 |
|
|
 |
Home > Financial Education |
|
|
|
Financial Education Topics:
|
TIPS ON REBUILDING CREDIT
|
Bills, bills, bills. Like death and taxes, paying bills is an inevitable and sometimes unpleasant fact of life; however, not paying bills can create an even bigger problem.
If you are experiencing or have ever experienced significant difficulties paying your debts, you know that the situation is a personal catastrophe.
Recovery in such circumstances may take years, but there are some steps you can take to ease the restoration of an acceptable credit rating.
Contact Your Creditors and Your Credit Union
If you are having a tough time paying your creditors, we urge you to call them. Be up front about your problem, and try to negotiate a revised payment schedule that is acceptable to you and your creditors. If you show a good-faith willingness to repay your debts, most of the time you will find companies willing to assist you. In fact, many creditors have an entire department devoted to helping out people in such circumstance.
Obviously, companies would rather collect on your debt with a revised repayment schedule than not at all, and it's typically less costly and more effective for a company to renegotiate than to assign your account to a collection agency. Take advantage of this leniency. In the long run, it may be far more advantageous than other options, such as declaring personal bankruptcy.
Although your credit union may not be one of your creditors, you should call them also. They may have a loan officer or financial planner on staff who can assist you, or at least refer you to someone who can help. While dealing with or recovering from your financial troubles may seem overwhelming to you now, credit unions have a great deal of experience in helping members in similar situations. They will be able to help you develop a rational, manageable response to your condition.
Check your phone book for the Consumer Credit Counseling Service, or Credit Counseling Centers of America. These not-for-profit organizations provide free and low-cost counseling, information, and other valuable services.
Bankruptcy and What It Means
Although bankruptcy may be unavoidable under certain circumstances--catastrophic illness or medical expenses, for example--it should be the last resort among your choices. You may have heard that personal bankruptcies are on the increase in America, and believe that it is an easy solution to what seems like an insurmountable problem, but declaring bankruptcy is not without consequences. Ultimately, declaring bankruptcy can be a greater impediment to regaining financial stability than slowly paying off your debts.
Declaring bankruptcy tells everyone that you cannot be trusted with a mortgage, loans or credit cards because you cannot be counted on to repay your debts. You may have trouble getting a job, an apartment, a car loan, even a simple checking account. Employers (with the consumers authorization), management companies, financial institutions, and many other types of organizations frequently check credit reports for these items, a practice that is perfectly legal.
Furthermore, bankruptcy remains on your credit report for 10 years and is a court action that remains on public records forever.
Secured Loans and Credit Cards
One way to rebuild credit following a period of bill-paying problems is a secured loan or credit card. Secured simply means that your savings are being held in a special account as collateral for the line of credit. This money will be returned to you once the debt is paid or the secured credit card account is closed. Many credit unions now offer this type of product, which allows you to demonstrate that you have recovered from your credit problems and now can be fully trusted to pay your bills. Typically, the line of credit is very small at the outset, but your good repayment performance may mean credit line increases in the future. As this positive data accumulates on your credit report, your rating will improve, although restoring your financial health to its fullest capacity may take many years.
Before you apply, however, be sure your ability to repay your debts is improving, since you don't want to increase the severity of an already difficult situation with another loan or credit card.
Your Credit Report
If you suspect your credit record may contain items that will prevent you from obtaining a loan or credit line, don't wait for the bad news--check your credit report before applying. Credit bureaus must provide you a copy of your credit report at any time for a nominal fee. You have the right to challenge any and all data in the report you feel may be in error. Ask your credit union for the contact information of the credit bureaus to provide one free copy of your credit report per year, upon request. To find out if your state is one of them, call your state consumer affairs division.
If you have been unexpectedly turned down for a loan, credit card, apartment rental or mortgage, you may want to check your credit report to verify that it is fully accurate. The Fair Credit Reporting Act, passed in the 1970's and amended in 1996, requires credit bureaus to provide you a copy of your credit report at no charge if you have been denied credit. In addition, you are entitled to one free credit report per 12-month period if:
- You certify in writing that you are unemployed and intending to apply for employment
- You are receiving public welfare assistance
- You have reason to believe your file contains inaccurate information due to fraud.
Whoever denies you credit--a bank, car dealer, department store, etc.--may choose, but is not required, to disclose the contents of the credit report to you. They are required to provide you with the name, address and phone number of their credit bureau.
Upon examining your credit report, if you find incorrect information (for example, it lists as outstanding a debt which has been repaid), there are steps you can take to correct the information. First, obtain a copy of your credit report. At the bottom of your copy of the report, there should be a space for you to provide clarification of any items that you think are incorrect. Clearly state the disputed amount and your reasons for requesting that it be removed (you have paid the debt off, you never incurred the debt, etc.). Make a copy for your records and return the form to the credit bureau. The credit bureau will then contact the creditor reporting the debt. By law, the disputed amount must be removed from your credit report during the investigation, and if the creditor is unable to verify that you are responsible for the debt, it will be removed from your credit report permanently.
How to Stay Out of Trouble
- Stick to your plan/budget.
You've taken the first and best steps now stay with them. Your credit union can help by arranging a savings or direct payment plan that will ensure you've got the funds you need to finance your budget.
- Don't get overextended again.
Keep an eye on the debts you incur they're what get most people into trouble in the first place. As a rule of thumb, you should always be able to meet your regular monthly expense and installment payments and still have at least 5 to 10 percent of your monthly take home pay left over.
- Talk to the experts.
If you aren't confident about your ability to keep out of trouble on your own, talk to your credit union. They can offer you financial counseling, or can recommend a reputable, low-cost financial counseling service. Either way, you'll get the advice you need to stay on the path of financial stability.
Keeping Your Credit Good
If you're beginning to have credit problems, don't wait until the situation becomes unmanageable. If you suspect you could have a problem with handling your debts, talk to your credit union. They can point you in the right direction by: finding or providing adequate credit counseling; setting up a savings plan; or, arranging a debt consolidation loan. Your credit union stands ready to help you keep your good credit.
|
Information from the brochure, Tips on Rebuilding Credit, presented by the National Association of Federal Credit Unions (NAFCU). Copyright 1998.
|
TOP
|
HOW LONG TO KEEP FINANCIAL RECORDS
|
|
Deciding which records to keep and for how long can be a confusing process, one that leads too many of us to keep everything just to be safe. Despite the revolution in online service and availability of high-tech information storage and retrieval, paper documentation is still the standard.
Keeping Records for Tax Purposes
The IRS has three years to audit your federal income tax returns for any reason, with the following exceptions:
- The IRS has six years to collect tax or initiate legal action if 25% or more of gross income is not reported.
- There is no time limit in the case of fraudulent or never-filed returns.
Any documents used to complete or support a tax return should always be readily available. They may be the evidence you need to save yourself at an audit. Canceled checks that correspond to entries on your tax returns should be saved, as should medical bills for three years to substantiate canceled checks. Weekly and monthly salary statements can be discarded provided your annual W-2 form reflects the correct information.
The outline below summarizes H&R Blocks checklist for keeping records:
In Your Safe-Deposit Box
| 1. |
Automobile title and lien release: |
Save until vehicle is sold or traded. |
| 2. |
Credit or installment records: |
Keep until debt is paid or as needed. |
| 3. |
Will and/or trust documents: |
Keep indefinitely or as needed. |
| 4. |
Property ownership documents: |
Keep until property is sold, then keep a copy of the purchase and sale agreements indefinitely. |
| 5. |
Investments: |
Keep until sold, maturity and/or redemption. |
| 6. |
Important records:
(Copies of things you will need in the event that your house is robbed, damaged, or destroyed) |
Inventory of valuable property, including photographs, purchase prices and/or receipts; inventory of insurance policies and brokers; inventory of bank accounts and other investments; pension records; credit card records, etc. |
| |
|
|
In Your Home Files
| 1. |
Automobile Records:
|
Payment book:
|
Repair records, receipts for parts, and record of gasoline purchases:
|
| Car used for business purposes: |
|
|
Keep until car is paid in full.
|
Keep until car is sold or traded.
|
| Keep and store records to substantiate business use with the tax return. Keep purchase and sales agreements for six years after car is sold or traded. |
|
| 2. |
Credit Union/Financial Records:
|
Passbook:
|
| Statements, check registers, and canceled checks: |
|
|
Keep until account is closed.
|
Keep for three years. Store checks substantiating tax-related deductions with tax return.
|
|
| 3. |
Cash receipts for major purchases: |
Keep until item is sold or discarded if the item is included on your household inventory. |
| 4. |
Current bills, charge slips: |
Keep one year for general purposes and indefinitely if used to provide legal evidence as proof of purchase. Store with tax return if needed to substantiate a tax-deductible item. |
| 5. |
Credit card records:
|
List of credit card account numbers, creditors phone numbers and addresses:
|
|
|
|
Keep until cards expire or are destroyed, or account is closed.
|
|
| 6. |
Education/employment information:
|
| Personal benefits reports and other information: |
|
|
| Keep only as needed. Pension records from any prior employer should be kept indefinitely. |
|
| 7. |
Copy of will and/or trust documents: |
Keep indefinitely or as needed. |
| 8. |
Guarantees or warranties: |
Attach purchase receipts. Annually remove expired warranties and guarantees. Throw away instruction manuals when item is sold or discarded. |
| 9. |
Housing:
|
Home improvement receipts, record of land transfer taxes and list of purchase price, closing costs and selling costs:
|
Termite inspection policy:
|
| Rented property: |
|
|
For tax purposes, keep all records and receipts until the end of the third year following the year in which you sold the home.
|
Keep until the property is sold.
|
| Copy of lease or rental agreement and pictures showing move-in condition of rental property. |
|
| 10. |
Insurance:
|
Policies and other information:
|
Car:
|
Health:
|
| Property: |
|
|
Keep list of all policies and related information. Update as necessary.
|
Record of traffic violations or accidents. Keep for six years after violation.
|
Medical history. Update as necessary.
|
| Personal property inventory including original purchase price and photos of each room showing especially valuable or unusual possessions. |
|
| 11. |
Investments:
|
Record of mutual fund, stock and bond statements and certificates:
|
| Transaction slips: |
|
|
Update as necessary for tax purposes.
|
| Keep until third year after the asset is sold for tax purposes. |
|
| 12. |
Taxes
|
Paycheck stubs:
|
| Receipts for tax-deductible items and investment statements: |
|
|
Discard annually after checking against W-2 totals.
|
| Use annually, then store with tax returns. |
|
| 13. |
Inventory of safe-deposit box: |
Keep indefinitely and update if contents change. |
| 14. |
Loan statements and payment books: |
Keep until at least the end of the tax year in which the loan is paid off or as needed. |
| |
|
|
Business Travel Log
Receipts for tolls, taxis, parking fees, gas and maintenance, tips and miscellaneous, auto rental and transportation tickets: Use annually, then store with tax returns.
In Your Share Draft/Check Register
Items such as charitable contributions or miscellaneous expenses (including professional association and union dues, tax return preparation costs, financial publication subscriptions, etc.): Use annually and then store with tax returns.
|
Information from the brochure, How Long to Keep Financial Records, presented by the National Association of Federal Credit Unions (NAFCU). Copyright 1998.
|
TOP
|
WHEN IS YOUR CHECK NOT A CHECK?
|
|
Suppose you're at a store making a purchase and decide to pay by check at least, that's what you believe you're doing.
The clerk asks you for a check that is completely filled out, partially filled out, or even blank. The clerk then runs the check through a machine and hands the voided check back to you with your receipt.
What just happened? Did you pay by check? Why did the clerk return the check to you? The answer is, you just experienced electronic check conversion.
The following questions and answers explain how electronic check conversion works and what your rights are as a consumer.
|
|
|
|
What is electronic check conversion?
Electronic check conversion is a process where your check is used as a source of information for the check number, your account number, and the number that identifies your financial institution. The information is then used to make a one-time electronic payment from your account an electronic fund transfer. The check itself is not the method of payment.
|
|
How will I know that my check is being used for electronic check conversion?
When you provide your check, you must be given notice that information from your check will be used to make an electronic payment from your account. The notice is required by the federal law that applies to electronic fund transfers the Electronic Fund Transfer Act and the Federal Reserve Boards Regulation E. Notice may be provided in different ways. For example, a merchant may post a sign at the register or may give you a written notice that you'll be asked to sign.
|
|
What are some of the differences between electronic check conversion and using my check as payment?
Your electronic transaction may be processed faster than a check. Be sure you have enough money in your account at the time you make the purchase.
You have different consumer rights with an electronic check conversion transaction than when you use your check as payment. For example, with electronic check conversion, you have the right to an investigation by your financial institution when an error occurs.
|
|
What are my rights in electronic check conversion transactions?
You have the right to receive notice when you provide your check telling you that information from the check will be used to make an electronic payment from your account.
When you provide your check, you have the right to a notice telling you of any fee that the merchant will collect from your account electronically if you do not have enough money in your account to cover the transaction. This fee is similar to a bounced check fee.
You have the right to receive a receipt when you make a purchase at a store. The receipt will contain information about the transaction, including:
| Date |
| Amount |
| Location |
| Name of merchant |
You have the right to have this same information included as part of the regular account statement from your financial institution.
You have the right to ask your financial institution to investigate any electronic fund transfers from your account that you believe are unauthorized or incorrect.
|
|
What should I do if I have a problem with an electronic check conversion transaction?
Always review your regular account statement from your financial institution. You should immediately contact your financial institution if you see a problem. Were you charged the wrong amount? Were you charged twice for the same transaction? You have only 60 days (from the date your statement was sent) to tell the financial institution about the problem. Depending on the circumstances, the financial institution may take up to 45 days from the time you notify it to complete its investigation.
|
|
With electronic check conversion, may I use the same check more than once?
No. An electronic check conversion transaction is a one-time electronic payment from your account. If you were to use the same check for more than one transaction and you had a problem with one of the transactions, your financial institution might have difficulty investigating the problem because the same check number would appear more than once on your statement.
|
|
Can electronic check conversion occur if I mail a check to pay a bill?
Yes. For example, lets assume that each time you get your insurance bill there is a notice. It tells you that when you mail a check, information from that check will be used to make an electronic payment from your account. If you then send a check, you have agreed to electronic check conversion. Unlike what happens when you make a purchase at a store, however, you wont receive a receipt. Your check wont be returned to you with your account statement from your financial institution because the transaction was processed as an electronic fund transfer, not as a check transaction.
As with electronic check conversions in stores, be sure you have enough money in your account when you mail your check, keep records of your payments, and check your account statements from your financial institution to make sure the amounts charged are correct.
|
|
What if I don't want my check to be used for electronic check conversion?
If you don't want your check to be used for electronic check conversion, you may have to provide another form of payment (for example, cash, debit card, or credit card).
|
|
Where can I get more information?
Contact your financial institution directly. For information on state laws that may apply to electronic check conversion, contact your states consumer protection agency or attorney generals office.
|
|
Where can I file a complaint?
- Contact:
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Ave., NW
Washington, DC 20580
877-FTC-HELP toll free (877-382-4357)
- Please also send a copy of your complaint to:
Board of Governors of the Federal Reserve System
Division of Consumer and Community Affairs
Washington, DC 20551
202-452-3693
www.ftc.gov
www.federalreserve.gov
|
|
Remember . . .
Before you agree to electronic check conversion, you should first ask yourself
- Do I understand that the information from my check will be used to make an electronic payment from my account?
- Do I have enough money in my account to cover the payment?
Before you leave the store, you should ask yourself
- Did I receive a receipt?
- Does the amount on the receipt match the amount of my purchase?
- Was my check returned to me and voided?
When you receive your statement from your financial institution, you should
- Make sure that the charges on your statement match your records
- Contact your financial institution right away if you notice a problem.
|
|
|
|
Information from the brochure, When Is Your Check Not a Check? Electronic Check Conversion, presented by the Board of Governors of the Federal Reserve System, 2002. All rights reserved.
|
TOP
|
RECOGNIZING & AVOIDING COUNTERFEIT CHECK SCAMS
|
|
If someone you don't know wants to pay you by check and wants you to wire a portion of the money back, beware! It's a scam that could cost you thousands of dollars.
-
There are many variations of the counterfeit check scam. It could start with someone offering to buy something you advertised, pay you to do work at home, give you an "advance" on a sweepstakes you've supposedly won, or pay the first installment on the millions that you'll receive for agreeing to have money in a foreign country transferred to your account for safekeeping. Whatever the pitch, the person may sound quite believable.
-
Counterfeit check scammers hunt for victims. They scan newspaper and online advertisements for people listing items for sale, and check postings on online job sites from people seeking employment. They place their own ads with phone numbers or email addresses for people to contact them. And they call or send emails or faxes to people randomly, knowing that someone will take the bait.
-
They often claim to be in another country. The scammers say it's too difficult and complicated to send you the money directly from their country, so they'll arrange for someone in the U.S. to send you a check.
-
They tell you to wire money to them after you've deposited the check. If you're selling something, they say they'll pay you by having someone in the U.S. who owes them money send you a check. It will be for more than the sale price; you deposit the check, keep what you're owed, and wire the rest to them. If it's part of a work-at-home scheme, they may claim that you'll be processing checks from their "clients." You deposit the checks and then wire them the money minus your "pay." Or they may send you a check for more than your pay "by mistake" and ask you to wire them the excess. In the sweepstakes and foreign money offer, they tell you to wire them money for taxes, customs, bonding, processing, legal fees, or other expenses that must be paid before you can get the rest of the money.
-
The checks are counterfeit but they look real. In fact, they look so real that even tellers may be fooled. Some are phony cashiers checks, others look like they're from legitimate business accounts. The companies whose names appear may be real, but someone has dummied up the checks without their knowledge.
-
You don't have to wait long to use the money, but that doesn't mean the check is good. Under federal law (Regulation CC), financial institutions have to make the funds you deposit available - usually within one to five business days (sometimes longer), depending on the type of check. But just because you can withdraw the money does not mean the check is good, even if it's a cashiers check. It can take weeks for the counterfeit or forgery to be discovered and the check to bounce.
-
You are responsible for the checks you deposit. That's because you're in the best position to determine the risk - you're the one dealing directly with the person who is arranging for the check to be sent to you. When a check bounces, the financial institution deducts the amount that was originally credited to your account. If there isn't enough to cover it, the financial institution may be able to take money from other accounts you have at that institution, or sue you to recover the funds.
-
There is no legitimate reason for someone who is giving you money to ask you to wire money back. If a stranger wants to pay you for something, insist on a cashiers check for the exact amount, preferably from a local credit union or bank, or a credit union or bank that has a branch in your area.
-
Don't deposit it - report it! Report counterfeit check scams to the National Fraud Information Center/Internet Fraud Watch, a service of the nonprofit National Consumers League, at www.fraud.org or (800) 876-7060. The information will be transmitted to the appropriate law enforcement agencies.
TOP
|
RESOURCES FOR YOUTH
|
|
We hope the following links will be useful in helping our young members become financially savvy adults.
|
|
|
|
Thrive by FiveTM:
Teaching Your Preschooler About Spending and Saving
Free activities and other resources for parents who want to encourage healthy attitudes about money in young children.
|
|
|
|
|
|
|
|
|
|
|
|
