Being on your own can be fun and exciting as you are free to make your own decisions. Turning 18 also brings a great deal of responsibility, and your parents do not have to help. The decisions you make today about money can affect your future. Choose wisely when making decisions about money.
Q: What are the pros and cons of having a credit card?
A: Pros: Credit cards offer spending flexibility by allowing you to buy something now and pay for it later, and they are useful for unexpected expenses or when traveling. Using credit cards responsibly (always paying off the balance in full and on time) can increase your credit score, which can help you get a lower interest rate on a car or house loan. Many credit cards also offer rewards such as cash back.
Cons: Using credit cards can lead to you paying a lot more over time due to interest and fees. If not careful, credit card users can end up with high-interest debt that is difficult to pay off and will reduce your credit score, making it harder to get a car or house loan. Credit cards can become a major financial burden instead of a helpful tool if not used responsibly.
Q: Someone stole my credit card. Now what?
A: Immediately report the loss or theft of a credit card to the bank or company that issued the credit card to you. If it is not promptly reported, you may be responsible for the unauthorized charges on the credit card.
Q: What is a credit report?
A: A credit report is a statement that has information about your credit activity and current situation, such
as loan paying history and the status of your credit accounts. The information comes from the companies where you have credit accounts and from public court records. It is collected and stored by companies called credit bureaus who make the information available when you want to open a credit card or make a major purchase on a payment plan.
Q: Does bad credit history ever go away?
A: That depends on the seriousness of the credit issues. There are exceptions to credit reporting, but generally, no credit report may contain any of the following information:
- Bankruptcy cases that, from the date of entry of the order for relief or the date of adjudication, precede the report by more than 10 years;
- Civil suits, judgments, and arrest records that precede the report by more than 7 years or until the statute of limitations has expired, whichever is longer; and
- The following items that precede the report by more than 7 years: paid tax liens; accounts placed for collection or charged to profit and loss; and any other adverse information other than criminal conviction records.
Q: Can I see and correct errors in my credit report?
A: Yes. The three major credit-reporting agencies are:
- Equifax, 1-800-685-1111, Equifax.com
- Experian, 1-888-397-3742, Experian.com
- TransUnion, 1-877-322-8228, TransUnion.com.
If you request it, each agency must provide you a free credit report yearly, so you can check one for accuracy every four months for free an be able to report any errors. To safely check your credit online weekly and avoid potential credit scams, use the official government-recommended fraud-free website to review your credit report: www.annualcreditreport.com.
Q: Can a lender have different rules for making loans to women, men, or minorities?
A: No. The Federal Equal Credit Opportunity Act (ECOA) prohibits discrimination based on sex, marital status, age, race, national origin, or public assistance status. This does not mean that everyone who applies for credit will get it. Factors such as income, expenses, debt, and credit history are all taken into consideration.
Q: What is collateral?
A: Collateral is an item a lender accepts as security for a loan. If the borrower does not make loan payments, the lender may keep the collateral and sell it to recover some of their losses.
Laws may have changed since the last time this article was updated. The current and most up-to-date laws can be accessed here.