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Credit

Credit is more than just a plastic card you stuff in your wallet.  It is your financial trustworthiness.  If you have ever applied for a credit card or personal loan, there is a file about you.  This file is known as your credit report and provides information on where you live, how you pay yours bills, and whether you have been sued, or have filed for bankruptcy. 
Having a good credit report means it will be easier for you to get loans and lower interest rates.  Lower interest rates usually mean that you will pay smaller monthly payments.  On the other hand, bad credit can be a burden.  Bad credit is generally caused by making late payments or borrowing excessive amounts of money.  Bad credit can make it difficult to get a car loan, credit card, house, and sometimes a job.

With no prior credit history, you might find that is difficult to secure a loan or obtain a credit card. This is because without a credit history lenders do not  know if you will repay your debts.        
It seems that the only way to get credit is to have credit. This is not as impossible as it sounds. There are a number of ways to get your credit history started.

  • Open a checking or savings account.   With no prior credit history, you might find that is difficult to secure a loan or obtain a credit card. This is because, without a credit history, lenders do not  know if you will repay your debts or be a "good risk."
  • Apply for a credit card at a local department store.  Local department stores are more likely to extend you a line of credit with no prior credit history. Once a credit card is opened, it needs to be used  responsibly.  Use the newly aquired credit card to only buy items that you can afford and make timely payments to get a good start on your credit history.
  • Have a friend or relative with a good credit history co-sign your loan or credit card application.   Having a co-signer will provide the lender greater assurance that the bill will be paid.  If you can not afford to make a payment it will be the co-signers responsibility to do so.  Be careful though, not paying your bill on time could damage the co-signers credit.

Once a line of credit has been established it is very important to maintain a good credit rating. Your behavior regarding borrowing and making payments will greatly effect future loans or credit requests. Below is a list of examples that will keep you on track to maintaining a good credit report.

  • Create and follow a budget.  Unless necessary, do not charge more than you can afford to pay. At no point should you owe more money than you are making. Avoid making large impulse purchases as these purchases are especially difficult to pay off.
  • Do not exceed your available credit limit.  Keep a cushion between your outstanding balance and your credit limit. Make sure you have enough available credit in case of an emergency (car repairs, emergency home repairs, loss of income).
  • Make timely payments.  Pay at least the minumum amount required on time every month. Your payment should be received by your lender on or before the due date printed on your statement. Late payments will lower your credit score.
  • Limit your number of credit cards.  If you have credit cards with no outstanding balance and you do not plan on using them again, close the account. Keeping accounts open that you no longer intend to use is seen by creditors as potential debt and may hurt your credit rating.
  • Review your credit report.  The information on your credit report is used to evaluate your applications for credit, insurance, employment and rental properties. You are entitled to a free copy of your credit report once every 12 months, per your request.  Check out  Understanding Your Credit Score (Consumer Action) to help you understand your credit report and how it may affect your future investments and transactions

You can obtain a copy of your credit report from:
Annual Credit Report.com
Annual Credit Report Request Service
PO Box 105283
Atlanta, GA 30348-5283

Worried about debt collectors? Can't seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may want to consider the services of a credit counselor. 

  • Find the right credit counselor for you.  Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But beware - just because an organization says it is "nonprofit" does not guarantee that its services are free or affordable or that its services are legitimate. Before you work with a counseling service, make sure it is licensed by contacting the Maryland Commissioner of Financial Regulation
  • Having trouble making payments?  Act immediately, don't wait until you are about to be sent to collections. Try contacting your creditors to let them know that you are going to have trouble making the payments. Some creditors will work with you to try to make a more manageable payment schedule. 
  • Are debt collectors harassing you? The  Fair Debt Collection Practices Act (FDCPA) has laws which prohibit debt collectors from using abusive, unfair, or deceptive practices to collect from you.
Montgomery County
Office of Consumer Protection

100 Maryland Ave., Ste. 330
Rockville, MD 20850
T: 240.777.3636
www.montgomerycountymd.gov/consumer
Maryland Attorney General
200 St. Paul Pl.
Baltimore, MD 21202
T: 410.576.6300
TTY: 410.576.6372
www.oag.state.md.us
Annual Credit Report
PO Box 105283
Atlanta, GA 30348
T: 877.322.8228
www.annualcreditreport.com
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, DC 20580
T: 202.326.2222
www.ftc.gov
Federal Reserve Board
20th Street and Constitution Ave., NW
Washington, DC 20551
T: 888.851.1920
TTY: 877.766.8533
www.federalreserve.gov
Consumer Action
221 Main St., Suite 480
San Francisco, CA 94105
T: 415.576.6372
TTY: 877.766.8533
www.consumer-action.org
For additional information, please view the following brochures:
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