Building Your Credit History
- Establish a steady work record.
- Pay all bills promptly.
- Open a checking account and don't bounce checks or overdraw your account.
- Open a savings account and make regular deposits.
- Apply for a local store credit card and make regular monthly payments.
- Apply for a small loan using your savings account as collateral.
- Get a co?signer on a loan and pay back the loan as agreed.

Before You Sign Up for a Card
- Shop around for the best terms. BankRate is a great resource for finding the best available deals.
- Read and understand the contract.
- Don't rush into signing anything.
- Once a contract is signed, get a copy of it.
- Figure out total price when paying with credit.
- Make the largest payments possible.
- Know the penalties for missed payments.

Your Credit Rights

The Truth In Lending Act (enacted 1968)
Ensures consumers are fully informed about cost and conditions of borrowing. Sets standards for disclosing interest rates and fees.

The Fair Credit Reporting Act (enacted 1970)
Protects the privacy and accuracy of the information in your credit reports.

The Equal Opportunity Act (enacted 1974)
Prohibits discrimination in giving credit on the basis of sex, race, color, religion, national origin, marital status, age, or receipt of public assistance.

The Fair Credit Billing Act (enacted 1974)
Sets up a procedure for the quick correction of mistakes that appear on consumer credit accounts.

The Fair Debt Collection Practices Act (enacted 1977)
Prevents abuse by professional debt collectors, and applies to anyone employed to collect debts owed to others. This act does not apply to banks or other businesses collecting their own accounts.

Types & Sources of Credit

Single-payment credit
This is when items and services are paid for in one payment, within a agreed upon time period. Interest is usually not charged.
Examples:
- Utility companies
- Medical services
- Some retail businesses

Installment credit
This is when merchandise and services are paid for in two or more regularly scheduled payments of a set amount. The interest is included. Money may also be loaned for a special purpose, with the consumer agreeing to repay the debt in two or more regularly scheduled payments.
Examples:
- Some retail businesses, such as car and appliance dealers
- Commercial banks
- Consumer finance companies
- Savings and loans
- Credit unions

Revolving credit
This is when repayment is made in regular time intervals for any amount at or above the minimum required amount. Interest is charged on the remaining balance. Many goods and services can be bought using revolving credit as long as the total amount does not go over the consumer's credit limit.
Examples:
- Retail stores
- Gas stations
- Financial institutions that issue credit cards

How Much Credit Can You Afford

Never borrow more than 15% of your yearly net income.
Example:
If you earn $1,500 a month after taxes, then your yearly net income is: 12 x $1,500= $18,000. Calculate 15% of your annual net income to find your safe debt load. $18,000 x 15% = $2,700. So, you should never have more than $2,700 of debt outstanding.

Note: Housing debt should not be counted as part of the 15%.

Monthly payments shouldn't exceed 10% of your monthly net income
Example:
If your take?home pay is $1,500 a month: $1,500 x 10% = $150. Your total monthly debt payments shouldn't total more than $150 per month.

Comparing Credit Cards
Cost of Credit
Annual fees
Annual Percentage Rate (APR)
Finance charge computation
Grace period
Know the penalties for missed payments
Transaction fees

Credit Card Questions
- What would be your credit limit?
- How widely the card is accepted?
- What services are available?

Credit Card Stats

- Total credit card debt in the U.S. now is a record $700 billion and counting. Source: CardTrak Online

- The average American household has 13 to 14 cards including bank cards, travel and entertainment cards, department store cards, gasoline cards, and debit cards. They add up to 1.4 billion pieces of plastic scattered throughout the land.

- The Federal Reserve's Survey of Consumer Finance found the largest expansion of consumer credit has been among the poor. Debt is falling for families with incomes above $50,000 and rising for families with incomes below $10,000.

- An increase in outstanding consumer debt, particularly credit card debt, has been cited as a significant contributor to the increased rate of bankruptcy filings. Source: Federal Deposit Insurance Corporation (FDIC)

- Many families will pay almost the same amount in interest on credit cards as they spend for food this year.