Service, P.O.
Box 105281, Atlanta, GA 30348-5281.
Adapted from Federal Trade Commission publication “Building a Better
Credit Report,” available at www.ftc.gov
Freezing Your Files
A “security freeze” can help prevent identity theft. Placing a security freeze on your credit files indicates that your information
cannot be shared with potential creditors. Most businesses will not
open credit accounts without first checking your credit history.
 E
vidence that you have made a report (copy of a complaint, police
or investigative report concerning identity theft). If this is not available, include payment by check or money order.
 A
ddresses where you have lived during the past five years.
 Proof of your current address, such as a recent utility or phone bill.
 P
hotocopy of government issued identification (driver’s license
or ID card, military identification, etc.).
How Long Does It Take For a Security Freeze To Go Into Effect?
After five business days from receiving your letter, the credit reporting agencies will place the freeze and stop providing credit
reports to potential creditors.
After 10 business days from receiving your letter to place a freeze
on your account, the credit reporting agencies will send you a confirmation letter containing a unique PIN (personal identification
number) or password — keep this in a safe place. You’ll need this
number when you want to release the freeze on your credit files.
5
Bankruptcy and Credit Counseling
Considering bankruptcy? This legal process allows someone deeply
in debt to create a plan to get out of debt. Bankruptcy should be an
option of last resort. A bankruptcy, even when discharged, will stay
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.
Filing bankruptcy can be expensive — court costs and attorney’s
fees add up, and are non-dischargeable. Financial counseling can
help you determine if bankruptcy is the right option or if you
could use the money you would spend on a bankruptcy to bring
your accounts current.
Two basic types of bankruptcy are:
Chapter 13
A Chapter 13 bankruptcy puts you on a debt repayment plan of up
to five years. With a Chapter 13 filing, you generally don’t lose any
property or possessions.
Credit Counseling
Credit counseling is an excellent alternative if you are considering bankruptcy or just looking to re-establish your credit. These
options are available for you to use as you wish.
Consumer Credit Counseling Services of Greater Milwaukee
(a service of the Center for Financial Wellness, part of Aurora)
7 locations in Milwaukee, Waukesha and Walworth Counties
(414) 482-8801
www.creditcounselingwi.org
Money Management Inc. (partners with Racine Family Services)
524 Main St., Racine
(262) 619-1530
GreenPath (an Educators Credit Union partner)
Offices in Racine and Milwaukee
www.greenpath.com
(800) 550-1961
Chapter 7
A Chapter 7 bankruptcy involves the liquidation of all your assets,
except those exempt by law, to pay your debts. This means that
you may lose your home, car, electronic equipment or anything
of value.
With the new bankruptcy laws in effect, fewer people will be allowed to file Chapter 7 bankruptcies. More people will be required
to file Chapter 13. 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
percent of your unsecured debt.
The court also applies living standards derived by the IRS to determine reasonable living expenses to figure what is left to pay debts.
Two classes are required during the process of the bankruptcy — a
pre-filing credit counseling class and a pre-discharge debtor education class.
7
Spending Plan
The most important part of establishing and maintaining good
credit is to live within your means. And you can’t do that without
a budget and spending plan.
cards or family in times of financial crisis. A good rule of thumb
is having three to six times the amount of your essential living
expenses readily available.
It sounds easy, but if it were so easy, debt would not be such a big
problem for people. In its most basic form, budgeting is about
one simple rule — expenses should never exceed income.
 “Special” Savings Accounts: Set aside money for a specific purpose.
Some examples are insurance, vacation, taxes or Christmas.
A well-designed plan is not about hardship, it’s about achieveing
your financial goals. If your current spending habits are keeping
you from your goals, it’s important to make some changes. It may
be difficult at first, but most life changes are. Just remember you
are trying to achieve your goals.
Budget Guidelines
These are the suggested percentages of
net income that should be allocated to
your expenses:
 H
ousing: Spend no more than 35%
of net income (after taxes) on housing.
Depending on whether you rent or own,
to include: mortgage/rent, utilities, insurance, taxes and home
maintenance.
 S
avings: Save at least 10% of net income throughout your working
life. Make sure you have 3 to 6 months of expenses in an emergency
fund before you start saving for other goals.
 T
ransportation: Spend no more than 15% of net income on
transportation. That includes: car payment, auto insurance, tag
or license maintenance, gasoline and parking.
 D
ebt: Spend no more than 15% of net income on all other consumer debt: students loans, retail installment contracts, credit
cards, personal loans, tax and medical debts.
 O
ther: Spend no more than 25% of net income on all other
expenses: food, clothing, entertainment, child care, medical expenses, charity and vacations.
Helpful Hints
 S
tay Organized: Pay your bills on time, set up an area in your
home for money management, have your spending plan on
hand and refer to it often.
 T
rack Spending: Carry a small notebook with you and record
every purchase you make. Add up your daily spending. After a
few weeks of doing this, you will have a good idea of where and
how you spend your cash.
 E
mergency Account: Establish and maintain a savings fund that
would act as a safety net in the event of an emergency, such as
illness or job loss. This will prevent you from turning to credit
 D
irect Deposit: To help you save effectively, sign up for automatic deposit with your financial institution.
 Credit Cards: Credit cards are extremely convenient, useful and
have good features but it is easy to get in over your head in a hurry.
When it comes to credit cards, compound interest can work against
you. If you carry a balance from month to month, you’re paying
interest on your interest.
 C
onsolidation: If you are juggling many different credit cards, try
consolidating them into one or two. It can make repayment easier
and more efficient. Credit card debt can easily spiral out of control, so limit credit card use to only when you can afford to repay
the balances in full. Close unused and unnecessary accounts.
 Be realistic: Recognize that your goals won’t be achieved overnight, and that changing habits takes work. Need more help?
Educators can assist you with basic budgeting. Visit our website
at www.ecu.com, contact us or stop into a branch. If you need
more detailed assistance, we recommend other options:
GreenPath, a non-profit financial credit counseling organization, offers free money management and financial education services in person or online. They can be reached at
(800) 550-1961 or at www.greenpath.com. Or, contact
Consumer Credit Counseling Services of Greater Milwaukee
at (414) 482-8801 or online at www.creditcounselingwi.org
Bottom Line
Once you have determined the total of your income and expenses
you are ready to determine your bottom line. Subtract the total of
all expenses from your income. If the result is a positive number,
you can add the extra money to your savings to reach your goals
sooner. If your expenses exceed your income, you’ll need to make
adjustments to bring your finances back into balance.
Could you increase the amount you’re saving by earning more
or spending less? Making lifestyle changes means breaking poor
habits. You may be accustomed to shopping without considering
whether you can afford the items (and charging them to credit
cards). Adjusting this behavior may be difficult. It will take work
and commitment to change habits. Keep in mind that the advantages of doing so far outweigh the short-term pain and can help
you achieve other goals.
Monthly Net Income -
Total Expenses
=
Balance
9
What Are You Going To Do Now?
Keep the plan going! A well-developed spending plan is your
springboard to financial independence. The key is to spend wisely
and use your dollars effectively. It will help you clarify objectives,
organize personal finances, refine spending and attain your goals.
To make sure you are staying on track, it’s a good idea to review
your expenses and spending habits annually.
Monthly Income
Health
Paycheck
Paycheck
Tips/Commission/Other
Social Security/Pension
Child Support/Alimony
Total Monthly Net Income
Medications
Doctor
Dentist
Optometrist/Lenses
Insurance
Exercise Classes/Health Club
Misc.
Total
Housing
Setting Goals
Your financial goals are specific things you want to do with your
money. They are the rewards that can encourage you to stick to
your spending plan.
Savings Needed
Per Month
Savings Needed
Per Pay Period
Pay Periods Until
Target Date
Additional
Savings Needed
Current Savings
Total Needed
Would you like to repay a debt, buy a new car or save for a down
payment on a house? Keep your goals reasonable and realistic.
Once you have determined what your goals are, the calculation is
simple: the amount of the goal divided by the number of months
you have to save.
Rent or Mortgage
Gas/Electric
Water
Phone
Cell Phone
TV/Cable/Internet
Insurance/Maintenance
Property Taxes
Total
Transportation
Mid-Range Goals
Loan Payments
Long-Range Goals
Credit Union
Credit Card
Credit Card
Credit Card
Loan
Student Loan
Total
Target Date
Short-Range Goals
Car Payment
Car Payment
Gas
Insurance/Maintenance
Bus/Taxi/Toll/Parking
Total
Family
Getting Started
There are two simple parts to a spending plan: Income and
Spending. Begin with monthly income, as it will determine what
you can afford to spend and save each month. Then fill in your
monthly expenses. Some essential expenses will be fixed (the same
amount every month) while others will be variable (for example
gas and electric may be more or less based on the season). For those
that are variable, determine an average by totaling what it typically
costs for a year, then divide that amount by 12 months.
10
Life Insurance
Legal (Child Support/Alimony)
Child Care (Daily/Occasional)
Allowances
Gifts
Pets (Food and Medical)
Total
Total Monthly Net Income -
Food
Groceries
Work Lunches
School Lunches
Total
Education
Lessons
Tuition
Books/Supplies
Total
Personal
Haircuts
Toiletries
Clothing
Other
Donations
Total
Entertainment
Vacations
Dining Out
Movies/Plays/Music/Sports
Total
Savings
Credit Union
Education
Company Savings Plan
IRA
Other
Total
Total Debt
Total Debt
=