YOUR CREDIT — YOUR RIGHTS


Numerous agencies (lenders, insurers, employers, landlords, etc.) view your credit when making decisions about you – how familiar are you with your credit and your rights? The Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA) are legislation designed to protect you and your credit.

FAIR CREDIT REPORTING ACT.
This act is designed to promote accuracy, fairness, and privacy of information in the files of every consumer’s credit report.

FCRA PROVISIONS:

  • You must be told if information in your file has been used against you (denial of employment, credit, insurance, etc.)
  • You have a right to know what is in your file.
  • You are entitled to a free report at any time if: You are unemployed and plan to seek employment within 60 days; you are currently on welfare; you are a fraud victim or you are denied credit, employment, insurance, etc. based on report info.
  • All consumers are entitled to one free report (per credit reporting agency) every 12 months upon request – http://annualcreditreport.com/
  • You have the right to ask for a credit score (a numerical summary of your creditworthiness). You will have to pay for the score, but you now have access to it.
  • You have a right to dispute inaccurate information.
  • Inaccurate or unverifiable information must be corrected or deleted.
  • Outdated information may not be reported (FCRA specifies duration). 2 years for inquiries; 7 years for 'most' negative information; 10 years for judgment liens and most bankruptcies; 10 years [or more] for 'positive' information.
  • Access to your file is limited – may be used for consideration of applications such as employment, insurance, credit and landlords.
  • Forces identification of individuals inspecting your file.
  • Consent is required for reports provided to employers or reports containing medical information. An estimated 70% of employers examine credit reports prior to hiring.
  • You have a right to file a lawsuit against collector if FCRA has been violated.
  • You may limit 'pre-approved' offers for credit and insurance. You may opt-out by calling toll free (1-888-5-OPTOUT). Additional information is available at: http://financialsuccess.missouri.edu/tipoftheweek/optoutcc.pdf and http://financialsuccess.missouri.edu/tipoftheweek/optout.pdf.

Maintaining the accuracy of your credit report is YOUR responsibility. To read the entire FCRA, go to http://www.ftc.gov/os/statutes/fcra.htm.

FAIR AND ACCURATE CREDIT TRANSACTIONS ACT.
Signed into law by Pres. Bush in December of 2003, the Fact Act [as it’s often called] was designed to ensure that all citizens are treated fairly when applying for credit. Specifically, the bill was designed to significantly increase consumer protections against the growing problem of identity theft. FACTA also extends the current provisions (mentioned above) of the Fair Credit Reporting Act.

Some of the major provisions of FACTA:

  • Provide consumers with a free credit report every year.
  • Give consumers the right to see their credit scores (for a fee).
  • Provide consumers with the ability to opt-out of information sharing between affiliated companies for marketing purposes.
  • Ensure that consumers are notified if merchants are going to report negative information to the credit bureaus about them.
  • Allow consumers to place “fraud alerts” in their credit reports to prevent identity thieves from opening accounts in their names (includes special provisions to active duty military).
  • Allow consumers to block information from being given to a credit bureau and from being reported by a credit bureau if such information results from identity theft.
  • Restrict access to consumers' sensitive health information.
  • Provide consumers with one-call-for-all protection by requiring credit bureaus to share consumer calls on identity theft, including requested fraud alert blocking.
  • Require creditors to take certain precautions before extending credit to consumers who have placed “fraud alerts” in their files.
  • Stop merchants from printing more than the last five digits of a payment card on an electronic receipt.

Consumer credit is a vital thing for many – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical.

NEW LOAN RATES + NEW HAMPSHIRE


The past few years have been very attention-grabbing at this time of year; with students and grads awaiting word of where student loan rates would go on July 1st. Things this year are much less eventful for three reasons:

1. Last year’s law change prohibits students now from consolidating until graduation.

2. The new legislation changed the nature of Federal [Stafford and PLUS] loans borrowed after 7/1/06. Loans borrowed after that date are a fixed 6.8% for Stafford (7.9% or 8.5% for PLUS). You should have already ‘locked’ the rates on all of your variable rate federal loans during the low rate environment of the past three years, making this rate change moot – hopefully that is the case.

3. Lastly, the rate change is very minimal. Rates will go up on July 1st to 6.62% from it’s current 6.54% level (that is in-school/in-grace rate; rates are .6% higher for out of grace); variable rates on PLUS loans will go from 7.94% to 8.02%. Not a very dramatic move considering the nearly 2% jump each of the past two years … Loans affected by the new rate are those taken out between 7/1/98 and 6/30/06 that have not been consolidated.

The Department of Education’s press release on the new variable interest rate is available at: http://ifap.ed.gov/eannouncements/0530FFELDLInterestRate.html.

New Hampshire.
Several consolidation programs have been mentioned in the past because of their borrower benefits: Educational Loan Company, The Loanster, and North Carolina are often discussed because of their deep interest rate benefits (preferable for those using extended repayment options). Key Bank and FinanSure provide the most competitive principal balance credits (beneficial to those planning to pay loans off promptly). Now entering the arena … New Hampshire. A state program that no longer has residency requirements. They are the first program in the country to offer substantial rate reduction benefits immediately (rather than the typical reductions after 3-4 years of on-time payments).

The New Hampshire program offers the following:
– ½% rate reduction for setting up auto pay
– 1% rate reduction when repayment starts
– $250 principal balance reduction after 12 on-time payments

It is unlikely this program will be able to save more time and interest payments for those with large student loan debts opting for extended repayments; it will likely best serve those looking at repaying their student loans off in 10 years or less … another good option available nonetheless. Also, NH has a small required loan minimum (only $5,000); many programs require $20K+ … You can learn more about New Hampshire’s program at: http://www.nhheaf.org/ln_cons.asp … information about all of the consolidation programs is available at the OFS website (http://financialsuccess.missouri.edu).

OFFICE FOR FINANCIAL SUCCESS


For many of you, aside from receiving the Financial Tip of the Week, you may not know a lot (anything?) about what other educational efforts we’re involved in. Let me share more with you about our Office for Financial Success (OFS).

History.
About two years ago, several ingredients came together (an open faculty position in the Personal Financial Planning Department/ College of Human Environmental Sciences; generous funding from State Farm Insurance to remodel office space; and me [Dr. Mark Oleson]. I had been at Iowa State for the prior 6 years running their Financial Counseling Clinic when the opportunity came knocking). The OFS officially opened its doors in fall of 2005 with two primary missions in mind: (1) Provide training opportunities for undergraduate and graduate students in the Personal Financial Planning Department; and (2) Provide educational services and resources to the University and University Community. The OFS is in place to provide unbiased information to individuals at all stages of life [with the obvious primary target being college students]. We provide resources in all aspects of personal finance: remedial issues (debt management, bankruptcy, credit card, student loan problems, etc.); productive issues (investing, insurance, homeownership, etc.) and all areas in between. This service function is the one that I will outline in this weeks tip …

Financial Tip of the Week.
The weekly blog, our most visible service [tens of thousands of subscribers nationwide], has received national recognition for its educational efforts. I’ve been sending a “Financial Tip of the Week” for over seven years (about 10 months in the blog format). The weekly tip is the primary springboard directing people to OFS services (classes, workshops, etc.). You can view current/ past tips and in a ‘topical’ format.

Individual Counseling Services.
The OFS offers personalized financial counseling services [free to students]. We offer counseling face-to-face, over the phone, and via e-mail. We try to make our services as accessible to as many as possible. The OFS houses one of the MoTAX (Missouri Volunteer Tax Assistance) offices that assisted over 1,000 people [in the OFS – more were served in other parts of the State] with taxes this past season. We are also the only University-run program in the country approved by the US Dept of Justice to provide the pre-filing financial counseling required for those seeking bankruptcy.

Group Workshops/Seminars.
We regularly provide information [on a myriad of topics] to different groups: residence halls, fraternities/sororities, professional student groups, classes, summer/new student orientation, community groups, etc. Workshops can be requested via the OFS website.

Personal Finance Courses (Financial Survival/Financial Success).
The Personal Financial Planning Department offers many valuable classes on a wide range of personal finance topics. Since arriving at MU, I have added two 1-credit courses to that curriculum (designed for non-majors). Financial Survival is written as a ‘front end’/underclassmen course: understanding student loans, credit/ credit cards, financial pitfalls, etc. Financial Success is designed to be a class taken on the back end [as one approaches graduation] to address issues such as managing debt after graduation, 401(k)/IRA plans, general investing, insurance, homeownership, and other post-graduation financial issues. Both courses [currently] are available fall and spring semesters; Financial Survival is also available this summer.

Web Resources.
Most people today use the Internet to gather information. The OFS website was created to provide a resource that could direct consumers to useful financial information. Information about budgeting, debt management, credit/credit cards, investing, taxes, insurance, student loans, and a lot of other issues are all available on the OFS website.

I am pleased with the great things the OFS has done in such a short period of time. The Personal Financial Planning Department, the financial backing for the OFS, deserves much of the credit for its early successes since their support is the reason we exist!

OFS CONTACT/RESOURCE INFORMATION.
Director – Dr. Mark Oleson
Student Assistant – Sam Miller (2006-07)

Website – http://financialsuccess.missouri.edu
Blogsite – http://financialtip.blogspot.com

E-mail –
financialsuccess@missouri.edu
Phone – (573) 882-2173

STUDENT LOAN CONSOLIDATION – "What if my loan is sold?"


I almost feel apologetic in writing on this topic since it seems I do it so frequently; it is, however, one of the most commonly queried topics (student loan consolidation) as well as one of the least understood/most confusing issues. When consolidating federal loans (after graduating), seek out the program that will save you the most money: Educational Loan Company, North Carolina, The Loanster, FinanSure, and Key Bank are examples of programs that offer the best borrower benefits (depending on your selected repayment strategy – see 4/25/2007 tip).

Many students become confused thinking they need to consolidate with their existing lender or the Dept of Ed (in the event that’s not their lender) in order to get the benefits of “federal consolidation” – neither case is true. You can consolidate wherever you want; and regardless of the federal consolidation program you use, the loan will always be regulated by the federal government (meaning your ability to defer the loan, and the other benefits associated with a federal loan will apply regardless of who you choose for your lender to be) … Many students have been asking the question “What if the lender sells my loan?” The obvious concern is that I don’t want to find a program with good financial benefits that I will lose when/if they sell my loan to someone else (an obvious [and common] bait and switch tactic). Asking the question of whether a lender will sell your loan is the wrong question to ask, however – the question you need to ask is whether or not the lender will offer something in writing that will enable you to keep the advertised benefits in the event that the loan gets sold to a different lender. Ultimately, does it really matter who you’re paying if you’re receiving the best benefits? I don’t think so. I share the example regularly of moving to Columbia about two years ago. When shopping for a mortgage, my only real interest was in getting “the best deal” (lowest interest rate; lowest loan fees). About two or three months later, our loan was sold. Did that bother me? No. The rate that we’d contracted earlier was established, so the only change was who payments were made to. This is what you want to ensure with your federal consolidation – don’t be concerned about whether or not the lender will sell your loan; rather, find out whether or not they will guarantee your benefits in the event that it does get sold.

NOTE. I'm sure several of you have already consolidated your loans, not fully understanding the issues I just outlined (the primary irrelevance of who your lender is [from the standpoint of deferment and other general 'federal loan' benefits], or the vast difference in benefits that companies may offer). Understand that if you're in your grace period and the loan has not yet been consolidated [it is scheduled to be done at the end of your grace period], you can likely “get out” of the loan and reconsolidate elsewhere …

SELECTING AN INSURANCE COMPANY


For most, the selection of an insurance company is based upon one issue – price. Price obviously plays a very critical role in shopping for insurance. Let me suggest some other things to consider when selecting an insurance company (Source: Insurance Information Institute) …

Licensing. Not every company is licensed to operate in each state. As a general rule, it is good to work with a company licensed in your state because if you have a problem, you can rely on your state insurance department to help out. Go here to find a listing of companies licensed in your state.

Financial Stability. Insurance is purchased to protect you and your family financially and provide peace of mind. You should purchase insurance through a company that is solidly ranked in terms of credit (financial standing; likelihood of payout). It would be unfortunate to have the company be unable to pay because they’ve gone out of business. A.M. Best, Moodys, and Standard & Poors are three of the most common agencies that rate the financial strength of insurance companies.

Service. Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and promptly. You can get a feel for whether this is the case by talking to other customers who have used a particular company or agent. You may also want to check a national claims database to see what complaint information it has on a company (state insurance departments provide this information on their website – see resources below). You have a right to quality customer service.

Comfort. Ultimately, you should feel comfortable with your insurance purchase, whether you buy it from a local agent, directly from the company over the phone, or over the Internet. Make sure that the agent or company will be easy to reach if you have a question or need to file a claim. You should never feel pressure to buy certain products – your agent should serve as an ‘educator.’

Complaint Index. If you find that after reviewing these items that companies are tied, a complaint index could serve as a good tiebreaker. A complaint index measures how many complaints are received over a period of time relative to the amount of money brought in through premiums. View Missouri’s complaint index. A national complaint database is also available.

Cost. Initially, I mentioned the importance of examining other issues, but there’s no denying the fact that price should be part of your “shopping equation.” Policies and prices will vary dramatically from company to company; as a result, most consumer advocates suggest pricing 3-4 policies before making a decision [use the Internet as well as agents]. Many state insurance departments publish guides to assist with your ‘insurance journey.’ See resources below for a link to all state insurance departments.

So whether your priority is to find a good neighbor; feel inclined to be in good hands; or have an affinity for lizards, shop around. Make sure you’re comparing apples with apples (similar types and levels of coverage). Lastly, review your insurance at least once a year to ensure that the company you’ve selected and the product you’re utilizing continues to meet your constantly changing needs.

INSURANCE RESOURCES.
Information on insurance for various life stages
NAIC “Insure U” – Get Smart About Insurance

– Shopping for insurance online:
—>
Insurance Finder

—> Insure.com
—> Insurance Web
State Insurance Department Websites
What companies offer what insurance products in your state?




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