Credit “How to Obtain, Increase and Preserve Credit”

Credit
How to Obtain,
Increase and
Preserve Credit.

Copyright © 2000, 2001

Digital Format © 2001
Whitney Education Group, Inc.
4818 Coronado Parkway
Cape Coral, FL 33904
941-542-8999

All Rights Reserved

NOTICE
This publication and the accompanying materials are designed to provide accurate
and authoritative information in regard to the subject matter covered in it. It is
sold with the understanding that the publisher is not engaged in rendering legal,
accounting or other professional opinions. If legal advice or other expert assis-
tance is required, the service of a competent professional should be sought. (From
a Declaration of Principles adopted jointly by a Committee of the American Bar
Association and a Committee of Publishers and Associations.)

Page 1
Whitney Education Group, Inc.

Page 2
Credit “How to Obtain, Increase and Preserve Credit”

Table of Contents
How to Obtain, Increase and Preserve Credit .................................................. 9
Historical Perspective .................................................................................................. 9
Credit Tightens ............................................................................................................. 9
Credit Boom ................................................................................................................. 10
Here is the Proof ......................................................................................................... 10
Too Much Debt Okay ................................................................................................ 10
Understanding Credit ................................................................................................ 10
Understanding Your Rights ..................................................................................... 11
Did You Get the Best Deal? ..................................................................................... 11
Understanding the Process ...................................................................................... 11
Getting Started ........................................................................................................... 11
Additional Funding Sources ..................................................................................... 11
Repairing Credit .......................................................................................................... 11
Preserving What is Yours ......................................................................................... 11
Where to Find Help ................................................................................................... 11
Consumer Protection Laws...................................................................................... 12
Conclusion .................................................................................................................... 12

Chapter 1
Understanding Credit ........................................................................................... 13
Let’s Start by Understanding Credit ..................................................................... 13
The Six C’s of Credit ................................................................................................. 13
How Do You Score ..................................................................................................... 13
Credit Scoring.............................................................................................................. 14
Credit Scores ................................................................................................................ 14
Credit Score Systems ................................................................................................. 14
A Major Consumer Breakthrough .......................................................................... 15
FICO Available ............................................................................................................ 15
Knowledge Is Power .................................................................................................. 15
How You Are Scored .................................................................................................. 15
Why Bother? ............................................................................................................... 15
Credit Reports, Credit Scores ................................................................................... 16
What’s Changing ........................................................................................................ 17
Does Scoring Work?................................................................................................... 17

Page 3
Whitney Education Group, Inc.

The 28/36% Rule ........................................................................................................ 17

Credit Criteria .............................................................................................................. 18
Credit Cards.................................................................................................................. 18
Direct Cards ................................................................................................................. 18
Travel and Entertainment Cards ............................................................................ 19
Bank Cards.................................................................................................................... 19
Secured & Unsecured Bank Cards ........................................................................... 19
Debit Cards ................................................................................................................... 20
Consumer Credit Glossary of Terms ..................................................................... 20
A Credit Creed ............................................................................................................. 22

Chapter 2
Your Credit Rights ................................................................................................ 23
What are Your Rights in the Marketplace? ......................................................... 23
The Truth in Lending Act ....................................................................................... 23
The Fair Credit Reporting Act ............................................................................... 24
The Fair Credit Billing Act ...................................................................................... 25
The Fair Debt Collection Act .................................................................................. 25
The Equal Credit Opportunity Act ........................................................................ 27
The Electronic Funds Transfer Act....................................................................... 27
The Credit Repair Organization Act ..................................................................... 28
The Truth in Leasing Act ........................................................................................ 29
The Real Estate Settlement Procedures Act ....................................................... 29

Chapter 3
The Credit Card for You ..................................................................................... 31
Did You Get the Best Deal? ..................................................................................... 31
Thousands of Dollars in Interest Payments Lost .............................................. 31
Annual Percentage Rate ........................................................................................... 31
Grace or Free Period .................................................................................................. 32
Annual Fees .................................................................................................................. 32
Transaction Fees ......................................................................................................... 32
Balance Computation Method ................................................................................ 32
Average Daily Balance ............................................................................................... 32
Adjusted Balance ......................................................................................................... 33
Previous Balance ......................................................................................................... 33
Other Important Features ........................................................................................ 33
Other Areas for Concern .......................................................................................... 33
How Do I Start to Shop? .......................................................................................... 34
Low Rate Card Survey............................................................................................... 34
Platinum Low Rate Survey ..................................................................................... 34
No Annual Fee Survey ............................................................................................... 35
Platinum No Annual Fee Survey ........................................................................... 35
Secured Card Survey................................................................................................... 35
Federal Reserve System Survey ............................................................................... 35
Institution .................................................................................................................... 36

Page 4
Credit “How to Obtain, Increase and Preserve Credit”

Chapter 4
Understanding the Process ................................................................................. 47
The Credit Bureaus..................................................................................................... 47
The Credit Reporting Agency ................................................................................ 47
Credit Bureaus Share Information .......................................................................... 47
They are a Major Industry ....................................................................................... 47
How to Contact the Credit Bureaus....................................................................... 48
What Information Do Credit Bureaus Have? ...................................................... 49
Personal ......................................................................................................................... 49
Equifax .......................................................................................................................... 50
Credit or Account Information ............................................................................... 52
Who May Access the File? ....................................................................................... 52
Public Records ............................................................................................................. 53
Some Codes That Bureaus Use ................................................................................ 53
Reading a Credit Report ........................................................................................... 53
Equifax Credit Report ............................................................................................... 53
How Long Will An Item Stay in a File? ............................................................... 55
How Mistakes Happen............................................................................................... 55

Chapter 5
Getting Started ...................................................................................................... 56
Rebuilding Your Future............................................................................................. 56
Low Risk Credit Cards............................................................................................... 56
The Automobile Retail Card .................................................................................... 56
Retail Consumer Credit Card ................................................................................... 57
How Many Cards Do I Need?.................................................................................. 57
Seek a Co-Signer ......................................................................................................... 57
Obtain a Secured Credit Card .................................................................................. 57
Passbook Signature Loan .......................................................................................... 58
Go for the Big Loan ................................................................................................... 58
Be On the Lookout for Specialty Cards ................................................................. 58
Go On the Offensive .................................................................................................. 59
Find Those Gems ....................................................................................................... 59
You Have the Plan ...................................................................................................... 59

Chapter 6
Enhancing Your Credit ........................................................................................ 60
The Hard Part is Over, Now Comes the Smart Part .......................................... 60
You are Now a Prime Target Customer ................................................................ 60
Accept a New Card ..................................................................................................... 60
Never Request A Specific Credit Limit ................................................................. 60
Ask for the Moon ....................................................................................................... 61
Never Accept Less ...................................................................................................... 61
Should the Mix Change? .......................................................................................... 61
An Annual Event ........................................................................................................ 61
Address Your Debt ...................................................................................................... 62

Page 5
Whitney Education Group, Inc.

Consumer Loan ........................................................................................................... 62

Cash Advance .............................................................................................................. 62
Balance Transfers ....................................................................................................... 62
Exploit the Grace Period .......................................................................................... 63
Restrict the Use of Your Card ................................................................................ 63
Creative Financing ..................................................................................................... 63
Equity Line of Credit ................................................................................................ 64
100 Percent Plus Loan to Value .............................................................................. 64
Home Improvement Loans ...................................................................................... 64
Life Insurance Policy ................................................................................................. 65
Lease Option ................................................................................................................ 65
Partners ......................................................................................................................... 65
Do You Need a Home?............................................................................................... 65
Direct Federal Programs .......................................................................................... 66
There is No Excuse .................................................................................................... 66
Take Advantage of the System .............................................................................. 66

Chapter 7
Improving Bad Credit ........................................................................................... 67
It Can Be a Long, But Highly Rewarding Process ............................................ 67
Make Sure They Have All the Good Items. ......................................................... 67
Is it Credit Repair That You Need? ........................................................................ 67
Don’t Forget Your Spouse ........................................................................................ 67
Let’s Get Started ......................................................................................................... 68
Organization is Key ................................................................................................... 68
It’s a Letter Campaign............................................................................................... 68
Certified Mail Only..................................................................................................... 69
Develop a Mail Schedule ........................................................................................... 69
The Ball is in Their Court ......................................................................................... 69
Accuracy is Essential ................................................................................................. 69
Demand Detail ............................................................................................................ 69
The Next Step ............................................................................................................. 69
File Again ..................................................................................................................... 70
They Didn’t Respond Timely .................................................................................. 70
A Possible Pitfall You Must be Prepared to Handle ........................................... 70
Public Records ............................................................................................................. 71
Techniques for Those Hard-to-Remove Items ................................................... 71
If You Can’t Get the Item Removed ..................................................................... 71
Simply Dispute ............................................................................................................ 71
Handling Judgments .................................................................................................. 71
Consent Agreements are Another Story .............................................................. 72
What You Must Know About Judgments ............................................................ 72
Vacate the Order ......................................................................................................... 72
Handling Tax Liens ................................................................................................... 72
Federal Tax Liens ....................................................................................................... 73
Common Questions and Answers About the Credit Repair Process ............. 73
Sample Letters ............................................................................................................. 74

Page 6
Credit “How to Obtain, Increase and Preserve Credit”

To Request a Copy of a Credit Report .................................................................. 76

To Request a Copy of an Investigative Consumer Report .............................. 77
Requesting a Personal Interview ............................................................................ 78
Requesting a Telephone Interview ........................................................................ 79
Requesting an Investigation.................................................................................... 80
Requesting the Deletion of Information ............................................................. 81
Letter of Dispute ....................................................................................................... 82
Requesting Re-investigation ................................................................................... 83
Requesting Inclusion of a Consumer Statement in a Credit File .................. 84
Requesting Information Disclosure ....................................................................... 85
Letter to Creditor Sending Erroneous Information .......................................... 86
Requesting the Deletion of Obsolete Information ........................................... 87
Requesting Updated Credit Reports Be Sent to Inquirers ............................... 88
Filing a Complaint with the FTC About a Credit Bureau ................................ 89
Filing a Complaint with a Better Business Bureau or Other
Consumer Agency ...................................................................................................... 90
Requesting Separate Files for a Husband and Wife ........................................... 91
Letter to Add Data to a Consumer Report .......................................................... 92
Sample Settlement Agreement ............................................................................... 93

Chapter 8
Preserving What’s Yours ..................................................................................... 94
Don’t Let an Accident Destroy What You’ve Built ........................................... 94
No One Should Know Your Business ..................................................................... 94
Never Deed a Property in Your Name ................................................................... 94
Use a Different Name for Every Property ........................................................... 94
Incorporate ................................................................................................................... 95
Limited Partnership ................................................................................................... 95
The Land Trust ........................................................................................................... 95
Land Trust Agreement ............................................................................................. 95
Agreement and Declaration of Trust ................................................................... 96

Chapter 9
Where to Find Help? .......................................................................................... 102
Sometimes the Toughest Task is to Find and Ask For Help ......................... 102
National Foundation for Consumer Credit ......................................................... 102
Common Sense Approach ....................................................................................... 102
Monthly Income ....................................................................................................... 103
Having Problems, Contact Your Creditors ......................................................... 103
Debt Consolidation................................................................................................... 103
Bankruptcy ................................................................................................................. 103
Chapter Seven............................................................................................................ 103
Chapter Thirteen ...................................................................................................... 104
Credit Counseling ..................................................................................................... 104
Help on the Federal Level ....................................................................................... 104
Credit and Consumer Problems ............................................................................ 104
Federal Trade Commission ..................................................................................... 105

Page 7
Whitney Education Group, Inc.

U.S. Department of Justice .................................................................................... 105

Federal Credit Unions .............................................................................................. 105
National Banks .......................................................................................................... 106
Federal Savings and Loans Banks ......................................................................... 106
State Banks That are Members of the Federal Reserve System .................. 106
Non-Member Federally Insured State Banks .................................................... 107
State Attorneys General ......................................................................................... 108

Chapter 10
It’s a Never Ending Process .............................................................................. 113
You Can Never Assume That Your Credit is Safe ............................................. 113
How Often Should You Check? ............................................................................. 113
Once a Year is Fine ................................................................................................... 113
There is Another Threat on the Horizon ........................................................... 114
The Risk of Buying On-Line ................................................................................ 114
The Educational System Has Failed Us .............................................................. 114
Envision a Stop Sign ................................................................................................ 115
Remember the Credit Creed .................................................................................. 115

Page 8
Credit “How to Obtain, Increase and Preserve Credit”

How to Obtain, Increase and

Preserve Credit.
Credit or one’s ability to pay their obligations has always been a critical component of
our system of exchange. For years, government was on the side of the lender to the
extent that people were actually sent to jail for nonpayment of obligations. Debtor’s
prisons were abolished long ago, but it wasn’t until 1968 that the Consumer Credit Pro-
tection Act was initially enacted. For the first time, creditors had to state the true cost
of borrowing.

Historical Perspective
Today to buy a car, home, get a job, or a new TV, most will have to pass the muster of a
credit bureau. With the electronic age, the collection of credit data is a multi-billion
dollar industry. The first known credit bureau was formed by a group of tailors in Lon-
don, England in 1803. Members of the Mutual Communication Society of London ex-
changed information on bad credit risks. The first US credit bureau was started in Brook-
lyn, New York in 1869.

For years, consumers were able to obtain credit primarily from their local stores and
vendors. Then, to take advantage of all those eating out and traveling, a whole new set
of credit evolved, the travel and entertainment cards. American Express and Diner’s
Club are prime examples. The economy was booming and banks were anxious to partake
in what was the “plastic” revolution in America. Up to that point, to make a “material”
purchase you had to have an account directly with the merchant you were buying from.
Then some banks in California got together and the MasterCard was born.

Credit Tightens
Credit was easy. Credit card companies were determined to sign up as many members as
possible. “You have been pre-approved for X amount of credit,” stated their marketing

Page 9
Whitney Education Group, Inc.

materials. More often than not, the annual family income was the only criteria consid-
ered. But consumers went on a spending spree, charging everything in sight; as a result
many were unable to pay, and credit procedures were tightened considerably. The economy
went sour, interest rates went through the roof and numerous consumers fell into a
credit “no-man’s” land. Down-sizing became the buzz word in corporate circles and many
became unemployed and creditless.

Credit Boom
Today, we have come full circle. The economy is booming at a 50-year high and interest
rates are now very low. A recent Time magazine story quoted the Consumer Federation
of America as stating that from 55 to 60 million Americans had an outstanding balance
of over $7,000 in their credit card accounts, up $1,000 from the previous year. However,
bank profit margins have been declining steadily since the mid-eighties. The article esti-
mated a 300% decline during that period. Where can they look for additional business?
One way they are going about it is to further penalize current customers. Some have
decreased the grace period from 30 to 20 days. Others are actually charging a fee if the
account is not used during a certain time frame. How important is this business to their
bottom line? Credit card loans account for 7.8% of total bank lending, however it repre-
sents 12.2% of their loan income. It is very important to them. Some have even insti-
tuted a fee should one decide to close the account. How about those 50 million Americans
with poor, or no credit? Many financial institutions are actually targeting them as a
major new source of consumer business, realizing that their stringent rules have pre-
vented many good and stable people from receiving the credit they deserve. A divorce,
illness, job loss or even a bankruptcy deprived consumers of a record that included years
of steady and faithful payments.

Here is the Proof

Too Much Debt Okay
If you have no credit
If you have some credit and need more
If your credit needs rehabilitation
Then this manual was written for you.

Understanding Credit
We will start by understanding credit. What
do the lenders look for when they evaluate
someone for a loan? What are the different
methods they employ to do so? We will ex-
plain the terminology used in credit, and re-
view the different types of credit cards that
are available.

Page 10
Credit “How to Obtain, Increase and Preserve Credit”

Understanding Your Rights

We will identify the nine important pieces of federal
legislation that were enacted to protect you in the
marketplace. We will explain the significance of each
and review what they mean to you, from the land-
mark Truth in Lending Act to the Real Estate Settle-
ment Procedures Act.

Did You Get the Best Deal?

We will explain how to evaluate the different types
of credit card proposals that you receive, how to
shop around for the best deals and where to look.
This will include the most comprehensive evaluation list available.

Understanding the Process

How are credit histories compiled and kept? Who are the keepers of this vital informa-
tion and how can you access and understand what it all means? Where can you go if you
have questions about your report.

Getting Started
If you have no credit, or if you have bad credit, a step-by-step plan will be provided to
insure that you have the financial resources to pursue whatever it is you need. Which
cards should you apply for first and what is the ideal mix?

Additional Funding Sources

If you have credit but need more, how can you attain those additional revenue sources
and credit lines? Your goal is a $100,000 line-of-credit. How can you use creative financ-
ing while you are building up your credit resources?

Repairing Credit
How do you go about restoring credit problems? What do you look for, where do you go,
and even sample letters you can use to combat every conceivable problem will be pro-
vided. This is the definitive credit-repair guide.

Preserving What is Yours

Now that you are on the road to financial success, what
should you consider doing to ensure that you are not put in
a position of losing your gains? We will show you how to
shelter what you have from others.

Where to Find Help

If you need help in solving a problem or in straightening
out your debt, we will tell you the places to go for that help,
Page 11
Whitney Education Group, Inc.

including federal, state and not-for-profit agencies. We will also show you how and which
agency you should contact to report a specific problem with a financial institution.

Consumer Protection Laws

Copies of all the consumer protection laws that one would need to fully grasp every
aspect of credit in the market place will be included and exactly what your rights are
under these statutes.

Conclusion
How protecting your credit is a never-ending process, and what the professionals recom-
mend you do and how often.

And now let’s begin by understanding credit.

Page 12
Credit “How to Obtain, Increase and Preserve Credit”

Understanding Credit
Let’s Start by Understanding Credit
You get credit by promising to pay in the future for something you receive in the present.
Credit is a convenience: you can enjoy your purchase while paying it off. Today when
someone mentions credit, what they are usually referring to is a credit history. This is a
record of a person’s credit past, as tracked by an agency or bureau, from credit cards they
have applied for and received, and the promptness of their payments. Accounts in depart-
ment stores, car loans, home financing or renting, phone and electric bills, cable charges
all can be variables. What do lenders want to see in a credit history? Stability is the key,
both on the job and where one lives. Prompt payments of past debt and a low debt to
income ratio are major determinants.

The Six C’s of Credit

Many lenders, including financial institutions, use what is commonly referred to as the
six “C’s” of credit. They are listed in the order of implied importance:
.
Character: Does the person appear to be trustworthy? This is a summary of what was
thought about you as a person.
Capacity: The ability to pay off the debt, based upon earnings and outstanding debt.
Collateral: Is security required for the loan?
Conditions: Are there economic or regulatory influences that would come into play?
Credit: Your credit history.
Capital: Your net-worth determined by a financial statement.

Most people automatically assume that credit is the most important factor, but it stands
fifth in importance. Your image, both dress and presence, have a major impact on whether
one receives a loan. Once again, it boils down to stability and how you relate to the
particular loan officer.

How Do You Score?

Most consumers are not aware that many creditors actually use a system to score or rate a
potential customer. Simply, it is a way to compare you with other consumers to see how you
fair against their average or “safe” loans. There are two major categories: one driven by
other than financial factors and one strictly based upon income and debt.

Page 13
Whitney Education Group, Inc.

Credit Scoring
Over the years, many commercial establishments such as department stores, automobile
dealerships, and the like, began to develop profiles on their customers and used them as a
determinant as to their potential for prompt payment of their debt. No one system is
perfect and most will not even divulge their own formula. For every type of business, the
potential customer has different traits. One major factor is that it reduces the importance
of their impression of you and is suppose to judge all applicants equally. According to the
Federal Trade Commission (FTC), most employ from six to fifteen factors to determine
credit-worthiness.

Credit Scores
Different factors that the establishment considers important are given a point score and
the points are then tallied and the determination made. Here is an example that we have
drawn up for this book:Those receiving under 15 points will be rejected for the loan, a
score of 16 to 19 points, they will be referred to the credit manager for further financial
data, and those scoring 20 or more will be accepted straight up. The variables that can be
used are endless. However race, sex, martial status, national origin, religion, or age can-
not (are not suppose to) be used as they fall under discrimination laws. Having said that,
notice that we did have age as a criteria, but the law states that people 62 or older must
receive the maximum number of points for that factor.

Credit Score Systems

Factor Points Awarded
Monthly Income:
Less than $400 0
$400 to $659 3
$651 to $800 7
$801 to $1,000 12
$1,200 + 15
Length of time at address:
One year 0
Two to three 2
Three to five 3
Five + 5
Telephone in Home:
Yes 2
No -5
Time on the Job:
One year 0
Two to three 2
Three to Five 3
Five + 5
Age:
21-30 5
31-49 2
50-61 3
61 + 5
Occupation:
Unskilled 1
Skilled 2
Professional 4

Page 14
Credit “How to Obtain, Increase and Preserve Credit”

A Major Consumer Breakthrough

Until recently, people had a very difficult time finding out exactly what credit reporting
agencies were saying about them. Thanks to the Internet, consumer pressure, and even
government regulation, your credit report — a formerly obscure and murky aspect of
personal finance — is becoming more transparent, accessible, and increasingly manage-
able. You can obtain a credit report from any number of on-line sources with just a few
mouse clicks.

FICO Available
As of April 1, 2001, however, you can go right to the source of all this elusiveness. That’s
because the Fair, Isaac & Company, a firm that developed the formula for rating the
creditworthiness of nearly every borrower, opened its files to the public.

The company was founded in 1956 by Bill Fair and Earl Isaac and is considered to be the
most renowned of all the credit scoring agencies. The company preferred to work in the
deep background in servicing lenders.

Now, anyone can find out their own personal FICO Score — just like a banker. The FICO
score is a three-digit number, ranging from 300 to 900, assigned to your credit based on a
formula developed by Fair, Isaac & Co.

Knowledge Is Power
It is in your best interest to know your FICO Score because it is a key factor in determining
if you get a mortgage, whether you can refinance your home at a favorable rate, or whether
or not you can get a new credit card.

Your FICO Score can also determine whether or not you can finance a new car, buy insur-
ance - or even get a job.

For many years, this small company sat in the background of the huge credit industry
controlling the credit scoring business with a secret mathematical formula.

How You Are Scored

A FICO score is usually calculated through information supplied by credit reporting agen-
cies based on your credit history. Fair and Isaac long sought to keep FICO scores secret,
as well as the methodology they used to score them.

As a result of this new Open Policy, managing credit is much easier, and can be as much a part
of your personal finances as keeping track of your checking account, debts, and investments.

Why Bother?
As we mentioned earlier, your credit score will significantly affect your ability to obtain
loans and mortgages, and will likely affect the interest rate you pay. According to Fair,
Isaa & Co., the FICO score is used in 75% of residential mortgage applications. More-
Page 15
Whitney Education Group, Inc.

over, use of FICO scores has increased in recent years as automated loan approvals have
become more common among lenders.

According to a recent U.S. News & World Report article, E-Loan, an online lender that
has fought with Fair, Isaac & Co. over making FICO scores public, found that for auto
loans, consumers with FICO scores of 720 or higher were likely to receive interest rates
up to four percentage points lower than those with scores under 640.

You can order your own FICO Score by logging on at either of these two web sites:
myfico.com or at fairissac.com

The cost for the survey is $12.95 payable by credit card only. This is a relatively inexpen-
sive way to find out where you stand with your credit - much cheaper than not knowing!

Credit Reports, Credit Scores

To be precise, a credit report is different from a credit score.

Specifically, a credit report is a summary of various accounts, past and present, opened in
your name, including credit cards, bank credit lines, mortgages, department store charge
cards, and other bills, though usually not rent payments or utilities. A report will also
include any collection actions taken against you, and any public-record information that
may exist, such as liens or bankruptcy proceedings.

This information has always been available, though in the past you might have had to call
a credit bureau’s 1-800 number and then mail in a check. These days you can purchase this
information online (more about this later).

In addition to your credit report, there’s your credit score. When you apply for a loan

Page 16
Credit “How to Obtain, Increase and Preserve Credit”

through a mortgage bank or other lender, they request your credit report from one of
the three major credit reporting agencies (CRAs), who then calculate your FICO score
based on Fair, Isaac & Co.’s model. Since your credit report might differ among the vari-
ous CRAs, your FICO scores might differ as well!

What’s Changing
In response to increasing pressure from the U.S. Congress and consumer groups, and
some lenders such as E-Loan (not to mention the California legislature), Fair, Isaac & Co.
struck a deal earlier this year with Equifax to provide FICO scores online, for a fee of
$12.95. In addition, the two companies will provide additional information about where
you stand compared to everyone else, and the factors that led to your score. In addition,
the reports will likely include four “reason codes,” as Fair, Isaac & Co. calls them, which
are “the top four reasons your score was not higher.” For example, having excessive
balances on credit cards — particularly relative to a card’s credit limit (in other words,
don’t “max out”) — or having balances on too many accounts.

Fair, Isaac & Co. has also explained all the factors they consider when formulating your
score, and how much weight they are given. For example, about 35% of your FICO
score is based on your history of repaying loans!

Does Scoring Work?

With large numbers of applicants, many firms are committed to scoring. It is generally a
fair way to judge applicants, but if the sample is small, the results may not be accurate.
Remember, while the firm will not tell you how they measure the factors or points, they
must by law tell you why you were rejected for credit, if that is the case. Also remember
that different firms use different factors, so if you are rejected by one, the next might
not use the same formula and you could receive a positive score.

The 28/36 % Rule

The other commonly used credit rule is utilized primarily by bankers and mortgage brokers
to determine how much credit or mortgage a consumer can qualify for. For standard mort-
gage programs, most lenders qualify buyers whose total housing expenses (principle, inter-
est, taxes and insurance) equal 28 percent of their gross income. You take your gross
monthly income, multiply the amount by 28%, and the resulting figure is the maximum
amount one can afford for a monthly real estate payment.
The 36% refers to the maximum amount of debt ver-
sus gross income traditional lenders find acceptable.
For those with very good credit, they will go as high
as 38%. Car payments, installment loan payments
with more than 10 remaining payments, average
monthly credit card payments, student loans, medical/
health care payments, and alimony or child support payments fall
into this category. If your monthly income is $4,000, the high-
est monthly mortgage payment you would qualify for would be
$1,120. Using the same monthly gross income, the total addi-

Page 17
Whitney Education Group, Inc.

tional monthly debt allowable would be $320, or a combined $1,440.

There are other types of credit categories used mostly by mortgage brokers who issue A,
B, C, and D ratings based on one’s credit history. These vary by the lending institutions.
Most use a combination of mortgage history, major and minor late pays, and loan to
value ratios. We will outline one such guide.

Credit Criteria
Type Mortgage Consumer Bankruptcy Charge Offs
Late Pays Late Pays Discharge Judgments

A 1- 30 days None 3 years none

B 2-30 days 1- 90 days 2 years $1,500

C 3-60 days 50% late 1 year $5,000

D Foreclosure 100% late case case

Current by case by case

Credit cards
Any explanation of credit must include the different
types of credit cards that are available. To rent a car,
shop online, book a hotel room, or for hundreds of other
transactions, the use of a credit card has become al-
most mandatory for the consumer. Telephone and cata-
log shopping have carried these cards on a meteoric in-
crease. You never have to worry about having enough
money because you carry the card. Need something in
a hurry? Don’t send a check because it might take weeks
to clear and a month before the product is received. (We will go into how best to obtain
and use credit cards in another chapter).

Direct Cards
Direct cards for credit go back as far as one remembers. Merchants have used them far
before anyone ever imagined the concept of a credit card. Major stores have issued credit
for their best customers for years. At first it was a minor line of pre-approved credit that
you had to apply for prior to approval of the sale. Then accounting improved and they
were able to have a pre-approved limit that you could access at the point of sale. At first
they were made of paper, but those wore out rapidly and, with the advent of plastic, a
new type of card was made. Today, the term “plastic” doesn’t refer to the material the
card is printed on, but a whole new way of conducting business: the credit card genera-
tion was born. These cards used by oil companies, department stores, etc. are only good
in the retailer’s store itself and are not transferable.

Page 18
Credit “How to Obtain, Increase and Preserve Credit”

Travel and Entertainment Cards

American Express, Carte Blanche, and Diners Club are the primary sources of entertain-
ment cards. As their names imply, they were designed for that purpose. American Ex-
press was used for airline tickets and had an international travel business. If you run out
of money in a foreign country, find the local American Express office and you are in
business. They all eventually made their way into mainstream businesses and were used
to charge every type of merchandise and service imaginable. Designed originally with
no stated limits, all charges were due and payable the following month. American Ex-
press originally had a number at the end of the card number which identified the status
level of the customer, but it dropped it after it was called a discriminatory practice. To-
day, all companies have different levels of credit standing. With the popularity of Visa
and MasterCard, some travel and entertainment cards are offering card combinations
with extended payment plans. American Express only used this feature in the past with
travel arrangement; today its Optima card has the same features as Mastercard or Visa.

Bank Cards
Bank cards got their start in California with the advent of the MasterCard. Banks saw
the way consumers were using the direct cards and the interest payments that were
being raked in. If they work for a single merchant, how much more powerful a tool they
would be if one could use the card in a majority of stores. At first it was the small stores
that signed on. They couldn’t afford to set up their own system like the large stores
could. Predictably, the large stores resisted, but today they except all cards, still pushing
their own as well. Bank cards are issued in the name of the bank that signed up the
consumer, but process their card through one of the major bank cards, Visa or MasterCard.
The bank issues the credit and use their local
credit criteria, while Visa and MasterCard are
their servicing bureaus. Each individual has
their own credit-limit ceiling. There are dif-
ferent ways to arrive at the interest payment
and annual fee and we will cover them in an-
other chapter.

Secured & Unsecured Bank Cards

Payments are monthly with minimum balances required. It is these cards, averaging an
outstanding balance of over $7,000 per household, that we mentioned in the introduc-
tion. There are two different types of bank cards, secured and unsecured. Unsecured are
the ones most of us use. The secured card is usually given to one just starting to build
credit or repairing their credit. You have to place an amount of money equal to your
credit limit in their bank. As you make purchases, your limit is reduced until your next
monthly payment, then it is increased to the original limit if the balance is paid. Some
banks today, in an attempt to capture this portion of consumer spending, are giving
people limits that exceed their security. The normal introductory amount is $500. Some
banks are only requiring 40 to 59 percent of the base amount.

Page 19
Whitney Education Group, Inc.

Debit Cards
We will include debit cards in our discussion even if they are not credit cards in the truest
sense of the word. Many even carry the MasterCard or Visa logo and are processed by
them. Similar to a checking account, the money is taken or debited from your account at
the transaction. It is more like paying in cash, except you do not have to carry the cash
with you. There are those who think these cards are more convenient to the bank than
the consumer. Some financial planners are instructing their clients not to use these cards
because the security features have not been perfected as of yet. Many institutions are
substituting these cards for their ATM cards. For those without any means of credit,
they can be of assistance for those establishments that will not accept a check. It is our
opinion that a secured card is the better way to go.

We will review a small glossary of terms put together by the board of governors of the
Federal Reserve System in their handbook on consumer credit. This will help you to
better understand the buzz words in describing the aspects of credit.

Consumer Credit Glossary of Terms

Annual Percentage Rate (APR): The cost of credit at a yearly rate.

Appraisal Fee: The charge for estimating the value of property offered as security.

Asset: Property that can be used to repay debt, such as stocks and bonds or a car.
.
Automated Teller Machines (ATM): Electronic terminals located on bank premises or
elsewhere, through which customers of financial institutions may make deposits, with-
drawals, or other transactions as they would through a bank teller.

Balloon Payment: A large extra payment that may be charged at the end of a loan
or lease.

Billing Error: Any mistake in your monthly statement as defined by the Fair Credit
Billing Act.

Business Days: Check with your institution to find out what days it counts as business
days under the Truth in Lending and Electronic Fund Transfer Acts.

Collateral: Property offered to support a loan and subject to seizure if you default.

Cosigner: Another person who signs your loan and assumes equal responsibility for it.

Credit: The right granted by a creditor to pay in the future in order to buy or borrow in
the present; a sum of money due a person or business.

Credit Bureau: An agency that keeps your credit record.

Page 20
Credit “How to Obtain, Increase and Preserve Credit”

Credit Card: Any card, plate, or coupon book used from time to time or over and over
again to borrow money or buy goods or services on credit.

Credit History: The record of how you’ve borrowed and repaid debts.

Creditor: A person or business from whom you borrow or to whom you owe money.

Credit-related Insurance: Health, life, or accident insurance designed to pay the out-
standing balance of debt.

Credit Scoring System: A statistical system used to rate credit applicants according to
various characteristics relevant to creditworthiness.

Debit Card (EFT Card): A plastic card, looking similar to a credit card, that consumers
may use to make purchases, withdrawals, or other types of electronic fund transfers.
.
Default: Failure to repay a loan or otherwise meet the terms of your credit agreement.

Disclosures: Information that must be given to consumers about their financial dealings.

Elderly Applicant: As defined in the Equal Credit Opportunity Act, a person 62 or older.

Electronic Fund Transfer (EFT) Systems: A variety of systems and technologies for
transferring funds electronically rather than by check.

Finance Charge: The total dollar amount credit will cost.

Home Equity Line-of-Credit: A form of open-end credit in which the home serves as
collateral.

Joint Account: A credit account held by two or more people so that all can use the
account and all assume legal responsibility to repay.

Late Payment: A payment made later than agreed upon in a credit contract and on
which additional charges may be imposed.

Lessee: A person or company who signs a lease to get temporary use of a property.

Lessor: A company or person that provides temporary use of a property usually in return
for periodic payment.

Page 21
Whitney Education Group, Inc.

Liability on an Account: Legal responsibility to repay debt.

Open-end Credit: A line-of-credit that may be used over and over again including credit
cards, overdraft credit accounts, and home-equity lines.

Open-end Lease: A lease, which may involve a balloon payment, based on the value of
the property when it is returned.

Overdraft Checking: A line of credit that allows you to write checks or draw funds by
means of an EFT card for more than your actual balance, with an interest charge on the
overdraft. Deposit accounts are debited electronically without the use of checks.

Points and Origination Fees: Points are finance charges paid at the beginning of a
mortgage in addition to monthly interest. One point equals one percent of the loan
amount. An origination fee covers the lender’s work in preparing your mortgage loan.

Punitive Damages: Damages awarded by a court above actual damages as punishment

for a violation of law.

Rescission: The cancellation or “unwinding” of a contract.

Security: Property pledged to the creditor in case of default on a loan; see collateral.

Security Interest: The creditor’s right to take property or a portion of property offered
as security.

Service Charge: A component of some finance charges, such as the fee for triggering
an overdraft checking account into use.

A Credit Creed
Most people are going to use credit to establish themselves in the financial marketplace.
We want to end this chapter on understanding credit on what many have called the secret
to building wealth. Use borrowed money or credit only for those items that will increase
in value or appreciate, never for items that will depreciate like cars, boats, etc. Take your
borrowed money and turn it into something that will go up in value, for example real
estate. Then take the profits from that investment and use it for assets that depreciate.
Do this and you will indeed find yourself on the road to building wealth. Now that we
have covered understanding credit, let’s understand your credit rights.

For more information/literature on ways to Build Your Wealth call 1-800-741-7877. Ask
for our Business Consulting Department. The consultation and the call is “Free.”

Page 22
Credit “How to Obtain, Increase and Preserve Credit”

Your Credit Rights

What Are Your Rights in the Marketplace?

The Consumer Protection Act, signed into law in 1969 with the original Truth in Lend-
ing Act, was historic in nature because for the first time, it set up a mechanism that
enabled the consumer to be both informed and to dispute a commercial transaction. As
time went on, Congress has seen fit to address various other major consumer concerns.
We will summarize each of these laws in this chapter:

1. The Truth in Lending Act

2. The Fair Credit Reporting Act
3. The Fair Credit Billing Act
4. The Fair Debt Collection Practices Act
5. The Equal Credit Opportunity Act
6. The Electronic Funds Transfer Act
7. The Credit Repair Organization Act

Then we will touch upon two other acts that have had impact on your consumer rights:

1. The Truth in Leasing Act

2. The Real Estate Settlement Procedures Act

The Truth in Lending Act

The Truth in Lending Act spelled out that the consumer had to be told the true cost of
borrowing, in a common language, so that they could figure out exactly what the charges
would be. You must be informed, in writing, of the finance charge and the annual per-
centage rate before you sign any contract. They must also inform you of the method
they are going to use to calculate the balance on which you pay a finance charge.

Truth in Lending gives you a chance to change your mind when you use your home as
security in any transaction. It established the first three-day right-of-rescission: you
have three business days to cancel a transaction, and the creditor must give you this
notice prior to the transaction.

Page 23
Whitney Education Group, Inc.

If a credit card is lost or stolen and you promptly

notify the company, your liability is limited by law
for the first time to $50 per card. It is also illegal
for a card issuer to send you a credit card unless you
ask for or agree to receive one.

If a creditor does not comply with the law you may

sue for actual damages and, in any law suit you win,
you are entitled to be reimbursed for court costs
and attorney’s fees.

The Fair Credit Reporting Act

The Fair Credit Reporting Act was enacted when horror story after horror story was
presented to Congress about people being deprived of the ability to conduct normal
business after being refused credit because of an erroneous entry on their credit history.
Up to then, the consumer was helpless because they couldn’t even gain access to the
records, let alone correct them. The law regulates the activities of credit reporting agen-
cies, or as more commonly known, credit bureaus and gives the Federal Trade Commis-
sion responsibility for enforcement. The FTC capsulizes its consumer rights as:

• You have the right to know all the information in your credit report,
including the source of the information in most cases.
• You have the right to know the name of anyone who received your
credit report in the past six months.
• You have the right to a free copy of your credit report when your
application is denied because of information supplied by the credit
bureau. Your request must be made within 30 days of receiving your
denial notice.
• You have a right to add a summary explanation to your credit report if
the problem is not resolved to your satisfaction.

If you find an error or incomplete information in your credit report, contact the credit
bureau and they are required to investigate the items in question. If the investigation
reveals an error, the credit bureau may be required to send an amended report to all
those who asked for your report in the last six months. There are provisions on how
long an item can appear on a credit report.

• Generally seven years

• Bankruptcy information can be reported for 10 years.
• Information regarding a job application with a salary of more than $20,000
no limit.
• Information for more than $50,000 of life insurance no limit.
• A lawsuit or a judgement can be reported for 7 years or until the statute of
limitations runs out.

Page 24
Credit “How to Obtain, Increase and Preserve Credit”

The Fair Credit Billing Act

The Fair Credit Billing Act was an attempt by Congress to level the playing field be-
tween business and the consumer when a contested bill arose. Up to now all the leverage
was with the vendor: they could charge your account, keep the money, and you were
stuck with a defective product, something you didn’t order, or a simple error. The law
sets up procedures requiring creditors to promptly correct billing errors, and allows the
consumer to withhold payment on damaged goods, and makes creditors promptly credit
your payments. The Federal Reserve quotes the law as defining an error as any charge:

• For something you didn’t buy or for a purchase made by someone not authorized
to use your account.
• That is not properly identified on your bill or is for an amount different from the
actual purchase price or was entered on a date different from the purchase date.
• For something that you did not accept on delivery or that was not delivered
according to agreement.
• Errors in arithmetic.
• Failure to show a payment or other credit to your account.
• Failure to mail the bill to your current address, if you told the creditor about an
address change at least 20 days before the end of the business cycle.
• A questionable item, or an item for which you need more information.

In case of an error:
• Notify the creditor in writing, detailing the error.
• Pay all the parts of the bill that are not in dispute.
• The creditor must respond within 30 days.
• The item must be resolved within 90 days.
• If a creditor has indeed made a mistake, no finance charges may be charged.

The Fair Debt Collection Act

The Fair Debt Collection Act was enacted to protect consumers from the over-zealous
activities of some debt collection agencies and the tactics they employed. It also includes
attorneys who do debt collection as a part of their practice. It sets basic guidelines for
them to follow. They may not contact you at unreasonable times or places. Unless you
agree, they must not contact you before 8AM or after 9PM, nor at your place of em-
ployment. You must receive a written expla-
nation of your supposed debt and what to do
if you feel you do not owe the money.

The FTC has prepared some

excellent guidelines.

What Debt Collection

Practices are prohibited?

Page 25
Whitney Education Group, Inc.

Harassment:
Debt collectors may not harass, oppress, or
abuse anyone.
For example, debt collectors may not:
• Use threats of violence or harm against
the person, property or reputation.
• Publish a list of consumers who refuse to
pay their debts (except to a credit bureau).
• Use obscene or profane language.
• Repeatedly use the phone to annoy someone.
• Telephone people without identifying themselves.
• Advertise your debt.

False statements:
Debt collectors may not use any false statements when collecting a debt.
For example, debt collectors may not:
• Falsely imply that they are attorneys or government representatives.
• Falsely imply that you have committed a crime.
• Falsely represent that they operate or work for a credit bureau.
• Misrepresent the amount of your debt.
• Misrepresent the involvement of an attorney in collecting a debt.
• Indicate that papers being sent to you are legal forms when they are not.
• Indicate that papers being sent to you are not legal forms when they are.

Debt Collectors also may not state that:

• You will be arrested if you do not pay your debt.
• They will seize, garnish, attach, or sell your property or wages, unless the collection
agency or creditor intends to do so, and it is legal to do so.
• Actions such as a lawsuit will be taken against you, which legally may not be taken, or
which they do not intend to take.

Debt Collectors may not:

• Give false credit information about you to anyone.
• Send you anything that looks like an official document from a court or government
agency when it is not.
• Use a false name.

Unfair Practices:
Debt collectors may not engage in unfair practices when they try to collect a debt. For
example, collectors may not:
• Collect any amount greater than your debt, unless allowed by law.
• Deposit a post-dated check prematurely.
• Make you accept collect calls or pay for telegrams.
• Take or threaten to take your property unless this can be done legally.

Page 26
Credit “How to Obtain, Increase and Preserve Credit”

The Equal Credit Opportunity Act

The Equal Credit Opportunity Act passed in 1974 prohibits discrimination in the grant-
ing of credit of any form due to sex, marital status, race, religion or age. The FTC offers
the following guidelines:

When you apply for credit, a creditor may not:

• Discourage you from applying because of your sex, marital status, age, race, national
origin or because you receive public assistance.
• Ask you to reveal your sex, race, national origin or religion.
• Ask if you’re widowed or divorced.
• Ask about your marital status if your applying for a separate, unsecured account,
except in a community property state (Arizona, California, Idaho, Louisiana, Nevada,
New Mexico, Texas, and Washington).
• Inquire about your plans for having or raising children.
• Ask if you receive alimony, child support or separate maintenance payments.

When deciding to give you credit, a creditor may not:

• Consider your sex, marital status, race, national origin, or religion.
• Consider whether you have a telephone listing in your name, but they may consider
whether or not you have a phone.
• Consider the race of people in the neighborhood where you want to buy or improve
a house with borrowed money.
• Consider your age, unless:
You’re too young to sign contracts, generally under 18.
You’re 62 or older and the creditor will favor you because of your age.
It’s used to determine other factors important to creditworthiness.
It’s used in a scoring system that favors applicants 62 and older.

When evaluating your income, a creditor may not:

• Refuse to consider public assistance income the same way as other income.
• Discount income because of your sex or marital status. A creditor may not assume a
woman will stop working to raise children.
• Discount or refuse to consider income because it comes from part-time employment
or pension, annuity, or retirement benefits programs.
• Refuse to consider regular alimony, child support, or separate maintenance payments.

You have the right to know if your application was accepted or rejected within 30
days. You also have the right to know why your application was rejected and the
reason must be specific.

The Electronic Funds Transfer Act

The Electronic Funds Transfer Act provides protection in all phases of modern banking
techniques such as automatic teller machines (ATM), point-of-sale terminals, telephone
transfers, and computer transactions. Its limits for the first time customers’ liability for
lost or unauthorized use of debit or electronic cards are similar to those in place for credit
Page 27
Whitney Education Group, Inc.

cards. If you notify the bank within two days, your maximum liability is $50. If you miss
the two-day cut off you could be liable for up to $500 in charges. If sixty days go by and
you have not notified the financial institution and they have sent you a statement that
shows unauthorized use, you would be liable for the entire amount including any over-
draft privileges you might have in place.

The act forbids a creditor from requiring a consumer to repay a loan or other credit by
electronic funds transfer (EFT), except in the case of overdraft checking plans. While
your employer or the government agency can require you to receive your salary or gov-
ernment benefit by EFT, you have the right to choose the financial institution that will
receive your funds.
A financial institution may send you an EFT card that is valid for use only if you ask for
one, or to replace or renew an expiring card. They must provide the following information:
• A notice of your liability in case the card is lost or stolen.
• A telephone number to report loss or theft, or an unauthorized transfer.
• A description of its error resolution procedures.
• The kinds of electronic fund transfers you may make and any limits on the frequency
or dollar amounts of such transfers.
• Any charge by the institution for using EFT services.
• Your right to receive records of electronic fund transfers.
• How to stop payment of a pre-authorized transfer.
• The financial institution’s liability to you for any failure to make or stop transfers.
• The conditions under which a financial institution will give information to third
parties about your account.You must receive advance notice of any change in the
account that would increase your costs or liability, or limit transfers.

The Credit Repair Organization Act

When the Fair Credit Reporting Act was passed it became apparent to some that many
who could benefit from the act would not have the savvy nor the resources to do so. As
with any new avenue of regulation, those who mastered the legislation went on to
become consultants for others. Companies sprouted up everywhere offering to clean up
your credit, some giving both illegal and misleading advice. The credit bureaus and those
in government worked in unison to stop the abuses
with different agendas. So everyone involved became a
“bad guy” and the tough new Credit Repair Organiza-
tion Act became a reality. The shame of it all was that
there were those in the field giving consumers good
advice and helping repair their tattered credit history.
Many states have followed suit requiring that credit
repair firms be licensed.

The law addressed some basic issues: It said that the

credit repair organizations could not make a statement
that was misleading. More important, they were pro-
hibited from advising their clients to make a mislead-
ing or untrue statement to a credit bureau. Many were

Page 28
Credit “How to Obtain, Increase and Preserve Credit”

guilty of this abuse. They were stopped from advising consumers how to overlook prob-
lems in their records.

Prior to signing a contract, the credit repair organization was required to give the cus-
tomer a copy of their credit reporting rights under the law. The customer must ac-
knowledge receipt of this information in writing and the firm was required to retain
that document for two years.

It gave the consumer a clear three-day right-of-cancellation, which must be on the con-
tract and it must instruct you how to cancel. The contract must detail the services that
will be provided, spell out any guarantees, give a time frame for the service and a defini-
tive cost to the consumer which would be paid after the service was performed.

The Truth in Leasing Act

We are not going to review the entire Truth in Leasing Act, instead we will point out
some of its more important consumer protection features. To begin with, the act re-
quires the following: the amount or number of payments, down payment requirements,
total number of payments, your lease end responsibilities, and if you can purchase the
item at the end of the lease.
Prior to executing any lease, the firm must provide a written statement of its costs. The
written statement should include the following:

• The amount of any advance payment or security deposit.

• The number, amount, dates of your regular payments.
• The total costs of these payments.
• Amount due for license, registration, taxes and any other fee.
• Lease terms, including insurance, express warranty, who is responsible for mainte-
nance and what the standards are for wear and tear.
• Any penalty for default or late pay.
• Cancellation provisions, and charges.
• Purchase arrangements and cost.
• You could have an open-end lease where you are responsible for a loss in value, under
what the company feels it is worth. The law provides that you have the right to go to
an independent appraiser and both sides must abide by the estimate.

The Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) protects
homebuyers by requiring advanced estimates of settlement costs,
limiting the size of escrow accounts, and prohibiting referral
fees and kickbacks. The Federal Department of Housing
and Urban Development publishes a summary which we
have recapped for your purposes:

RESPA seeks to reduce unnecessarily high settlement

costs through three means: disclosure to homebuyers
and sellers, prohibition of abusive practices, and research.

Page 29
Whitney Education Group, Inc.

The law requires that lenders give all borrowers of federally related mortgage loans a
HUD prepared booklet with information about real estate transactions, settlement ser-
vices, cost comparisons, and relevant consumer protection laws. When applying for a
loan, borrowers must receive the booklet along with the lender’s good-faith estimate of
the settlement costs they are likely to incur. One day before settlement, the borrower
may request that the person conducting the settlement provide information on the ac-
tual settlement costs. At settlement, both the buyer and the seller are entitled to a settle-
ment statement that itemizes the costs they paid in connection with the transaction.
Kickbacks and referral fees are outlawed, sellers may not designate borrowers’ title insur-
ance companies, and excessively large escrow accounts cannot be established or main-
tained. Each borrower must receive an initial and annual account statement. The lender
must disclose the possibility of mortgage servicing being transferred, and establishes
certain borrower rights if the loan servicer makes errors in paying escrow account ex-
penditures.

Page 30
Credit “How to Obtain, Increase and Preserve Credit”

The Credit Card for You

Did You Get the Best Deal?

You cannot open up your mailbox or turn on your television set without being bom-
barded with solicitations urging you to sign up or call to get that credit card you need,
whether it is a secured card, Visa, MasterCard or the new boy on the block, the “Plati-
num Card.” The letter says, “Call now and you will be approved (or you have been pre-
approved) for a platinum card up to $100,000 in credit”. Sign up and that limit might fall
to what you currently have on your other cards (i.e.$2,000). We are not now addressing
what credit cards you should start with or have, we will do that in another chapter. You
would never dream of buying a new or used car without shopping around to get the best
possible deal. Nevertheless the vast majority of people applying for a new credit card
have no idea what the actual credit card terms are.

Thousands of Dollars in Interest Payments Lost

That’s right, had you shopped around you may have found a card with significantly lower
fees. They differ from card to card and from bank to bank. Some think that all MasterCard
or Visa cards are alike in their fee structure, but they are not. They differ from bank to
bank. Find out what the terms and conditions are before selecting a card. By law, credit
card companies must provide you with the information. Now let’s review the key compo-
nents as defined by the FTC.

Annual Percentage Rate

The annual percentage rate or APR is disclosed to you when you apply for a card, again
when you open the account, and it is also noted on each bill you receive. It is a measure of
the cost of credit, expressed as a yearly rate. The card issuer also must disclose the “peri-
odic rate,” that is the rate the card issuer applies to your outstanding account balance to
figure the finance charge for each billing period. Some credit card plans allow the card
issuer to change the annual percentage rate on your account when interest rates or other
economic indicators (called indexes) change. Because the rate change is linked to the
performance of the index, which may rise or fall, these plans are commonly called “vari-
able rate” plans. Rate changes raise or lower the amount of the finance charge you pay
on your amount. If the credit card you are considering has a variable rate feature, the
card issuer must tell you that the rate may vary and how the rate is determined, including
Page 31
Whitney Education Group, Inc.

which index is used and what additional amount

the “margin” is added to the index to determine
your new rate.

You also must be told how much and how often

your rate may change. The most common indexes
are: prime rate, one-month treasury bill rate,
three-month treasury bill rate, six-month trea-
sury bill rate, one-year treasury bill rate, federal
funds rate, cost of funds, and the Federal Reserve
discount rate.

Grace or Free Period

A free, or grace period, allows you to avoid the finance charge by paying your current
balance in full before the due date shown on your statement. Knowing whether a credit
card plan gives you a free period is especially important if you plan to pay your account in
full each month. If there is no free period, the card issuer will impose a finance charge
from the date you use your credit card or from the date each credit card transaction is
posted to your account. If your credit card plan allows a free period, the card issuer must
mail your bill at least 14 days before your payment is due. This is to ensure that you have
enough time to make your payment by the due date. The average grace period is 25 days.

Annual Fees
Most credit card issuers charge annual membership or other participation fees. These
fees range from $25 to $50 for most cards and from $75 on up for premium gold or
platinum cards.

Transaction Fees
A credit card may also involve other types of costs. For example, some card issuers charge
a fee when you use the card to obtain a cash advance, when you fail to make a payment on
time or when you go over your credit limit. Some charge a flat monthly fee whether or not
you use the card.

Balance Computation Method

If your plan has no free period, or if you expect to pay for purchases over time, it is
important to know how the card issuer will calculate your finance charge. This charge
will vary depending upon the method the card issuer uses to figure your balance. The
method used can make a difference, sometimes a big difference, in how much finance
charge you will pay, even when the APR is identical to that charged by another card
issuer and the pattern of purchases and payments is the same.

Average Daily Balance

The average daily balance method gives you credit for your payment from the day the
card issuer receives it. To compute the balance due, the card issuer totals the beginning
Page 32
Credit “How to Obtain, Increase and Preserve Credit”

balance for each day in the billing period and deducts any payments credited to your
account that day. New purchases may or may not be added to the balance, depending on
the plan, but cash advances typically are added. The resulting daily balances are added up
for the billing cycle and the total is then divided by the number of days in the billing
period to arrive at the average daily balance. This is the most common method used by
credit card issuers.

Adjusted Balance
This balance is computed by subtracting the payments you made and any credits you
received during the present billing period from the balance you owed at the end of the
previous billing period. New purchases that you have made during the billing period are
not included. Under the adjusted balance method, you have until the end of the billing
cycle to pay part of your balance and you avoid the interest charges on that portion.
Some creditors exclude prior, unpaid finance charges from the previous balance. The
adjusted balance method usually is the most advantageous to card users.

Previous Balance
As the name suggests, this balance is simply the amount that you owed at the end of the
previous billing period. Payments, credits, or new purchases made during the current
billing period are not taken into account. Some creditors also exclude unpaid finance
charges in computing this balance.

An explanation of how the balance was determined must appear on the billing state-
ments the card issuer provides you, and on applications and pre-approved solicitations
the card issuer may send you.

Other Important Features

Some card issuers add enhancements with their cards that you might find valuable. Some
examples are:
• Rebates on purchases
• Extension of manufacturer’s warranty
• Purchase protection/security
• Travel accident insurance
• Travel related discounts
• Automobile rental insurance
• Frequent flyer miles
• Credit card registration

Other Areas for Concern

Stay with the major credit card companies. Avoid those that offer gold or platinum pack-
ages that only permit you to shop from specialized catalogs. Chances are that they don’t
report to a major credit bureau and you will not receive any credit enhancement by deal-
ing with them. Be wary of up-front or processing fees. Do not make those application

Page 33
Whitney Education Group, Inc.

calls through a 900 or 976 exchange, you might not get

the card you wanted, but instead a hefty telephone bill.

How Do I Start to Shop?

First inquire into the major banks that service your area,
especially those with a national or regional network. They
will be your safest bets. There are also organizations that
specialize in providing consumers with the lowest-cost credit cards available. They used
to provide the service free of charge but now a fee of approximately $5 and up is at-
tached. The two largest providers are:
Bankcard Holders of America Card Trak
524 Branch Drive PO Box 1700 (College Estates)
Salem, VA 24153 Frederick, Maryland 21702
(540) 389-5445 1-800-344-7714 or (301) 631-9100

Check with magazines that specialize in giving advice on financial matters. Money Maga-
zine lists the best credit card deals on a regular basis. We did pull some of the banks that
Card Trak listed in their surveys and will share them with you. You need to know what
the codes they use mean.

X Fixed rate (otherwise the rate is variable).

P Denotes the rate is good for at least six months only.
• A banking relationship (checking, savings, or loan) to have an application considered.
N National issuer.
O Out of state applications from adjacent states.
I Only consider in-state applications.
L Only issue to the local metropolitan area.

Low Rate Card Survey

APR Annual Fee Area State Issuer Name

9.99 0 N Delaware First USA Bank

9.99 0 N Virginia Capital One Bank
7.99 0 N California Aria Visa
8.72 0 N Georgia Wachovia Bank

Platinum Low Rate Survey

9.99 0 N Virgina Capital One Bank
9.99 28 N Delaware First USA Bank
10.75 35 N Colorado AFBA Industrial Bank
9.99 18 N New York American Express

Page 34
Credit “How to Obtain, Increase and Preserve Credit”

No Annual Fee Survey

9.99 0 N California Aria Visa
13.75 0 N California M&T Bank
13.90 0 N Ohio Metropolitan Bank & Trust
11.40 0 N Colorado AFBA Industrial Bank

Platinum No Annual Fee Survey

9.99 0 N Virginia Capital One Bank
9.99 0 N Delaware First USA Bank
11.40 0 N Colorado AFBA Industrial Bank
15.65 0 N North Carolina Bank of America

Secured Card Survey

They only list one bank in their free survey; they will send you a list of 40 more for a $10 charge.

Future Card
State – California
APR – 18.84
Annual fee – varies
Minimum Savings Deposit - $500
Interest paid on deposit – 4%

For those shopping for the best credit card available, one of the best places to go is the
Federal Reserve System. Every 6 months, they publish a report showing the terms of
credit card plans offered by the largest card issuers in the country. We have provided a
copy of their latest report.

Federal Reserve System Survey

Availability Index
N – National 1 – Prime rate
R – Only in selected states 2 – One-month Treasury bill rate
State Abbreviation – Only in the 3 – Three-month Treasury bill rate
state specified 4 – Six-month Treasury bill rate
5 – One-year Treasury bill rate
Type of Pricing 6 – Federal funds rate
F – Fixed 7 – Cost of funds
V – Variable 8 – Federal Reserve discount rate
T – Tiered pricing 9 – Other

Page 35
Whitney Education Group, Inc.

Institution Annual Type Grace

Credit Card Plan, % of Period Annual
Availability Rate Pricing Index days fee

ADVANTA NB
VISA, N 16.06 V 9 25 25

AFBA IND BK
AFBA INDUSTRIAL BANK, N 14.50 V 1 25 0

ALBANK FSB
VISA CLASSIC, R 14.90 F 0 25 0

AMALGAMATED BK CHICAGO
AMALGAMATED
BANK MASTERCARD, IN 12.25 V 1 25 0

AMSOUTH BK
VISA CLASSIC, R 13.75 V 1 25 15

ASSOCIATES NB DE
MASTERCARD & VISA, N 19.70 V 1 30 0

AT & T UNIVERSAL FNCL CORP

MASTER CARD GOLD, N 18.40 V 1 25 20

BANCORPSOUTH BK
MASTERCARD, MS 15.65 V 1 25 0

BANK OF AMERICA
BANK OF AMERICA, N.A., R 17.99 V 1 25 0

BANK OF BOSTON CT
MASTERCARD, N 14.99 V 1 25 18

BANK OF HI
VISA CLASSIC, HI 16.50 F 0 0 15

BANK OF HOVEN
VISA, R 21.00 F 0 25 39

BANK OF NY DE
MASTERCARD GOLD, N 14.40 V 1 25 0

BANK OF SIERRA
VISA, CA 19.92 F 0 25 0

Page 36
Credit “How to Obtain, Increase and Preserve Credit”

BANK ONE AZ NA
VISA CLASSIC, R 15.90 V 9 25 0

BANK ONE NA
VISA, N 15.90 V 9 25 0

BARNETT BK NA
VISA, R 14.40 V 1 25 21

BENEFICIAL NB
VISA GOLD, R 15.70 V 1 25 0

BRANCH BKG & TC

VISA, R 13.90 V 1 25 12

BROADWAY NB
VISA, TX 12.60 V 4 25 0

CAPITAL ONE BK
VISA, N 9.90 F 9 25 20

CAROLINA FIRST BK
VISA, SC 9.90 F 0 30 0

CENTRAL CAROLINA B & TC

MASTERCARD, N 11.25 F 0 25 29

CENTRAL FIDELITY NB
MASTERCARD, VA 15.60 F 0 25 15

CENTURA BK
VISA CLASSIC, N 15.90 V 1 25 0

CHASE MANHATTAN BK USA NA

VISA & MASTERCARD, N 15.40 V 1 25 0

CHEVY CHASE BK FSB

VISA GOLD, N 12.90 V 1 25 40

CHINA TR BK OF NEW YORK

VISA, N 15.40 V 1 25 0

CHITTENDEN TC
MASTERCARD STANDARD, N 16.65 V 1 25 18

CITIBANK SOUTH DAKOTA NA

CITIBANK MASTERCARD OR VISA, N 17.15 V 1 25 0

Page 37
Whitney Education Group, Inc.

CITIZENS BK NH
VISA CLASSIC, N 15.90 V 1 25 0

CITIZENS NB OF EVANSVILLE
VISA CLASSIC, R 17.40 V 1 25 0

CITY NB
VISA/MASTERCARD, TX 15.96 V 4 25 0

COLUMBUS B & TC
VISA GOLD, N 14.40 V 1 25 25

COMERICA BK
COMERICA CLASSIC CARD, N 16.75 F 0 25 15

COMMERCE BK NA
SPECIAL CONNECTIONS VISA &
MASTERCARD, R 16.50 V 1 25 0

COMPASS BK
VISA, R 15.24 V 1 30 20

COMPASS BK
MASTERCARD/VISA, TX 14.74 V 1 25 0

CORESTATES BK OF DE NA
VISA, R 17.03 V 9 25 20

COVEST BK
VISA GOLD, IL 11.26 V 1 25 39

CRESTAR BK
VISA CLASSIC, N 15.90 F 0 25 20

DAUPHIN DEPOSIT B & TC

VISA, N 14.90 V 1 25 0

DIAL BK
VISA 19.80 F 0 25 20

DOLLARD BK FSB
VISA, R 16.90 F 0 25 0

EUROPEAN AMER BK
VISA, NY 18.40 V 1 25 0

Page 38
Credit “How to Obtain, Increase and Preserve Credit”

FCC NB
FIRST CARD VISA CLASSIC, N 17.90 V 1 25 0

FEDERAL SVG BK
VISA, N 9.35 V 8 25 33

FIDELITY NB
CONSUMER VISA CARD, N 14.90 F 0 25 20

FIDELITY TC
MASTERCARD GOLD, N 18.40 V 1 25 0

FIFTH THIRD BK
FIFTH THIRD SLECT VISA, N 14.65 V 1 25 18

FIRST AMER NB
VISA, R 12.75 V 1 25 28

FIRST BK NA
VISA, R 19.40 V 1 25 12

FIRST BK OF FL
VISA , FL 12.90 F 1 25 50

FIRST CMNTY BK OF MERCER CTY

MASTERCARD, N 17.00 V 1 25 15

FIRST CONSUMERS NB
MASTERCARD, N 17.25 V 1 30 39

FIRST DEPOSIT NB
VISA GOLD, R 15.90 V 1 25 0

FIRST FNCL CARD SVC BK NA

VISA (AAA) , WI 17.50 V 1 25 0

FIRST FS & LA
VISA, N 16.92 F 0 25 10

FIRST HAWAIIAN BK
MASTERCARD, R 16.50 F 0 25 15

FIRST NB
VISA, N 19.75 V 9 25 0

FIRST NB OF ATLANTA
VISA, N 13.90 V 1 20 18

Page 39
Whitney Education Group, Inc.

FIRST NB OF CMRC
VISA, N 16.90 V 1 25 12

FIRST NB OF MARIN
VISA U.S.A., N 19.80 F 0 25 49

FIRST NB OF OMAHA
VISA, N 13.99 V 9 25 0

FIRST NB SD
VISA, N 13.99 V 9 25 0

FIRST OF AMER BK NA
MICHIGAN, N 15.40 V 1 25 0

FIRST OF AMER BK-IL NA

FOA GOLD, N 15.40 V 1 25 0

FIRST OMNI BK NA
VISA/MASTERCARD, N 17.20 V 1 25 0

FIRST SECURITY BK NA
VISA, R 17.40 V 1 25 0

FIRST SECURITY BK OF NM NA
VISA/MASTERCARD, NM 16.65 V 1 25 0

FIRST TENNESSEE BK NA MMPHS

VISA, N 14.90 V 1 30 0

FIRST UNION NB
VISA, N 15.90 F 0 25 20

FIRST USA BK
VISA, R 9.99 F 0 25 0

FIRST VA BK
VISA, R 16.98 F 0 25 15

FIRST-CITIZENS B & TC
MASTERCARD, R 18.00 F 0 25 15

FIRST-CITIZENS B & TC OF SC
MASTERCARD, SC 14.88 F 0 25 20

FIRSTAR BK USA NA
ELAN REGULAR VISA & MASTERCARD, R 18.40 V 1 25 20

Page 40
Credit “How to Obtain, Increase and Preserve Credit”

FLEET BK
VISA GOLD, N 17.40 V 1 25 40

GE CAPITAL CONSUMER CARD CO

G.E. REWARDS PREFERRED, N 16.16 V 1 25 0

GLENS FALLS NB & TC

VISA, NY 16.80 F 0 25 0

GREAT FINANCIAL BK FSB

VISA GOLD, N 15.50 V 8 30 20

GREENWOOD TC
DISCOVER CARD, N 19.99 V 1 25 0

HANCOCK BK OF LA
GOLD CARD, N 16.90 V 1 25 12

HARRIS T & SB
MASTERCARD OR VISA GOLD, R 14.40 V 1 25 0

HOME FED BK OF TN FSB

VISA, TN 12.84 F 0 25 15

HOME FS & LA
VISA, NC 10.68 V 1 25 0

HOME FSB
VISA, N 14.50 V 1 25 0

HOUSEHOLD BK NV NA
VISA, N 18.15 V 1 25 0

HOUSEHOLD BK SB NA
MASTERCARD, N 18.65 V 1 25 0

HOWARD BK NA
VISA CLASSIC, R 15.90 F 0 25 15

HUNTINGTON NB
VISA, N 8.75 V 1 25 75

INTRUST BK NA
VISA, N 16.90 F 0 25 0

JC PENNEY CARD BK NA
VISA, N 17.90 F 0 25 15

Page 41
Whitney Education Group, Inc.

KEY B & TC
SECURED VISA, N 19.40 F 0 25 35

KEY BK USA NA
VISA CLASSIC, N 14.50 V 1 25 20

M & T BK NA
VISA, N 15.75 V 1 25 0

MAGNA BK NA
MASTERCARD, R 17.90 F 1 25 0

MARINE MIDLAND BK
MASTERCARD, N 14.11 V 9 25 20

MBNA AMERICA BK NA
MASTERCARD, N 16.99 F 1 25 0

MELLON BK DE NA
MASTERCARD/VISA, N 16.69 V 1 25 0

MERCHANTILE BK NA
MERCHANTILE BANKCARD, R 15.40 V 1 25 0

MERCHANTS BK
MASTERCARD, R 14.05 F 0 25 0

METROPOLITAN NB
VISA CLASSIC, N 9.48 V 8 25 25

METROPOLITAN SVG BK
VISA, N 9.35 V 0 25 0

MOUNTAINWEST FNCL
PRIME OPTION MASTERCARD, N 18.40 V 1 25 0

NATIONAL NK OF CMRC TR & SA

CABELA’S CARD LLC, N 16.40 V 1 25 25

NATIONAL BK OF COMMERCE
VISA CLASSIC, R 19.80 V 1 25 0

NATIONAL CITY BK
MASTERCARD CLASSIC, OH 15.90 V 1 25 0

Page 42
Credit “How to Obtain, Increase and Preserve Credit”

NATIONAL CITY BK
MASTERCARD, R 15.90 V 1 25 0

NATIONAL CITY BK COLUMBUS

VISA CLASSIC, OH 17.80 V 1 25 0

NATIONAL CITY BK IN
MASTERCARD, IN 15.65 V 1 25 0

NATIONAL CITY BK OF PA
NATIONAL CITY BANK OF PA 15.90 V 1 25 0

NATIONSBANK OF DE NA
VISA CLASSIC, N 14.40 V 1 25 18

NORWEST BK IA NA
NORWEST VISA, N 17.50 V 1 25 20

NORWEST BK NE NA
NORWEST VISA, N 16.90 V 1 25 20

NORWEST BK WY NA
NORWEST VISA, N 17.50 V 1 25 20

OHIO SVB BK
VISA AND MASTERCARD, R 14.75 V 1 30 0

ONE VALLEY BK NA
MASTERCARD, WV 15.25 V 0 0 12

ORCHARD FSB
MASTERCARD, N 18.90 V 1 30 30

PEOPLE’S BK
PEOPLE’S BK CREDIT CD PLAN, N 13.90 F 0 25 25

PROVIDENT BK
VISA CLASSIC, R 16.49 V 1 25 0

PROVIDIAN NB
VISA GOLD, R 15.90 V 1 25 0

PRUDENTIAL B & TC
VISA GOLD, R 16.90 V 1 30 0

Page 43
Whitney Education Group, Inc.

REGIONS BK
VISA, R 14.00 V 1 25 25

ROOSEVELT BK
VISA, N 14.40 V 1 25 0

S & T BK
VISA CLASSIC, PA 12.00 V 1 25 15

SEARS NB
PREFERRED MASTERCARD FROM
SEARS, R 16.65 V 1 30 0

SECURITY NB & TC
VISA AND MASTERCARD, R 14.51 V 3 25 18

SECURITY ST BK
VISA, N 13.90 F 0 30 0

SECURITY SVG BK FSB

VISA, N 14.49 V 1 25 0

SIGNET BK
MASTERCARD, R 16.90 V 1 25 20

SIMMONS FIRST NB
VISA, N 9.50 F 0 25 35

SOUTHTRUST BK NA
VISA CLASSIC, R 13.65 V 1 25 19

STANDARD FED BK
VISA, R 13.99 F 0 30 0

STAR BK NA
VISA, R 13.20 V 1 25 20

STATE SVG BK
VISA CLASSIC, R 14.63 F 0 25 0

STERLING SVG BK & TR FSB

STERLING SECRED BANKCARD, N 19.90 F 0 25 78

STUTSMAN COUNTY ST BK
VISA CLASSIC, N 17.88 F 0 25 39

Page 44
Credit “How to Obtain, Increase and Preserve Credit”

SUNTRUST BANKCARD NA
VISA STANDARD, R 14.65 V 1 25 0

TEXAS INDEPENDENT BK
MASTERCARD/VISA, N 16.40 V 1 25 0

TOWN NORTH NB
VISA/MASTERCARD, N 13.99 V 4 25 0

TRAVELERS BK
MASTERCARD/VISA, N 15.10 V 1 25 0

TRIANGLE BK
VISA, NC 13.00 V 1 25 24

TRUSTCO BK NA
MASTERCARD, NY 12.90 F 0 25 0

UMB USA NA
STANDARD MASTERCARD, N 17.90 V 1 25 0

UNION BK OF CA NA
VISA, CA 19.80 V 1 25 24

UNION PLANTERS NB
GOLD MASTERCARD, N 14.00 V 1 25 0

UNITED NB
VISA, R 15.70 V 1 25 0

UNITED SCTY BK
VISA CLASSIC, WA 12.96 F 0 25 0

UNITED ST NB OF OR
VISA, R 17.90 V 1 25 15

UNIVERSAL BK NA
MASTERCARD CLASSIC, N 17.69 V 1 25 20

USAA FSB
MASTERCARD, N 12.25 V 4 25 0

VALLEY NB
MASTERCARD, NJ 16.80 F 0 25 0

Page 45
Whitney Education Group, Inc.

VERMONT NB
VISA CLASSIC, N 14.90 F 0 25 0

WAYNE B & TC
VISA CLASSIC, R 14.76 F 0 25 0

WEBSTER BK
VISA CLASSIC, CT 12.10 V 1 25 18

WELLS FARGO BK AZ NA
VISA, N 19.30 V 1 25 18

WILMINGTON SFG FUND SCTY FSB

MASTERCARD, R 14.90 V 1 25 20

WILMINGTON TC
MASTERCARD, N 15.75 V 4 25 18

1ST FINANCIAL BK SD
VISA, N 19.50 V 1 25 20

Now let’s understand the process.

Page 46
Credit “How to Obtain, Increase and Preserve Credit”

Understanding the
Process
The Credit Bureaus
The terms “credit bureau” and “credit reporting agency” are often used interchangeably,
but there is a difference. There are three national credit bureaus: Experian (formally
TRW), Trans Union and CBI Equifax. These giant organizations maintain massive
computer files which are in turn fed by over 4,000 regional and local credit reporting
agencies, along with individual creditors.

The Credit Reporting Agency

The credit reporting agencies are often affiliates or subsidiaries of the credit bureaus, but
they operate as separate entities. It works like this: the credit reporting agency (CRA)
gathers information from creditors who provide payment data and account balance in-
formation – often on a monthly basis – on their customers. The CRA also gathers infor-
mation from other sources, which we’ll discuss shortly. This data is then fed into a credit
bureau’s computer. Ideally, the result is an up-to-date record of an individual’s credit
status, including who they owe, how much they owe, what their payment habits are,
and whether any action has been taken to collect overdue bills.

Credit Bureaus Share Information

The three major credit bureaus cooperate and share information. The idea behind this
policy is to make sure that an individual’s credit history follows them wherever they go.
But there’s no guarantee that an individual’s file with one credit bureau will match the
information on file with another. As a credit specialist, this is an important point. When
you begin working on cleaning up your credit history, you must work with all three
major credit bureaus, not just one.

They Are a Major Industry

Many people are under the impression that the “credit bureau” (they often don’t even
know the company name) is a government or quasi-government agency. Credit bureaus
are private, for-profit corporations, and the business of gathering and reporting credit

Page 47
Whitney Education Group, Inc.

information is a $10 billion industry. But while credit bureaus are not part of the gov-
ernment, the government regulates them. These regulations came into being as a result
of the clear need to protect consumers from errors and irresponsible operations by credit
bureaus. The credit bureaus and credit reporting agencies’ customers are not consumers
or the general public, but credit grantors and other companies that may have a reason to
examine individual credit reports. This includes various lenders, banks, credit card com-
panies, mortgage companies, department stores, insurance companies, employers, etc.,
who pay the credit bureaus and CRA’s large sums of money to collect and provide them
with information. The law dictates what responsibilities credit bureaus have to the gen-
eral public and consumers; but business practice dictates how they work with their cus-
tomers, who are, after all, paying the bill.

How to Contact the Credit

Bureaus

Equifax
For a copy of your report: To dispute data in your report:
PO Box 105873 PO Box 2106
Atlanta, GA 30348 Allen, TX 75013
1-800-997-2493 1-800-422-4879
www.equifax.com
To report credit fraud:
To dispute data in your report: 1-800-301-7195
PO Box 740256
Atlanta, GA 30374-0256 Trans Union
1-800-216-1035 For a copy of your report:
PO Box 1000
To report credit fraud: Chester, PA 19022
1-800-525-6285 1-800-888-4213
Experian www.transunion.com
National Consumer
Assistance Center To dispute data in
For a copy of your report: your report:
PO Box 2104 PO Box 34012
Allen, TX 75013-2104 Fullerton, CA 923634
1-888-397-3742 1-800-916-8800
www.experian.com To report credit fraud:
1-800-916-8800

Page 48
Credit “How to Obtain, Increase and Preserve Credit”

Originally the credit bureaus started and grew

regionally. Today, however, the big three are
pretty much national. However, there still is fall-
out from their original base. You will find that
most of your report will be on one of the ser-
vices, and assorted data will be reported on the
others. That’s because one of your accounts is
headquartered in an area originally serviced by
the other.

A reminder, if you have been turned down for

credit based on the information contained on a credit report, you are entitled to a free
copy of that credit bureau’s report on you. Otherwise a nominal charge might be im-
posed. You will also receive, as is required by law, a written summary of your rights under
the Fair Credit Reporting Act. A copy of the one provided by Equifax follows on the
next two pages. They will also provide a research request form assisting you to contest
any item.

What Information Do Credit Bureaus Have?

The information maintained by credit bureaus falls under three main categories:

. Personal

. Credit or account information

. Public records

Let’s take a look at the information in each category, what it means, and how you should
review it.

Personal
Name
This includes the full name, and nicknames or aliases, any suffixes such as Jr. or Sr., titles,
and maiden names of married women. If the individual has a common name, or lives
with or near a relative with a similar name, mistakes can occur and the wrong informa-
tion may be placed in the file. Always check to be sure the names noted on a file are
accurate.

Address
The current address and previous addresses for at least five years are listed. This helps
confirm an individual’s identity and establishes their stability. It also provides credit
agencies with the means to follow up on public records in other states. Make sure the
individual has actually lived at each address on the report.

Page 49
Whitney Education Group, Inc.

Page 50
Credit “How to Obtain, Increase and Preserve Credit”

Page 51
Whitney Education Group, Inc.

Social Security Number

One’s social security number is the method whereby everyone in the country can be
identified. Some have been known to apply for multiple social security numbers (usually
with fraud in mind, but sometimes for innocent reasons). There are people who will try
to escape from a bad credit history by changing a digit or two of their social security
number. If that happened and the computer caught them, it could mean the denial of
credit. If you have more than one social security number resolve the issue with the
Social Security Administration. In the long range, when you retire, you will only receive
a fraction of the benefits you are entitled to. If a second or third number that is only
slightly different from your real number appears, use the techniques to get those extra
numbers removed from the file.

Employment History
Current and previous employment information is listed,
including the company, address, position held, income,
dates, and when the information was verified.

Spouse’s name
If married, the spouse’s name and social security
number will appear.

Date of birth
The month, day, and year of birth is indicated. This
personal information is designed in part to identify
individuals and help keep data from being entered in
the wrong file. It also provides prospective creditors
with information they will consider in making a credit-
granting decision. Any discrepancies in this section
of a credit file should be corrected immediately.

Credit or Account Information

This is the section most people think of when they think of a credit report. It includes
general information about accounts, including the name of the creditor, the account
number (which is often scrambled or incomplete for security reasons), the date the ac-
count was opened, the highest credit level, the current balance, the date the account was
last reported or verified, any collateral, and payment terms and history. This section also
includes a listing of inquiries, or who has looked at the file, usually within the past two
years. This tells potential creditors who the individual has applied for credit with. If the
potential creditor does not see a corresponding open account, the assumption may be
that the credit application was denied.

Who May Access the File?

Federal law requires that companies have a permissible purpose before examining credit
files. However, it’s not unusual for inquiries to appear on a credit file that you will know
nothing about. Removing this information could be an important part of cleaning up a

Page 52
Credit “How to Obtain, Increase and Preserve Credit”

credit history. Finally, any accounts placed with collection agencies will also be noted in
this section.

Public Records
The third category of information maintained by credit bureaus is public information
kept on file by the county, or counties, where you live. This includes:

¨ Lawsuits ¨ Marriages
¨ Judgments ¨ Divorces
¨ Bankruptcies ¨ Legal name changes
¨ Arrests
¨ Convictions
¨ Tax Liens

It’s entirely possible for this public information to have absolutely nothing to do with an
individual’s creditworthiness, but it still appears on the credit report. It’s also not unusual
for this information to be inaccurate. Review it carefully.

Reading a Credit Report

At first glance, a credit report appears to be an almost-indecipherable collection of codes
and fine print. In all fairness to the credit bureaus, the purpose of the coding is not to
keep individuals from knowing and understanding what is in their files, but rather to
maximize the space on the reports and in the computer. Each credit-reporting agency
will provide you with an explanation of the codes and instructions on how to decipher
their reports. You’ll quickly become familiar and comfortable with the variations be-
tween the agencies, and you will be able to read and understand any report with ease.
Study the sample credit report that follows to familiarize yourself with the codes, terms
and formats used.

Equifax Credit Report

(see sample report on the following page)

Some Codes That Bureaus Use

Timeliness of Payment
0 - Approved, not used
1 - Paid as agreed
2 - 30 days past due, not more than one payment past due
3 - 60 days past due, two payments past due
4 - 90 days past due, three or more payments past due
5 - 120 days past due
7 - Making payments under wage-earner plan
8 - Repossession
9 - Serious / bad debt/ in collection

Page 53
Whitney Education Group, Inc.

(Sample EquiFAX credit Report)

Collection Status Date Indicators

BK Bankrupt A Automated
BL Discharged in Bankruptcy C Closed
CC Consumer Counseling D Declined
CD Dispute after Resolution F Repossessed/Written Off/
Collection
DM Dismissed H Hired
DP Disputed I Indirect
MP Making Payments M Manually Frozen
PD Paid N No Record
SK Skip P Paid Out
UK Unknown R Reported not verified
UP Unpaid S Slow Answering
WE Wage Earner Bankruptcy T Terminated
U Not Used
V Verified
X No Reply
Page 54
Credit “How to Obtain, Increase and Preserve Credit”

How Long Will an Item Stay in a File?

Federal law addresses the issue of how long
negative information can be maintained in an
individual’s credit file. Generally, derogatory
reports—such as slow pays, write-offs, and re-
possessions—will appear for seven years. Some
specifics are:

Bankruptcies may remain on file for up to ten

years.

Civil suits and judgments may remain for seven years or until the statute of limitations
expires. In most civil cases, the statute of limitations is ten years with a ten-year re-
newal, but generally these items are removed after seven years.

Unpaid tax liens may remain indefinitely. Paid tax liens are removed seven years after
the date of payment in full.

Accounts placed with a collection agency or that were written off would remain for
seven years.

Records of arrest, indictment or conviction of a crime must be removed seven years

after the date of disposition, release or parole.

Most other adverse information, such as late payments, must be removed after seven
years. Inquiries remain for two years.

How Mistakes Happen

Though the credit reporting agencies and credit bureaus do make a sincere effort to main-
tain a high level of accuracy, mistakes can and do occur. Think about the volume of
consumer financial transactions that occur in this country every day: automobile, home
and credit card purchases, consumer loans, insurance, lawsuits, and so on.

Credit reporting agencies gather the details on literally hundreds of thousands of trans-
actions every day, input the data into the appropriate file and store it in the credit bureau’s
massive computer system. Obviously, the potential for error due to the sheer volume of
the clerical work is tremendous.

Now let’s get started on the road to credit.

Page 55
Whitney Education Group, Inc.

Getting Started
Rebuilding Your Future
Whether you are just getting started or attempting to reestablish credit, your plan for
success is the same. Start by establishing a banking relationship. Look for a local bank
with strong community ties, not a national or regional bank. Local banks depend on
more consumer activity and are therefore more prone to have flexible lending practices.
Look to see where your employer has their payroll account—many smaller firms choose
a local bank for the same reasons. This makes your setting up the account much easier
and your gaining access to your funds much faster.

Low Risk Credit Cards

Apply for what we refer to as low-risk credit cards, cards with local business establish-
ments that carry a very small credit limit. These cards are issued by businesses with
heavy competition and very low profit margins. The cards are issued to give you an
incentive to shop in their store. We recommend two specific types of cards.

The Automobile Retail Card

The automobile retail credit card is the card you use when you gas up at the pump. With
few full-service stations left and the restrictions on how you can pay in the evening
hours because of the crime rate, they become a major convenience item as well. Most
have a limit on how much you can charge and even how much you can charge at one
time, usually fifty dollars. Remember, it is credit history you are seeking so forget about
those independents that have the lowest gas prices, you want a card from one of the
giants such as Mobil or Exxon. No, we are not recommending the type of gas you use.
Just that the majors report to the credit bureaus and the small ones don’t. You can usually
find a major in every market, however over the years certain chains seemed to have
become more regional, probably because of competition and distribution patterns. Look
for the one that seems to dominate your area for convenience sake. Don’t start charging
up your card every time you gas up. Of course, if you operate on a strict budget you can.
A technique you can use is that all these offer low-cost monthly services like emergency
towing that can be had for a monthly charge of only six dollars. Sign up and for that low
monthly fee you will have a constant favorable credit report and a valuable service as well.

Page 56
Credit “How to Obtain, Increase and Preserve Credit”

Retail Consumer Credit Card

Today every retail store of any size has its own unique
credit card. This isn’t surprising because they estab-
lished the credit card industry. Even with all those
major cards available (and they accept them) they still
push their own card. The reasons are obvious: they
want you to shop in their store regularly and they want
a piece of that interest-rate bonanza. Here again, your
purpose is to establish a credit history, so choose one
of the larger chains such as Sears or JCPenney. Some who deal in the credit market
advocate getting a consumer card such as Visa or Master Card first and then looking for
a retail card, but if you have a major you don’t need a retail card. Check the interest rate
if you have shopped around at all, your major card will carry a much lower interest rate.
You are pursuing a retail card for the sole purpose of establishing credit. Avoid the credit
card security syndrome.

How Many Cards Do I Need?

For years, there have been those who have preached that you should have as many credit
cards as you can - forget about the rates of interest. They have told stories of buying
real estate or items at government auctions on their credit cards and have sold the item
before the credit card statement was even received. Many have great success stories,
however, many received a rude awakening when applying for a loan they needed and
were turned down because the financial institution considered the combined limits of
those cards as outstanding debt. We recommend that the average person carry an enter-
tainment card with a monthly balance payment due, and a Visa and MasterCard for the
convenience in dealing with merchants who deal with one or the other. If you do a lot
of driving add a gasoline card to the mix. You then have all the credit you need, and
protect yourself from temptation. We will further this discussion in the next chapter on
expanding your credit base.

Seek a Co-Signer
One of the fastest ways to begin establishing a positive credit history is to obtain a loan by
having someone else co-sign it with you. This works so well that we recommend applying
for such a loan even if you do not need one. Seek out a friend or relative who has good
credit and ask that they co-sign a loan for you. Banks have no problem giving you a loan if
they know there is someone with good credit to back up the loan. If they are a little
nervous about risking their credit with you, tell them that you will even give them the
proceeds from the loan so that they can pay it back. However, make sure that you are on
record as having paid it back or it will not count towards your credit. Have them give you
the monthly payments from the loan proceeds every month, add the minimal finance charge,
and you both are protected. You now have a positive credit history with that institution.

Obtain a Secured Credit Card

Now the next step is to obtain a secured credit card. As we have explained, this is a card
backed up with a deposit of your funds. The basic card carries a $500 limit. Shop around,

Page 57
Whitney Education Group, Inc.

look for those banks in your area that have a regional presence. They tend to offer the
best rates. Avoid those you see advertised on television. Their inter-
est rates are out of sight. Also shop for one that will give
you the best deal in terms of credit versus deposit. Some
will offer $500 worth of credit with a $250 deposit. Stay
with the big two, MasterCard or Visa, don’t be fooled
by one of those scam catalog cards.

Passbook Signature Loan

Find an amount of money, say $1,000, either from a credit card or a loan from a relative
or friend. Take that money and deposit it in a local community bank, and then ask for a
short-term loan, using that money as collateral. Then take that $1,000 loan money and
deposit it in another community bank (not in another branch but another bank). Do the
exact same thing, but this time take the money to repay the first bank loan off. Don’t get
concerned about the interest, for $1,000 it will be under $10 a month. If they ask what
you want the loan for, tell them you want to consolidate some debts—they will under-
stand. Then go to the first bank where you paid off the loan early and request a signature
loan, one without having to tie up your funds. Since you have a positive track record with
them, they in all probability will give it to you. Then go to another community bank and
start the process once more. What have you accomplished? You now have a credit his-
tory with three, four, and five banks or however many you decide to deal with. Even
more important, you have a line-of-credit with each bank. When needed, you can obtain
a signature loan from each bank to do whatever you need the money for.

Go for the Big Loan

As the process unveils, think of a big-ticket item you need to purchase, whether it be a
car, boat or just a new stove. Wait as long as you possibly can, saving as much as you can
in advance. Then when you go in for the purchase and financing, put as much down as
you can possibly afford. Your paper will be easy for the dealership to give to a bank and
your credit reference will soar.

Be On the Lookout for Specialty Cards

One method credit card firms employ to get new customers is to identify a group of
prospects and offer them a specialty card in their name. They have pre-determined that
the average member would be a good credit risk. So they send out “you have been pre-
qualified for this airline frequent flyer credit card.” Apply and they will probably approve
you, with the smallest limit possible. Since they have already stated that you have been
pre-qualified, they will be hard pressed to turn you down. College students once found it
hard to obtain cards; they are now being encouraged to get their school’s special card.
Local fraternal and other similar type organizations are being offered these types of
cards and the organizations themselves receive a benefit. Many with marginal credit do
not apply for these cards thinking they could not possibly qualify. They have just missed
a golden opportunity.

Page 58
Credit “How to Obtain, Increase and Preserve Credit”

Go On the Offensive
Current Bills
You can also help create your own positive credit
history. Is that possible? Absolutely right! In Visa 12.4% 2650.
the chapter dealing with credit bureaus, we told
you to obtain copies of each of the “big” three’s Auto 10.0% 8440.
credit history as they pertain to you. Then we
discussed looking for items that might be in er- Loan 8.5% 6525.
ror. Now look for items that might have been
omitted, especially if you have moved. Like any Mort 1 7.25% 44,560.
other type of business, credit bureaus tend to
have regional strengths. Where you now live, Mort 2 8.50% 66,335.
they use one service almost exclusively. But
where you used to live, they used another. Pro-
vide that service with a recent copy of the report from the service that covered the area
where you used to live. They will up-date their records. Give each bureau a copy of the
other two reports and they will add the items that they did not have to their report,
further strengthening your rating.

Find those Gems

Go through each credit history with a fine-tooth comb. Compare it to your checkbook
and receipts, looking for every item that you have paid on a regular basis that is not listed.
Start with rents (if you rent). A lot of landlords do not want to bother with reporting
and do not. This could be a major “good” rating for you. Then look at the electric, gas,
telephone, cable bills, and water or sewer charges that you have paid. For any that are not
reported get a statement that you have used them for “x” years, have always paid on time
and have been a good customer. If they ask you why, tell them you’re are just trying to
show good credit. Then send each statement to your local credit bureau and they will
include these references on your next report.

You Have the Plan

You now have a plan that will not fail. Take your time, follow the plan, and in nine
months you will start receiving those notices in the mail that you have been pre-ap-
proved for all sorts of credit cards and opportunities. Before you decide which ones to
take, let’s go to the next chapter on enhancing your credit.

Page 59
Whitney Education Group, Inc.

Enhancing Your Credit

The Hard Part is Over, Now Comes the Smart Part

Now that your credit has been established, is your job over? No, we want you to think
smart and look to enhance your credit and build long-term stability. As we stated in the
last chapter, it usually takes from nine months to a year before you can further improve
your credit. Some financial planners feel that this time frame is more realistically eigh-
teen months, but you will not have to guess. When the time is right, the banks will let
you know.

You are Now a Prime Target Customer

With credit easier today than ever before, banks are scrambling to bring more cash
customers into the fold. No one brings more revenue to a financial institution than
those paying high-interest credit cards. Up to now, you have tried to be careful and get
the best deal with credit you could. But the reality is that you were really at the mercy of
the banks. Now that you are someone they want for a customer, the tables have turned.
Turned, that is, if you follow our guidance and are as tough with the banks as they were
with you. Look hard at all those offers of new unsecured cards. Compare the interest
rates, annual fees and how they compute your bills. While we have told you what cards
you need, they need not be the ones you currently have, that’s if you were able to obtain
more than a secured card.

Accept a New Card

That’s right, accept a new card. That will let all the banks know you are in the market.
Make sure it is a good deal for you; check the Federal Reserve listing in chapter four to be
sure. Credit bureaus scan their listings for updates such as yours. Call your secured card
company. Tell them you have credit card companies beating at your door and you don’t
see the sense of their tying up your money any longer. Request a better interest rate and
higher credit limits. If they balk, then part company—you don’t need them anymore.

Never Request A Specific Credit Limit

The first thing credit bureau personnel are trained to do is never let on the amount of
credit they are willing to give you. They will always say, “How much do you need?”

Page 60
Credit “How to Obtain, Increase and Preserve Credit”

Knowing that, in all probability, you will be given a low-ball figure, always come back
with, “How much will you give me?” The first person to give a number loses. If you
can’t get an answer say, “I take it by your answer that you do not have the authority to
make this decision,” and terminate the conversation. Then turn around and call the
company again. The chances of you getting the same individual are very slim. Start the
process once again using our script. It might take three or four calls but one will usually
cave in to you.

Ask for the Moon

If you find this difficult to do, pick a number that you feel they would never give you, like
$100,000, and see what happens. They might retort, “Gee, the highest we could go is
$25,000,” either way you have won. At the point you have a card with at least a $10,000
limit, unless you want to use it for investing, you are set. Bear in mind that your limit will
steadily increase until it will eventually reach that $100,000 number.

Never Accept Less

You are going to receive numerous requests in the mail all promising to give you a plati-
num card with a limit up to $100,000. Check them all out and apply for all those that have
acceptable rates. We said apply, not accept. What will happen is that most will come back
with a figure for your current high limit. If it is currently $2,000, they will say we will
give you a limit of $2,000 and it could increase to $5,000. Toss them in the trash. You
want the $10,000 with a low rate of
interest and no annual fee, if possible.

Should the Mix Change?

No, the mix shouldn’t change. You only
need two bankcards. If you want for
convenience sake to add another enter-
tainment card to the mix, that’s fine.
Keep in mind, our goal is to take you to
the $100,000 level. That will take time.
Make it an annual event.

An Annual Event
Once every year you are going to go
through the drill one more time until
you eventually reach the target plateau,
only now you have even more control.
You are a major creditor with the bank.
What you are looking for now, in addi-
tion to the limit increase, is a decrease
in the amount of interest they now
charge you. Banks never charge their
big customers the same interest rate
they charge everyone else. If you have

Page 61
Whitney Education Group, Inc.

an annual fee, get the bank to drop it entirely.

At first they will agree to lower the fee. At
every turn, if they refuse to increase the limit
or decrease your interest rate, make them tell
you why. Always be prepared to switch banks
if you don’t get what you want. A new bank
will not reduce what you have already in place.

Address Your Debt

Because your credit has improved, do not lose sight of the fact that you should still be
working to reduce the level of consumer debt. If your consumer debt is approaching
fifteen percent of your gross income then you are in the danger zone. If it has ap-
proached twenty percent you are in trouble. There are private agencies that will help you
consolidate your debt. The fees they charge can mount and if you have the discipline,
you are better off doing it yourself.

Consumer Loan
One of the first things you should look at is a consumer loan. Talk to one of those banks
you developed a relationship with when you established a line-of-credit with your pass-
book signature loan. By shopping around and negotiating a loan rate, you should be able
to get a rate far more favorable than you are currently paying the credit card company.
Since the consumer loan you want is for three years and credit card debt is on a two-year
cycle, your monthly payments will be automatically reduced even further.

Cash Advance
Another method to explore is using a cash advance from one of your new cards. Often
times the interest rate on a cash advance from a card you have shopped for is significantly
lower than what you are paying on your debt. It may even pay to take a cash advance to
reduce your outstanding balances. Bear in mind that interest continues to accrue on
unpaid balances. If you owe $2,500 and pay the minimum two percent required monthly,
it will take you 30 years and $6,500 in interest payments to clear up the debt. If you need
a couple of months to get out from under then consider taking an initial cash advance to
clear up card number one and then take a second cash advance from another card to clear
up your first advance. Use this technique only if you know you can pull out of the cycle,
otherwise you will drown in debt. There are some banks that see this as a way of attract-
ing new customers. If you sign up with them, they will give you a cash advance for a
period of time at a greatly reduced rate, some are even less than 5 percent. It is a great
one time chance to get your credit balances in order. The banks don’t care if you’re using
balances to pay off each other; they are making money every day you use one.

Balance Transfers
One of the new products banks are offering to in-
crease their credit card income and bottom line is
balance transfers. They will transfer all your pre-
existing credit card debt to their card at a greatly

Page 62
Credit “How to Obtain, Increase and Preserve Credit”

reduced annual percentage rate and, at the same time, increase your credit limits. Look at
the example shown, 4.9% APR. There are so many ways to improve your credit situa-
tion, you just have to be a smart credit shopper. Think about it, you have decent credit
but carry a heavy monthly balance, usually at an annual rate of 16%. Simply transfer
your activity to their card and your monthly savings are huge. What are the banks count-
ing on? Simply that your spending habits are not going to change and in time you will
be owing their bank a ton of interest payments. But, if you are smart, you can take
advantage of the offer and get out from under your credit crunch.

Exploit the Grace Period

Most articles you read about credit card use seem to place major importance on the grace
period each card gives. We have told you that this is one of the important items in
shopping for a card. However, remember that interest is accrued daily on any unpaid
balance so using the grace period is only the correct thing to do if you are intending to
completely pay off your balance. If you are not, then pay that bill the minute you receive
it because every day you delay is additional interest for the bank.

Restrict the Use of Your Card

Is that what we are extolling? No, if you do so you will never reach the high level of
credit you will eventually want. Remember the credit credo: only use borrowed money
for things that go up in value. You need to use your card during the year to show activity
to justify the raising of your limits. Only put an item on your charge card if you can
afford to pay cash for it. There are other times you should use your card, like when order-
ing from a catalog or when having your car repaired, because it’s protection for you
against the vendor. When making a purchase you fully
intended to pay cash for, address the store owner and say,
“If I use my credit card you have to pay from two to seven
percent in credit card charges and then wait for your
money. How about giving me a discount if I pay cash
right now?”

Creative Financing
You have started on the road to financial independence, and
now you want to start investing. Where do you turn?
There are a number of creative financing techniques that
you can use to get started. The most logical is to look for a
distressed seller, someone for whatever reason needs to sell
his property fast. Whether it’s a divorce, job transfer, estate
sale or possible foreclosure, there exists in every commu-
nity individuals who fall into some of these categories. It
will take work finding them, but that’s the ticket for you.
Once you have found such a possibility, talk the owner into
financing the property themselves, even to the extent of

Page 63
Whitney Education Group, Inc.

giving you a second mortgage. Let them know

how much more they will realize if they act
as the bank and accept a balloon payment
down the road.

Equity Line of Credit

If you presently own your own home or an-
other property, chances are you have built
up equity in the property that you can bor-
row against. It is one of the easiest types of loans to get. Many financial planners cau-
tion against this approach and we share their concern. We don’t want to see anyone out
in the street, but if you use the money to purchase an income producing property that
will pay off itself and cover the cost of the equity loan payments each month, you’re
pretty safe.

100 Percent Plus Loan to Value

One of the most creative loan strategies we have seen in a long time is the 100% plus
loan to value. The Detroit Free Press called it the hottest trend in American mortgages.
They cited a case of a local couple with decent credit who were drowning in debt. They
had accumulated $30,000 in credit card and other consumer debt. Their minimum monthly
payments totaled $2,200 plus a $900 PITI (principle, interest, taxes, insurance) mort-
gage payment. They took out a second mortgage that put their loan to value at 125%.
Their new monthly payments became $1,424 rather than the original $3,100. Also, re-
member that consumer debt interest is not tax deductible, while interest on real estate is.
The same article said that more than $10 billion worth of 100% plus loan-to-value loans
were written last year compared to $3 billion the year before. Interest rates are signifi-
cantly higher, but look at the difference in monthly payments in the example we cited.
There are even lenders that are offering portable second mortgages that you can transfer
to a new home, rather than pay off. Now to be letter perfect, you really are not allowed to
deduct interest payment on debt that’s above
the market value of your home. But then
when was the last time the IRS did an ap-
praisal of your home?

Home Improvement Loans

One of the fastest ways to increase income
when investing in real estate is through the
use of one of the home improvement loans
that are available. Put together inventories
of all the repairs that are needed: have sub-
contractors come in and give you a bid for
each type of repair. Then put them on a
proposal form that you can obtain at any
stationery store under your own contract-

Page 64
Credit “How to Obtain, Increase and Preserve Credit”

ing firm’s name, mark them up 100 percent

and submit it to the bank for approval. Sound
illegal? Not at all, you can be your own con-
tractor for any property you own, no license
required. Just make sure that you do as much
as possible of the work yourself. The more
you do the more you make. Best of all, the
money or profit is not taxable income because
it comes from loan proceeds. Your tenants will
pay it off in time.

Life Insurance Policy

A lot of people have life insurance policies
that they have been paying on for years. Most policies offer a loan provision whereby you
can actually borrow money based on the current value of the policy. This is an often
over-looked source of funds that can be turned into an investment.

Lease Option
Explore the purchase of properties using the lease-option technique. Make offers on
properties based on your ability to obtain satisfactory financing and in the offer add the
phrase “and/or assigns.” Then immediately look for buyers for the property. You will not
make a large spread on the deal because you will keep the asking price low to attract
buyers. Your “and/or assigns” phrase gives you the right to sell the property even though
you technically do not even own it. The wording “obtains suitable financing” protects
you in case you can’t find a suitable buyer and have to pass the deal by.

Partners
There are those in your community that have the money, but don’t have the expertise or
time to hunt for and invest in real estate. More than likely they will be professionals like
doctors, lawyers, accountants, etc. Contact them and see if they will partner with you.
You do all the work, they put up the money, and you split the profits at a pre-determined
percentage. You always have the arrangement in writing to protect yourself.

Do You Need a Home?

If you are looking for a home for you and your family, there are more opportunities today
since the west was opened with the Homestead Act. Providing every American with the
American dream of home ownership is one of the largest priorities of the federal gov-
ernment today. Even with the huge federal bureaucracy, combined with state govern-
ments and not-for-profit agencies, they haven’t even made a dent in matching up the
available funds with those who need housing.

Page 65
Whitney Education Group, Inc.

Direct Federal Programs

The Department of Housing and Urban Development, the Department of Veteran Af-
fairs, the remnants of the old Farmers Home Administration, all have massive programs
to assist those in need of housing. If you are a first-time home buyer, or one who hasn’t
owned a home for three to five years, every state in the nation has programs designed to
assist you, even with the initial down payment. The down-payment assistance is usually
tied to income limits that most of working America can qualify for. If you’re a veteran,
you don’t even need a down payment. Some state and local governments have offered a
soft second mortgage on the property to cover all or a portion of the down payment.
Live in the house for a period of time and that amount is forgiven.

There is No Excuse
If you want a house and have followed our blue print for obtaining credit, the only thing
that prevents you from homeownership is that you haven’t taken the first step.

Take Advantage of the System

Take advantage of the system; don’t let the system take advantage of you.

Some will need to clean up their credit first and we will show you how in the next chapter.

For more detailed information on borrowing money to buy real estate or to buy a busi-
ness, call one of our Business Consultants at 1-800/741-7877.

Page 66
Credit “How to Obtain, Increase and Preserve Credit”

Improving Bad Credit

It Can be a Long, but Highly Rewarding Process

Improving what took years to evolve can be a slow process, but one that is highly reward-
ing. Remember also that every action you take increases the credit rating even though
you are not at the “A” rating yet. In our chapter on establishing credit, we touched on the
first two steps in improving credit. The first is making sure each bureau is reporting all
your favorable items. Simply put, send each a recent copy of the other two reports.

Make Sure They Have All the Good Items

Then we addressed going over all your accounts and making sure that the bureaus re-
ported all those favorable credit transactions such as rent, telephone, electric, gas, and so
on that they were not aware of. These could also include some store cards that you have
but weren’t reported. Have these creditors give you a statement about your account and
then forward them to each bureau.

Is it Credit Repair That You Need?

The next step is going directly to your credit history. Before we do, let’s stop and reflect
on who would be the best candidates for help. A good candidate for credit repair will
generally meet these criteria: has a steady, verifiable source of income; is not currently in
arrears on any debts; has derogatory information on his or her credit report that is at
least 12 months old. Someone who is unemployed, over their head in debt with creditors
hounding them, or just needs help managing their money is not a candidate for credit
repair. They need help of another sort which we cover in the next chapter. Many will
likely have had problems a few years ago, but have paid everything off and just want to
straighten out their credit history so they can buy a home, a car or otherwise qualify for
credit. There is no way a legitimate debt that is currently in the process of collection
attempts can be removed from a credit report. Some credit repair experts may promise
this, but the methods they use are illegal, unethical and don’t always work.

Don’t Forget Your Spouse

If you are married, make sure that you request your spouse’s credit reports as well. Some

Page 67
Whitney Education Group, Inc.

items might appear jointly while others could be reported indi-

vidually. It is much easier to do both at the same time. Don’t for-
get that your spouse has rights, and must sign his or her own
request form.

Let’s Get Started

Review the credit files in detail. Go over each negative item and
write down the story behind what happened. Of course, errors
are usually the easiest items to remove, but it is possible and very
common to remove factual negative information. That’s why you
need to detail what really happened, whether it’s slow pay, a bank-
ruptcy, or an arrest.

Credit repair begins with a campaign of denial. The Fair Credit Reporting Act requires
credit bureaus and credit reporting agencies to respond to inquiries within 22 business
days or 30 calendar days. If you have challenged an item on a credit report and they do
not respond to your inquiry within the required period of time, they must remove the
item from the report. It’s really that simple. And in numerous cases, the credit bureau will
not respond in time.

Organization is Key
The key to your success is in organization, good record keeping, and persistence. Re-
member, while you’re challenging a credit bureau which is a massive, billion-dollar corpo-
ration, your contact with that corporation is an individual, usually a clerk, whose primary
concern is getting to work on time, leaving on time, and collecting a paycheck at the end
of the week. It’s highly unlikely that these clerks will have your entrepreneurial spirit.
It’s almost certain they don’t share your high level of motivation. They just want to
keep things simple and stay out of trouble.

It’s a Letter Campaign

Your initial campaign begins with a series of letters challenging every negative entry in
your credit history. We have prepared sample letters in this manual as a guide, and keep
the following in mind: Challenge only one item per letter. A lengthy letter challenging
several points may get special attention you don’t want at this point. Remember, the
credit bureau must respond within a specified time or the item must be removed regard-
less of whether or not it was a valid entry. If your letter makes someone at the credit
bureau suspicious, they may be inclined to give the investigation a higher level of per-
sonal attention. At this point, you’re better off getting lost in the shuffle—in fact, that
is what you would prefer to have happen. Make your challenge generic but truthful. This
is why it’s important that you know what really happened. Your letter may simply say
something like, “My records do not agree with the information you have listed. Please
investigate and remove this item.” Remember, sometimes account numbers are scrambled
for security reasons, and your lack of “agreement” may simply be that the account num-
ber doesn’t match precisely.

Page 68
Credit “How to Obtain, Increase and Preserve Credit”

Certified Mail Only

Date every letter and use certified mail, return receipt
requested. That way you have a record of when the
letter was delivered. Yes, this is slightly more expen-
sive than regular mail and takes more time to complete the forms, but it’s essential in proving
a lack of response from the credit bureau. Make sure you sign the letters yourself. If you are
doing this for your spouse or a friend, make sure they sign the letters. The logic behind this is
the same as the logic behind disputing only one item per letter. If someone at the credit
bureau thinks you are using a professional service, they may take steps to thwart your efforts.

Develop a Mail Schedule

Don’t send all the letters out at once. Set up a mailing schedule over a week or so, sending
out only two or three objections per day per file. Keep copies of every letter and attach
the return when it comes back. Set up a system, either manually or on your computer, to
follow up each letter within the appropriate time frame.

The Ball is in Their Court

The information contained in a credit report is considered to be accurate until and unless
it is disputed. Once you question an item, the credit bureau or reporting agency must
substantiate their information by verifying the entry with the original creditor. The bur-
den of proof is on the credit bureau. They must be able to document the entry, or it must
be removed from the file. Keep in mind, though, that credit bureaus will go to great
lengths to protect their reputation for accuracy.

Accuracy is Essential
That’s why you should never tell a lie when disputing an item, and you should never ask
questions that are frivolous. Don’t claim the entry doesn’t belong to you if you know it
does; don’t claim the account was paid if you know it wasn’t. If the credit bureau can
prove that you are either lying or making frivolous challenges, they are not required to
remove the derogatory item from the report.

Demand Detail
However, it is perfectly acceptable to ask for complete details on an entry. Just be sure the
questions are relevant, such as: What were the items purchased? What was the original
date credit was extended? Please provide a complete payment profile. Please send me a
complete and accurate disclosure of the information for this entry.

The Next Step

When you dispute an item on a credit report, there are four possible situations that may
result: the credit bureau will be unable to verify the information and will remove it from
the file; the credit bureau will issue a form letter challenging your dispute; the credit
bureau will verify the information with the creditor and leave the item in the file; the
credit bureau will not respond within the required time frame. The first situation is what
happens most of the time, and frankly, it’s what you are hoping for. When a credit

Page 69
Whitney Education Group, Inc.

bureau receives a dispute, they must contact the creditor, who must dig through their old
records to verify the item. Most companies store their records after a certain length of
time (it varies, depending on the company’s internal policies) and do not have immediate
access to the information. To research credit information in old, inactive records can be
very time-consuming and labor intensive, and many companies are not willing to invest
the time required to respond to the request for verification. But remember what the law
says: if the information cannot be verified within 30 days, it must be removed from the
consumer’s credit file. The burden of proof is on the creditor and the credit bureau. This
is why it’s especially easy to remove older entries from a file.

File Again
The second situation will only occur if you are not careful in how you compose your
letters, or if you dispute several items in one letter. If your disputes are personal and
specific, this won’t happen. If it does, simply respond appropriately by filing the dispute
again. In the third situation, it is also appropriate to file the dispute again. Challenge
something different about the item so the credit bureau can’t claim you are being frivo-
lous. (In other words, be creative). What often happens is this: the credit bureau receives
the first dispute, sends a request for verification to the creditor, receives verification and
advises the consumer of that fact. When the credit bureau receives the second dispute
letter, they are still obligated to request verification from the creditor. But it’s not un-
usual for the clerks in the creditor’s office to see the second request and think it’s a dupli-
cate. They know they already verified the information, so many times they won’t bother
to do it again. But if they don’t, the item then becomes unverified and must be removed.

They Didn’t Respond Timely

In the fourth situation, write a letter to the credit bureau advising them that they have
failed to respond to your dispute within the time frame required by law, and that they
now must remove the item from the credit file and provide evidence that they have done
so. A sample letter for this purpose is provided at the end of this chapter.

A Possible Pitfall You Must be Prepared to Handle

It’s possible that challenging an old derogatory entry may prompt a creditor to renew
pursuit of the claim if the item concerns a debt that was never fully paid. It doesn’t
happen often, but you should be prepared to deal with it. One ap-
proach is to negotiate. Your contact will probably be the credit man-
ager of the company that made the negative report. Keep in mind
that credit managers who have been on the job more than a week
or so have heard every story in the book. If your dispute of a nega-
tive credit entry becomes a request for payment by the creditor, be
prepared to discuss options. Think about how much you are willing
or able to pay to settle the debt. If the account was written off
years ago, anything the credit manager can collect will be a bonus,
so he or she may be happy to settle for a partial payment to close the
account. But remember that negotiating is a two-way street. If
you’re going to offer money, you must get something in return and
what you want is for the negative item to be removed from your
Page 70
Credit “How to Obtain, Increase and Preserve Credit”

file. When you reach an agreement on the settlement terms, get the credit manager to
sign a letter outlining the details before you send any money. There is a sample settle-
ment agreement at the end of this chapter.

Public Records
If the derogatory items are public record, they should still be disputed just as you would
a creditor’s item. It is the credit bureau’s responsibility to verify the public records within
the stipulated time frame and if they do not, the item must be removed. This means that
it’s even possible to have a bankruptcy removed from a credit report in less than the
standard 10 years. It won’t always happen, but it’s worth a try.

Techniques for Those Hard-to-Remove Items

It’s a good idea to pay attention to the signature on the verification form. It is usually a
clerk in the creditor’s office, someone who is usually at the same status as the army of
clerks at the credit bureau who process your disputes. These people aren’t looking for
trouble; they’re just pushing paper around. When they verify an item you are attempting
to get removed, write to them directly. Point out the consequences of incorrect infor-
mation in a credit file and explain that the item they verified was either incorrect or
erroneous. Request that they either verify it correctly or not at all. At the same time,
send another letter to the credit bureau to force another investigation. This, quite frankly,
is a technique that borders on intimidation. Some attorneys in the credit repair business
take this idea a step further and either hint or threaten legal action. Don’t do this unless
you either are an attorney or fully intend to follow through with your threat.

If You Can’t Get the Item Removed

If, despite your best efforts, you are unsuccessful at getting a negative item removed
from a credit file, the law allows you to include a 100-word explanation of the situation
that must be furnished to anyone who reviews the file. There are different ways to ap-
proach the explanation. Write a concise, clear, and reasonable statement—just tell the
story. After all, if you have managed to eliminate all but one or two negative entries and
they have plenty of positive entries, most creditors will sympathize with and understand
a period of temporary misfortune. A caution, the statement must be true and verifiable,
consistent with the remainder of the information on the credit report.

Simply Dispute
If the situation is more complicated (perhaps a judgement, lawsuit or even a bankruptcy), you
may want to simply include a statement to the effect that he or she should be contacted for a
complete explanation. For example: “This item is in dispute. See consumer’s statement
which accompanies the credit application” or “Contact consumer for a full and detailed expla-
nation.” You should be prepared to provide that explanation when applying for credit.

Handling Judgments
When creditors feel as though all other avenues of collection have been exhausted, they
seek a judgment against the debtor. This is a legal action designed to force payment.
Now, if you’ve ever been involved in collecting a debt to this extent, you know getting a
Page 71
Whitney Education Group, Inc.

judgment is one thing, and getting money is something else. But that’s another issue.
From a credit perspective, a judgment can be a serious matter. Once a judgment has been
entered against a debtor, court costs and interest are added to the amount owed. Worse,
a final binding and non-reversible public record exists and will remain for ten years from
the date of recording and is renewable for an additional ten years. The first step in deal-
ing with a judgment is to dispute it like any other derogatory entry. If it doesn’t get
verified within the required time period, off it comes.

Consent Agreements are Another Story

If it is verified, the only way it can be removed is with the consent of the creditor and
the creditor is not going to consent without payment of some sort. You should never
directly offer a creditor cash to vacate a judgment. You should use a third party to nego-
tiate a deal. Remember, anything you offer to satisfy the judgment already belongs to
the creditor. On the other hand, the creditor doesn’t actually have possession of the
money, so a power struggle is likely. A third party is in a position to help bring about a
meeting of the minds, with the stipulation that any settlement agreement includes re-
moving the record of the judgment from your credit history.

What You Must Know About Judgments

Keep in mind that judgments are the result of a lawsuit and the process must begin with
a summons and complaint. If the defendant doesn’t answer the summons within a speci-
fied period of time, the judgment is enforced as a general rule; judgments must be served
in person. There are some exceptions (such as actions by the IRS), but if you were not
served personally, then, in legal terms, good service has not been performed. What may
have happened was that the complaint was dropped at your home and a backup copy sent
in the mail. But however it was handled, if you were not personally handed the sum-
mons by a process server and a default judgment was enforced, he or she has cause for
reopening the judgment on the grounds that they never knew of the suit. That means
the entire case must be brought before a judge again and the creditor must prove you are
obligated to pay the debt involved.

Vacate the Order

This can be a very effective technique, especially if the creditor is no longer in business or
is not in a position to repeat the process. The rules of judgment service are different in
every state, so this tactic may not always be successful, but it’s a good idea to try it anyway.
If you have a situation where this method might work, use an Order Vacating Judgment
form, which can be purchased at most office supply stores. Remember that you are the
defendant in this action and you should always reference the index number of the judg-
ment, as well as the county and state where the judgment was made. The clerks at the
courthouse will be happy to help you file this document and get the process rolling.

Handling Tax Liens

Tax liens at the city, county and state level are the most difficult to settle. In most cases,
these liens deal with property taxes or other assessments which are secured by the prop-
erty itself. That means collection of the money due will take place when the property is

Page 72
Credit “How to Obtain, Increase and Preserve Credit”

sold (or at the foreclosure auction, if it comes to that), so payment is guaranteed. Con-
sequently, government representatives don’t have much motivation to settle and they
are rarely interested in compromising. Your best bet with these liens (assuming, of course,
that your initial dispute letter did not produce the desired result) is to pay them, if pos-
sible, and include an explanation in your credit file. If you do a good enough job cleaning
up the rest of the file, this one negative entry won’t do much damage.

Federal Tax Liens

You have much more flexibility when dealing with tax liens at the federal level. In spite
of its deadly reputation, the Internal Revenue Service offers a wide range of accommo-
dations to help the individual pay back taxes. If the federal tax lien is the result of an
unresolved tax problem, seek out the IRS’s problem resolution program. If normal ne-
gotiations don’t bring about satisfaction, you should ask to speak with a district director.
The only grounds for a compromise on a federal tax lien are doubt as to liability or doubt
as to collectability of the full amount of tax and penalties. If you cannot reach an agree-
ment with the IRS, you should consult a tax attorney for further assistance.

Common Questions and Answers About the

Credit Repair Process
Q Why are there three different credit reports?
A Because there are three different bureaus and their
files are usually not identical. For example, one may
have a negative entry the other two don’t have.

Q Why do you need to clear up a credit history with

all three credit bureaus if you have lived in the same
area all your life?
A Where someone lives has nothing to do with the lo-
cation of his or her credit. Credit is reported to the credit bureaus that serve the areas
where creditors are headquartered. For example, a person living in Florida who has a Sears
card will have credit reported to the bureau that serves Chicago where Sears is located. It’s
impossible to track the location of every creditor, so it’s just safer and smarter to clear up
the record with all three bureaus.

Q Does a married person need to clear only one history?

A No, married couples should clear up the credit files on both names. Marriage doesn’t auto-
matically mean that credit is a joint account. If you are going to work on repairing your
credit, you should do it fully and completely, or not bother at all. That means checking out
the records of both partners.

Q How long does it take to repair a credit history?

A This all depends on the extent of the individual’s history and how much work needs to be
done. The Fair Credit Act requires that the credit bureaus and credit reporting agencies
respond to you in a reasonable time, which has been defined as 22 working days or 30
calendar days. You also have to allow time for mail and follow-up. In most cases, you can
repair a credit history in three to six months; a complicated case could take as long as a year.

Q Who erases or removes credit items from the report?

A Only the credit bureaus can remove items from a credit file. This is why you cannot say you
Page 73
Whitney Education Group, Inc.

“erase” bad credit. What you do is clean up a credit report by taking the necessary actions
that will prompt the credit bureaus to remove negative items.

Q Must credit reports be signed before you send them in with a dispute?
A Yes, all correspondence must by signed by the person whose name is on the credit report.

Q Can a bank’s credit report be used in the credit repair process?

A The credit report used in the challenge must be from the credit bureau you are filing the
dispute with.

Q How do I know the process is working?

A The credit bureaus will comply with federal law and send an updated report to you when
corrections have been made. Closely monitor any and all correspondence you receive from
credit bureaus, credit reporting agencies, and creditors immediately.

Q What if the credit report includes charge-offs, late pays, judgments and bankruptcies?
A It’s possible to remove all of these negative entries with persistence and diligence. Some are
easier than others and there may be some entries you won’t be able to remove no matter
how hard you try.

We Have Provided Sample Letters for You to Use

Request a Copy of a Credit Report
This letter should be used after a letter of denial from a creditor,
or to initiate the credit repair process.

Request a Copy of an Investigative Consumer Report

This letter is used in connection with any person who procures or causes
an investigative consumer report on you.

Request a Personal or Telephone Interview

Requesting an Investigation
This letter should go to all of the credit bureaus challenging any and every inaccuracy on
the credit report.

Requesting the Deletion of Information

This letter goes to any agency not responding to your letter requesting an investigation
after 30 days.

Letter of Dispute
This letter goes to any agency that responded to your request for an investigation
within 30 days, but did not delete the information.

Requesting Re-investigation
This letter is used to request a re-investigation of items the credit bureau(s) have
verified as accurate.

Page 74
Credit “How to Obtain, Increase and Preserve Credit”

Consumer Statement in a Credit File

If you are not successful in getting a derogatory item removed, use this letter to insert
a consumer statement in your file.

Letter Requesting Information Disclosure

This letter is used to request complete details on information in your credit file which
have been provided by an organization other than a credit reporting agency.

Creditor Sending Erroneous Information

Use this letter to notify a creditor that they are reporting erroneous information about
you.

The Deletion of Obsolete Information

This letter requests the deletion of items remaining in your file after the statutory
date has passed.

Updated Credit Reports Be Sent to Inquirers

This requests that an updated credit report be sent to anyone who has made an inquiry
into your credit history within the statutory period.

Complaint with the FTC

When a credit bureau does not comply with Fair Credit Reporting Act, you should
lodge a complaint with the FTC.

Filing A Complaint with a Better Business Bureau or Other

Consumer Agency
Use this format to file a complaint with a Better Business Bureau or other consumer
agency about a credit bureau.

Separate Files for a Husband and Wife

This letter should be used in case of a divorce or when one spouse has a poor credit
history and the other does not.

Add Data to a Consumer Report

Use this letter to request the addition of positive information to your credit file.

Sample Settlement Agreement

When you have negotiated the best deal and you’re ready to settle with a creditor, use
this form.

Page 75
Whitney Education Group, Inc.

Sample Letter to Request a Copy of a Credit Report

(Your name and address)

Date

Equifax
PO Box 105873
Atlanta, GA 30348

Experian National Consumer Assistance Center

PO Box 2104
Allen, TX. 75013-2104

Trans Union
PO Box 1000
Chester, PA 19022

Attn: Customer Relations Dept.

Please send me a copy of my credit report. I’m including the following personal informa-
tion. My current address is as follows:

My former address is as follows:

My birth date is:

My Social Security Number is:

(If appropriate) I have been denied credit in the last 30 days by:

Yours truly,

(signature)
Name

Page 76
Credit “How to Obtain, Increase and Preserve Credit”

Letter to Request a Copy of an Investigative

Consumer Report

(Your name and address)

Date

(Name and address of company

requesting the report)

Re: Request for a copy of Investigative Consumer Report

Your organization recently requested an Investigative Consumer Report on me.

Please be advised that at this time I would like a complete and accurate disclosure of the
source and character of the report generated by you regarding me.

Please be further aware that this request is made pursuant to section 606 of the Federal
Fair Credit Reporting Act, which mandates a response by you within five (5) days.

Yours truly,

(signature)
Name

Page 77
Whitney Education Group, Inc.

Sample Letter Requesting a Personal Interview

(Your name and address)

Date

Credit bureau name and address

Re: Request for interview

At this time, I would like to request a personal interview with your organization. The purpose
of this interview will be to review the files you currently have on me and obtain a copy of my
credit report. I make this request pursuant to Sections 609 and 610 of the Fair Credit Report-
ing Act.

Please be further advised that a fee for your services is not due because of the following
reasons:

1. Because I recently received, within the last 30 days, a letter of adverse action.

2. Because I recently, within the last 30 days, heard from an affiliate in the collection business.

I am available (indicate time and telephone number). Please call me to arrange an appoint-
ment.

Sincerely,

(Signature)
Name

Page 78
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting a Telephone Interview

(Your name and address)

Date

(Credit bureau name and address)

Re: Request for interview

At this time, I would like to request an interview by telephone with your organization. The
purpose of this interview will be to review the files you currently have on me and obtain a
copy of my credit report. I make this request pursuant to Section 610 (b) (2) of the Fair
Credit Reporting Act.

1. Because I recently received, within the last 30 days, a letter of adverse action.

2. Because I recently heard, within the last 30 days, from an affiliate in the
collection business.

Please furnish the undersigned with the telephone number of the department and/or a name
of a person responsible for handling this request.

I can be reached at (insert telephone number) between the hours of (indicate time), or you
can write me at the above address.

Sincerely,

(Signature)
Name

Page 79
Whitney Education Group, Inc.

Sample Letter Requesting an Investigation

(Remember to use a separate letter for each type of complaint)

(Your name and address)

Date

(Credit bureau name and address)

Re: Request for investigation

This is a formal request to have the following items on my credit report investigated immediately. Please
make the following corrections in order to reflect my true credit file. These items are inaccurate and
therefore injurious to my credit rating.

My date of birth is not correct on my credit report. Please list my true date of birth as_____________.

The following is listed on my credit report as my previous address. It is incorrect. Please remove the
following:
1.

The following is listed on my credit report as my previous employment. It is incorrect. Please remove the
following:
1.

The following list of inquiries were never authorized. Please investigate and remove the following:
1.
2.
3.

The following account on my credit report contains erroneous information. Please investigate and remove
the following:
Firm ID Code Account Number
1.
2.
3.

Please send me a copy of your report and an updated copy of my credit report when you have completed
your investigation. Thank you for your prompt attention in this matter.

Sincerely,

(Signature)
Name

Page 80
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting the

Deletion of Information

(Your name and address)

Date

(Credit bureau name and address)

Re: Delete erroneous information

On (date), you received a letter from me requesting an investigation into errone-

ous information you have on my credit report. As of this date, I have not heard
from you.

Since a reasonable time has passed, I make the following request. Under the
Fair Credit Reporting Act, section 611, Subsection A, I formally request that the
information, which has not been verified, be deleted from my credit file. Please
send a copy of my updated report.

Thank you for your prompt attention to this matter.

Sincerely,

(Signature)
Name

Page 81
Whitney Education Group, Inc.

Sample Letter of Dispute

(Your name and address)

Date

(Credit bureau name and address)

Re: Section 611 of the Federal Fair Credit Reporting Act Notice of Accuracy Dispute

At this time the undersigned hereby disputes the completeness and accuracy of the
following information as it currently appears in your file:

Name of creditor ___________________________________________

Account number ______________________________________________

Pertaining to __________________________________________________

Amount professedly in arrears _____________________________________

1. I do not owe on this account and dispute the charges.

2. These charges were not incurred by me.

3. Other (describe):

At this time, I would request that you reinvestigate the information and if found inaccurate
or no longer verifiable, please delete from my report promptly.

Sincerely,

(Signature)
Name

Page 82
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting Re-investigation

(Your name and address)

Date

(Credit bureau name and address)

Re: Reinvestigate erroneous information

The following items are currently reflected on my credit report since your previous
investigation. These items are erroneous and injurious to my credit standing. Please
reinvestigate the following and send to me the names and addresses of the individuals
that have verified the information. This request is made in accordance with the Fair
Credit Reporting Act, Section 609, Subsection A.

The following accounts, on my credit report contain erroneous information. Please

investigate and remove the following:

Firm ID Code Account Number

1.
2.
3.

The following records on my credit report are erroneous. Please investigate and remove
the following:

Type of Record Description

Please send me a copy of your report and an updated copy of my credit report when you
have completed your investigation. Thank you for your prompt attention in this matter.

Sincerely,

(Signature)
Name

Page 83
Whitney Education Group, Inc.

Sample Letter Requesting Inclusion of a

Consumer Statement in a Credit File

(Your name and address)

Date

(Credit bureau name and address)

Re: Consumer statement

Reference is made to the following information currently maintained in your files concerning
the undersigned:
__________________________________________________________
Name of creditor:_____________________________________________
__________________________________________________________
Account reference: ____________________________________________
___________________________________________________________
Amount shown as owed:________________________________________

Please be advised that the undersigned vigorously disputes the truth of such information and
interposes the following consumer statement:

(insert typed statement; maximum length of 100 words)

Please be further advised that pursuant to Section 611 (b) of the Federal Fair Credit Re-
porting Act, the undersigned requests that you update your records to provide a copy of
such consumer statement or a clear and accurate codification or summary thereof.

Sincerely,

(Signature)
Name

Page 84
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting

Information Disclosure

(Your name and address)

Date

(Credit bureau name and address)

Re: Section 615 (b) Reasons for adverse action

Pursuant to Section 615 (b) of the Federal Fair Credit Reporting Act, please disclose the
nature of the information disclosed to you by persons other than Consumer Reporting
Agencies concerning the undersigned. This information should be a full disclosure of the
same to allow the undersigned to challenge or dispute its accuracy.

This information should be received within a reasonable amount of time, as required by the
referenced section.

Sincerely,

(Signature)
Name

Page 85
Whitney Education Group, Inc.

Sample Letter to Creditor Sending

Erroneous Information

(Your name and address)

Date

(Creditor’s name and address)

Attn: (individual name disclosed to you by credit bureau)

Re: (insert name of credit bureau involved)

Dear (individual name):

This is formal notification that you are sending erroneous information to the above credit
reporting agency. This information is highly injurious to my credit rating.

The credit reporting agency is currently investigating this information and will be in contact
with you. I would appreciate it if you would correctly verify my current status or not
verify it at all.

Thank you for your attention to this matter.

Sincerely,

(Signature)
Name

Page 86
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting the Deletion of

Obsolete Information

(Your name and address)

Date

(Credit bureau name and address)

Re: Obsolete information

Reference is made to your obligation under Section 605 and 607 of the Federal Fair
Credit Reporting Act to delete obsolete information from the consumer credit report
of the undersigned.

Please be advised that the information circle on the attached copy of my credit report
is obsolete and should be deleted from your credit files relating to the undersigned.

Please delete this information immediately and send me an updated copy of my report.

Sincerely,

(Signature)
Name

Page 87
Whitney Education Group, Inc.

Sample Letter Requesting Updated Credit

Reports Be Sent to Inquirers

(Your name and address)

Date

(Credit bureau name and address)

Re: Notification

With reference to Section 611 (d) (a) (b) of the Federal Fair Credit Reporting Act, I take
this opportunity to request that you notify all persons who received disputed and/or deleted
information from you within the last two (2) years with reference to employment or six (6)
months with reference to a consumer file, that information has been subsequently deleted or
that a personal statement has been added disputing the claim.

This request is made within 30 days after receipt of an adverse credit determination.

Sincerely,

(Signature)
Name

Page 88
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Filing a Complaint with the

FTC about a Credit Bureau

(Your name and address)

Date

Federal Trade Commission

Correspondence Branch
Fair Credit Reporting Act
Washington, DC 20580

The undersigned understands that you regulate consumer reporting agencies pursuant to the
Fair Credit Reporting Act and wishes to lodge a complaint against the following agency:

Name of Credit Bureau____________________________________________

Address of Credit Bueau___________________________________________

This credit bureau has refused to comply with its obligation under the Fair Credit Reporting
Act. The substance of the complaint is as follows:

(insert details)

Your organization is hereby notified so that you may be aware of and able to act upon a
matter of abuse of the Fair Credit Reporting Act.

The undersigned would be happy to furnish full particulars to you if you need further
information for enforcement proceedings.

Sincerely,

(Signature)
Name

Page 89
Whitney Education Group, Inc.

Sample Letter Filing a Complaint with a Better Business

Bureau or Other Consumer Agency about a Credit Bureau

(Your name and address)

Date

(Better Business Bureau address)

The undersigned hereby lodges a complaint against the following credit bureau:

Name of Credit Bureau_______________________________________

Address of Credit Bureau_____________________________________

This credit bureau has refused to comply with its obligations under the Federal Fair Credit
Reporting Act. The substance of the complaint is as follows:

(insert details)

Your organization is hereby notified of such complaint so that (a) you may be aware of a
pattern of abuse and (b) you may take action to help consumers.

The undersigned would be happy to furnish full particulars to you if you need additional
information.

Sincerely,

(Signature)
Name

Page 90
Credit “How to Obtain, Increase and Preserve Credit”

Sample Letter Requesting Separate Files

for a Husband and Wife

(Your name and address)

Date

(Credit bureau name and address)

Reference is made to those provisions of the Equal Opportunity Credit Act which allow
credit information to be maintained in separate files of each of a husband and wife.

Please be advised that the undersigned hereby request that credit information on the
account of the undersigned be maintained by you in separate files under each name.

Please be further advised that we request this information be made available to all credit
reporting agencies.

Sincerely,

________________________
Husband’s signature

Husband’s social security number

________________________
Wife’s signature

Wife’s social security number

Page 91
Whitney Education Group, Inc.

Sample Letter to Add Data to a

Consumer Report

(Your name and address)

Date

(Credit bureau name and address)

Re: Request to Add Data to Consumer Report

Pursuant to the Fair Credit Reporting Act, you are hereby requested to add the following
data to the consumer credit report of the undersigned:

(Insert details)

Please advise as to the amount, if any, of your fee for verifying and including this data on all
new consumer reports issued by you.

Sincerely,

(Signature)
Name

Social Security Number

Date of Birth

Page 92
Credit “How to Obtain, Increase and Preserve Credit”

Sample Settlement Agreement

SETTLEMENT AGREEMENT

AGREEMENT made this ___________ day of ____________, 20____,

between _______________________________________________(debtor),
residing at_____________________________________________________
and __________________________________ (creditor),
having an office at ______________________________________________.

WHEREAS, Debtor and Creditor have previously entered into a certain

commercial transaction, and

WHEREAS, certain circumstances had subsequently developed causing both Debtor

and Creditor to desire to enter into this agreement.

NOW THEREFORE based upon the mutual promises contained herein

IT IS AGREED:

1. Debtor agrees to pay and creditor agrees to accept $_______as full payment
for all amounts owed by Debtor to Creditor.

2. Debtor shall be permitted to pay the aforesaid sum by monthly payment

without interest at the rate of $__________ per month. All of the monthly
payments are to be made by mail or otherwise at the office of the Creditor set forth
above prior to the _______ day of each month, commencing the ______day of
______, 20_____.

3. In the event of a default by Debtor in making any of the above stated

payments, the Creditor shall have the right upon ten (10) days written notice to
Debtor, to declare the unpaid installments due hereunder immediately due
and payable.

4. Creditor agrees to notify each credit bureau with whom creditor deals that ad-
verse information regarding Debtor’s account is no longer verifiable and should be
deleted from Debtor’s consumer report.

IN WITNESS WHEREOF, the Debtor and Creditor have signed this agreement as
of the date set forth above.

__________________________________
(Debtor)
__________________________________
(Creditor)

Page 93
Whitney Education Group, Inc.

Preserving What’s Yours

Don’t Let an Accident Destroy What You’ve Built

In today’s society lawsuits are almost a way of life. Just about every day you hear about
someone suing someone else. There are people who seem to specialize in seeking out
others to sue. You have come a long way, don’t lose it all because of an accidental suit.
What if someone falls on one of your properties and gets seriously hurt. You could lose
all or part of your assets. Even with liability insurance, which is a must, what if the
injured party receives a settlement that exceeds your policy limits? There are attorneys
who regularly take on suits without an up-front payment relying on the settlement for
their payback. Why would they chance such an action? Because they know all about
your real estate investing and figure that you have plenty of money.

No One Should Know Your Business

You can never hide your real estate activity and you shouldn’t because referrals can be the
cornerstone to success. Once you have achieved a certain level of success, it will be a distinct
liability for everyone to know what your moves are. Why give you a deal on the property
when everyone is aware you are the biggest landlord in the neighborhood. With the Inter-
net, you can pull up the records of the real property appraiser in most communities, key in a
name and up on the screen will come every single property you own. Maybe you’re trying to
assemble a few lots for a small commercial venture. If everyone is aware of your moves, don’t
you think the individual lot prices will skyrocket? Absolutely. There are two rules to follow.

Never Deed a Property in Your Name

Straight out, it’s a privacy issue. No one should be aware of all your activity. We know
that that is almost impossible, but the fewer that do the better off you are. Want to be
sued, place it in your name. The second rule is just as simple.

Use a Different Name for Every Property

Always choose a different name for every property you purchase and deed. Many feel that by
getting a DBA (doing business as) or fictitious name as many states refer to it, you have
protected your privacy. It doesn’t take that long to figure out who really controls and owns
that DBA. Most will say, “Hey that’s okay for a few ventures but after a while just choosing a

Page 94
Credit “How to Obtain, Increase and Preserve Credit”

name will become complicated.” Not at all, simply name the venture after the street address.
That’s the best way to start. Now let’s explore other methods to further protect you. There
are numerous ways to shield your assets; we will just explore a few.

Incorporate
Most will say that is the way to go. You have limited liability and are somewhat shielded from
the public. However, all your profits will be taxed double: first the corporation has to pay taxes
and so will you on any income you derive from that corporation. But remember what we said
about having them deeded separately. If all your properties are in one corporation, then in a
suit all are vulnerable. Should you have a separate corporation for each property? Many will
say yes. Unless you have a number of large complexes or apartment houses, it doesn’t make
economic sense to us. Each will have to pay taxes and file tax returns separately. The only
ones who will make money under that scenario are your attorney and accountant.

Limited Partnership
Numerous experts in asset protection favor the limited partnership as a way of shielding your
assets. Like a corporation, its papers are filed with your state. In a limited partnership, taxes are not
paid by the partnership but by the partners as individuals. It is very difficult to attach the assets of
the limited partner in this arrangement and that is what makes it a favorite of many experts. No
one can attach or force the sale of this type of arrangement. (See Land Trust Agreement on page
96). For further details, call one of our Business Consultants at 800/741-7877.

The Land Trust

The land trust is the type of arrangement that we recommend for the purchase and re-
cording of real estate. Under a land trust only the trustee’s name is divulged to the public.
You, and only you, keep the trust agreement. It can be changed any time you want or need
it to be. The trustee can be your attorney, real estate broker, a friend or any combination
thereof. You as the beneficiary of the trust, have all the rights to the property. This in-
cludes control, and receipt of all the proceeds from the property. Now, every property you
own is deeded under a different trust. If you are sued and they get a judgement against the
property, it is only against that property and all your others are free and clear. If by chance
it is a serious action and you fear that they might try to find and attach your other holdings,
just remember legal actions take time and since only you have the trust agreement, you
always have further recourse. It is not a complicated document that requires an attorney
every time you execute one. In fact, we have included the one we use as part of this manual.
(See telephone number below for access to recommended trust agreements).

Land Trust Agreement

This was not meant to be a “how to protect yourself ” document, just some helpful hints
on how to get started on the road to protection. There are some excellent attorneys and
legal courses out there that we can recommend to you. Simply call our office at 1-800-
741-7877 and one of our counselors will be happy to oblige. We will tell you that most
experts feel strongly that you should be protected at least three layers deep, meaning
that there should be at least two entities between you and your assets. (See Land Trust
Agreement on the following pages.)
,
Page 95
Whitney Education Group, Inc.

AGREEMENT AND DECLARATION OF TRUST

THIS AGREEMENT AND DECLARATION OF TRUST Is made and entered into this ____of
________, 20__, by and between (Your Name), as Grantors and Beneficiaries, (hereinafter referred to
as the “Beneficiaries”, whether one or more, which designation shall include all successors in interest of
any Beneficiary), and (Name of Trustee), whose address is (Trustee’s Address), (hereinafter referred
to as the “Trustee”, which designation shall include all successor trustees). IT IS MUTUALLY AGREED
AS FOLLOWS:

1. Trust Property. The Beneficiaries are about to convey or cause to be conveyed to the Trustee
by deed, absolute in form, the property described in the attached Exhibit “A”, which said property
shall be held by the Trustee, in trust, for the following uses and purposes, under the terms of this
Agreement and shall be hereinafter referred to as the “Trust Property”.
2. Consideration. No consideration was paid by Trustee for such conveyance. The conveyance
will be accepted and will be held by Trustee subject to all existing encumbrances, easements,
restrictions or other clouds or claims against the title thereto, whether the same are of record or
otherwise. The property will be held on the trusts, terms and conditions and for the purposes
hereinafter set forth, until the whole of the trust estate is conveyed, free of this trust, as hereinafter
provided.
3. Beneficiaries. The persons named in the attached Exhibit “B” are the Beneficiaries of this Trust,
and as such, shall be entitled to all of the earnings, avails and proceeds of the Trust Property
according to their interests set opposite their respective names.
4. Interests. The interests of the Beneficiaries shall consist solely of the following rights respecting
the Trust Property:
a. The right to direct the Trustee to convey or otherwise deal with the title to the Trust Property
as hereinafter set out.
b. The right to manage and control the Trust Property.
c. The right to receive the proceeds and avails from the rental, sale, mortgage, or other disposi-
tion of the Trust Property.
The foregoing rights shall be deemed to be personal property and may be assigned and otherwise
transferred as such. No Beneficiary shall have any legal or equitable right, title or interest, as
realty, in or to any real estate held in trust under this Agreement, or the right to require partition of
that real estate, but shall have only the rights, as personalty, set out above, and the death of a
Beneficiary shall not terminate this Trust or in any manner affect the powers of the Trustee.
5. Powers of Trustee.
a. With the consent of the Beneficiary, the Trustee shall have authority to issue notes or bonds
and to secure the payment of the same by mortgaging the whole or any part of the Trust
Property; to borrow money, giving notes therefor signed by him in his capacity as Trustee; to
invest such part of the capital and the profits therefrom and the proceeds of the sale of bonds
and notes in such real estate, equities in real estate, and mortgages in real estate in the United
States of America, as he may deem advisable.
b. With the consent of the Beneficiary, the Trustee shall have the authority to hold the legal title to
all of the Trust Property, and shall have the exclusive management and control of the property
as if he were the absolute owner thereof, and the Trustee is hereby given full power to do all
things and perform all acts which in his judgment are necessary and proper for the protection
of the Trust Property and for the interest of the Beneficiaries in the property of the Trust,
subject to the restrictions, terms, and conditions herein set forth.
c. Without prejudice to the general powers conferred on the Trustee hereunder, it is hereby
declared that the Trustee shall have the following powers, with the consent of the Beneficia-
ries:
(1) To purchase any real property for the Trust at such times and on such terms as may seem
advisable; to assume mortgages upon the property.
(2) To sell at public auction or private sale, to barter, to exchange, or to dispose of otherwise,
any part, or the whole of the Trust Property which may, from time to time form part of the
Trust estate, subject to such restrictions and for such consideration for cash and for credit,
and generally upon such terms and conditions as may seem judicious, to secure payment
Page 96
Credit “How to Obtain, Increase and Preserve Credit”

upon any loan or loans of the Trust, by mortgage with or without power of sale, and to
include such provisions, terms, and conditions as may seem desirable.
(3) To rent or lease the whole or any part of the Trust Property for long or short terms, but not
for terms exceeding the term of the Trust then remaining.
(4) To repair, alter, tear down, add to, or erect any building or buildings upon land belonging
to the Trust; to fill, grade, drain, improve, and otherwise develop any land belonging to the
Trust; to carry on, operate, or manage any building, apartment house, or hotel belonging
to the Trust.
(5) To make, execute, acknowledge, and deliver all deeds, releases, mortgages, leases, con-
tracts, agreements, instruments, and other obligations of whatsoever nature relating to the
Trust Property, and generally to have full power to do all things and perform all acts
necessary to make the instruments proper and legal.
(6) To collect notes, obligations, dividends, and all other payments that may be due and
payable to the Trust; to deposit the proceeds thereof, as well as any other monies from
whatsoever source they may be derived, in any suitable bank or depository, and to draw
the same from time to time for the purposes herein provided.
(7) To pay all lawful taxes and assessments and the necessary expenses of the Trust; to em-
ploy such officers, brokers, engineers, architects, carpenters, contractors, agents, coun-
sel, and such other persons as may seem expedient, to designate their duties and fix their
compensation; to fix a reasonable compensation for their own services to the Trust, as
organizers thereof.
(8) To represent the Trust and the Beneficiaries in all suits and legal proceedings relating to the
Trust Property in any court of law of equity, or before any other bodies or tribunals; to
begin suits and to prosecute them to final judgment or decree; to compromise claims or
suits, and to submit the same to arbitration when, in his judgment, such course is necessary
or proper.
(9) To arrange and pay for and keep in force in the name and for the benefit of the Trustee,
such insurance as the Trustee may deem advisable, in such companies, in such amounts,
and against such risks as determined necessary by the Trustee.
6. Duties of Trustee. It shall be the duty of the Trustee in addition to the other duties herein
imposed upon him:
a. To keep a careful and complete record of all the beneficial interests in the Trust Property with
the name and residence of the person or persons owning such beneficial interest, and such
other items as he may deem of importance or as may be required by the Beneficiaries.
b. To keep careful and accurate books showing the receipts and disbursements of the Trust and
also of the Trust Property, and such other items as he may deem of importance or as the
Beneficiaries hereunder may require.
c. To keep books of the Trust open to the inspection of the Beneficiaries at such reasonable
times at the main office of the Trust as they may appoint.
d. To furnish the Beneficiaries at special meetings at which the same shall be requested a careful,
accurate, written report of his transactions as Trustee hereunder, of the financial standing of
the Trust, and of such other information concerning the affairs of the Trust as they shall request.
e. To sell the Trust Property and distribute the proceeds therefrom:
(1) If any property shall remain in trust under this Agreement for a term which exceeds that
allowed under applicable state law, the Trustee forthwith shall sell same at public sale after
a reasonable public advertisement and reasonable notice to the Beneficiaries and, after
deducting his reasonable fees and expenses, he shall divide the proceeds of the sale among
the Beneficiaries as their interests may then appear, without any direction or consent what-
soever, or
(2) To transfer, set over, convey and deliver to all the then Beneficiaries of this Trust their
respective undivided interests in any nondivisible assets, or
(3) To transfer, set over and deliver all of the assets of the Trust to its Beneficiaries, in their
respective proportionate shares, at any time when the assets of the Trust consist solely of
cash.
7. Compensation of Trustee. The Beneficiaries jointly and severally agree that the Trustee shall
receive the sum of $1.00 per month for his services as Trustee hereunder.
8. Liability of Trustee. The Trustee and his successor as Trustee shall not be required to give a
Page 97
Whitney Education Group, Inc.

bond, and each Trustee shall be liable only for his own acts and then only as a result of his own
gross negligence or bad faith.
9. Removal of Trustee. The Beneficiaries shall have the power to remove a Trustee from his office
or appoint a successor to succeed him.
10. Resignation and Successor.
a. Any Trustee may resign his office with thirty (30) days written notice to Beneficiaries and
Beneficiaries shall proceed to elect a new Trustee to take the place of the Trustee who had
resigned, but the resignation shall not take effect until a certificate thereof, signed, sealed, and
acknowledged by the Trustee, and a certificate of the election of the new Trustee, signed and
sworn to by the Beneficiaries and containing an acceptance of the office, signed and acknowl-
edged by the new Trustee, shall have been procured in a form which is acceptable for record-
ing in the registries of deeds of all the counties in which properties held under this instrument
are situated. If the Beneficiaries shall fail to elect a new Trustee within thirty (30) days after the
resignation, then the Trustee may petition any appropriate court in this state to accept his
resignation and appoint a new Trustee.
b. Any vacancy in the office of Trustee, whether arising from death or from any other cause not
herein provided for, shall be filled within thirty (30) days from the date of the vacancy and the
Beneficiaries shall proceed to elect a new Trustee to fill the vacancy, and immediately thereaf-
ter shall cause to be prepared a certificate of the election containing an acceptance of the
office, signed, sealed, and acknowledged by the new Trustee, which shall be in a form accept-
able for recording in the registries of deeds of all the counties in which properties held under
this instrument are situated.
c. Whenever a new Trustee shall have been elected or appointed to the office of Trustee and shall
have assumed the duties of office, he shall succeed to the title of all the properties of the Trust
and shall have all the powers and be subject to all the restrictions granted to or imposed upon
the Trustee by this agreement, and every Trustee shall have the same powers, rights, and
interests regarding the Trust Property, and shall be subject to the same restrictions and duties
as the original Trustee, except as the same shall have been modified by amendment, as herein
provided for.
d. Notwithstanding any such resignation, the Trustee shall continue to have a lien on the Trust
Property for all costs, expenses and attorney’s fees incurred and for said Trustee’s reasonable
compensation.
11. Objects and Purposes of Trust. The objects and purposes of this Trust shall be to hold title to
the Trust Property and to protect and conserve it until its sale or other disposition or liquidation.
The Trustee shall not undertake any activity not strictly necessary to the attainment of the foregoing
objects and purposes, nor shall the Trustee transact business within the meaning of applicable state
law, or any other law, nor shall this Agreement be deemed to be, or create or evidence the exist-
ence of a corporation, de facto or de jure, or a Massachusetts Trust, or any other type of business
trust, or an association in the nature of a corporation, or a copartnership or joint venture by or
between the Trustee and the Beneficiaries, or by or between the Beneficiaries.
12. Exculpation. The Trustee shall have no power to bind the Beneficiaries personally and, in every
written contract he may enter into, reference shall be made to this declaration; and any person or
corporation contracting with the Trustee, as well as any beneficiary, shall look to the funds and the
Trust Property for payment under such contract, or for the payment of any debt, mortgage, judg-
ment, or decree, or for any money that may otherwise become due or payable, whether by reason
or failure of the Trustee to perform the contract, or for any other reason, and neither the Trustee
nor the Beneficiaries shall be liable personally therefor.
13. Dealings with Trustee. No party dealing with the Trustee in relation to the Trust Property in any
manner whatsoever, and, without limiting the foregoing, no party to whom the property or any part
of it or any interest in it shall be conveyed, contracted to be sold, leased or mortgaged by the
Trustee, shall be obliged to see to the application of any purchase money, rent or money borrowed
or otherwise advanced on the property; to see that the terms of this Trust Agreement have been
complied with; to inquire into the authority, necessity or expediency of any act of the Trustee; or be
privileged to inquire into any of the terms of this Trust Agreement. Every deed, mortgage, lease or
other instrument executed by the Trustee in relation to the Trust Property shall be conclusive
evidence in favor of every person claiming any right, title or interest under the Trust that at the time
of its delivery the Trust created under this Agreement was in full force and effect; and that instru-
Page 98
Credit “How to Obtain, Increase and Preserve Credit”

ment was executed in accordance with the terms and conditions of this Agreement and all its
amendments, if any, and is binding upon all Beneficiaries under it; that the Trustee was duly autho-
rized and empowered to execute and deliver every such instrument; if a conveyance has been
made to a successor or successors in trust, that the successor or successors have been appointed
properly and are vested fully with all the title, estate, rights, powers, duties and obligations of its, his
or their predecessor in Trust.
14. Recording of Agreement. This Agreement shall not be placed on record in the county in which
the Trust Property is situated, or elsewhere, but if it is so recorded, that recording shall not be
considered as notice of the rights of any person under this Agreement derogatory to the title or
powers of the Trustee.
15. Name of Trustee. The name of the Trustee shall not be used by the Beneficiaries in connection
with any advertising or other publicity whatsoever without the written consent of the Trustee.
16. Income Tax Returns. The Trustee shall be obligated to file any income tax returns with respect to
the Trust, as required by law, and the Beneficiaries individually shall report and pay their share of
income taxes on the earnings and avails of the Trust Property or growing out of their interest under
this Trust.
17. Assignment. The interest of a Beneficiary, or any part of that interest, may be transferred only by
a written assignment, executed in duplicate and delivered to the Trustee. The Trustee shall note its
acceptance on the original and duplicate original of the assignment, retaining the original and deliv-
ering the duplicate original to the assignee as and for his or her evidence of ownership of a benefi-
cial interest under this Agreement. No assignment of any interest under this Agreement, other than
by operation of law, that is not so executed, delivered and accepted shall be valid without the
written approval of all of the other Beneficiaries who possess the power of direction. No person
who is vested with the power of direction, but who is not a Beneficiary under this Agreement, shall
assign that power without the written consent of all the Beneficiaries.
18. Individual Liability of Trustee. The Trustee shall not be required, in dealing with the Trust
Property or in otherwise acting under this Agreement, to enter into any individual contract or other
individual obligation whatsoever; nor to make himself individually liable to pay or incur the payment
of any damages, attorney’s fees, fines, and penalties, forfeitures, costs, charges or other sums of
money whatsoever. The Trustee shall have no individual liability or obligation whatsoever arising
from his ownership, as Trustee, of the legal title to the Trust Property, or with respect to any act
done or contract entered into or indebtedness incurred by him in dealing with the Trust Property or
in otherwise acting under this Agreement, except only as far as the Trust Property and any trust
funds in the actual possession of the Trustee shall be applicable to the payment and discharge of
that liability or obligation.
19. Reimbursement and Indemnification of Trustee. If the Trustee shall pay or incur any liability
to pay any money on account of this Trust, or incur any liability to pay any money on account of
being made a party to any litigation as a result of holding title to Trust Property or otherwise in
connection with this Trust, whether because of breach of contract, injury to person or property,
fines or penalties under any law, or otherwise, the Beneficiaries, jointly and severally agree that on
demand they will pay to the Trustee, with interest at the rate of 6.50% per annum, all such pay-
ments made or liabilities incurred by the Trustee, together with his expenses, including reasonable
attorney’s fees, and that they will indemnify and hold the Trustee harmless of and from any and all
payments made or liabilities incurred by him for any reason whatsoever as a result of this Agree-
ment; and all amounts so paid by the Trustee, as well as his compensation under this Agreement,
shall constitute a lien on the Trust Property. The Trustee shall not be required to convey or other-
wise deal with the Trust property as long as any money is due to the Trustee under this Agreement;
nor shall the Trustee be required to advance or pay out any money on account of this Trust or to
prosecute or defend any legal proceedings involving this Trust or any property or interest under this
Agreement unless he shall be furnished with sufficient funds or be indemnified to his satisfaction.
20. Entire Agreement. This Agreement contains the entire understanding between the parties and
may be amended, revoked, or terminated only by written agreement signed by the Trustee
and all of the Beneficiaries.

Page 99
Whitney Education Group, Inc.

21. Governing Law. This agreement, and all transactions contemplated hereby, shall be governed
by, construed and enforced in accordance with the laws of the State of Name of State. The
parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a
court of subject matter jurisdiction located in Name of County County, State of Name of
State. In the event that litigation results from or arises out of this Agreement or the performance
thereof, the parties agree to reimburse the prevailing party’s reasonable attorney’s fees, court
costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other
relief to which the prevailing party may be entitled. In such event, no action shall be entertained by
said court or any court of competent jurisdiction if filed more than one year subsequent to the date
the cause(s) of action actually accrued regardless of whether damages were otherwise as of said
time calculable.
22. Binding Effect. The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon any successor trustee under it, as well as upon the executors, administrators, heirs,
assigns and all other successors in interest of the Beneficiaries.
23. Trustee’s Liability to Beneficiaries. The Trustee shall be liable to the Beneficiaries for the
value of their respective beneficial interests only to the extent of the property held in Trust by him
hereunder and the Beneficiaries shall enforce such liability only against the Trust Property and not
against the Trustee personally.
24. Annual Statements. There shall be no annual meeting of the Beneficiaries, but the Trustee shall
prepare an annual report of their receipts and disbursements for the fiscal year preceding, which
fiscal year shall coincide with the calendar year, and a copy of the report shall be sent by mail to
the Beneficiaries not later than February 28 of each year.
25. Termination. This trust may be terminated at any time by the Beneficiaries and with thirty (30)
days written notice of termination delivered to the Trustee, the Trustee shall execute any and all
documents necessary to vest fee simple marketable title to any and all Trust Property in Beneficia-
ries.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and
year first above written.

Signed, sealed and delivered in the presence of:

BENEFICIARIES

____________________________________ _________________________________
Witness Your Name
____________________________________
Witness
____________________________________ _________________________________
Witness
____________________________________
Witness
____________________________________ _________________________________
Witness
____________________________________
Witness
____________________________________
Witness
____________________________________ _________________________________
Witness Name of Trustee

_________________________________
Witness

Page 100
Credit “How to Obtain, Increase and Preserve Credit”

STATE OF ___________________
COUNTY OF ___________________

Before me personally appeared Your Name to me well known and known to me to be

the person described in and who executed the foregoing instrument, and acknowledged to and
before me that he executed said instrument for the purposes therein expressed.

WITNESS my hand and official seal in the State and County aforesaid, this _____ day
of _____ 20_____.

______________________________
Notary Public
(SEAL) State of__________________
My Commission Expires:
__________________________

STATE OF ___________________
COUNTY OF ___________________

Before me personally appeared Name of Trustee to me well known and known to me

to be the person described in and who executed the foregoing instrument, and acknowledged to
and before me that he executed said instrument for the purposes therein expressed.

WITNESS my hand and official seal in the State and County aforesaid, this _____ day
of _____ 20_____.

______________________________
Notary Public
(SEAL) State of__________________
My Commission Expires:
__________________________

Page 101
Whitney Education Group, Inc.

Where to Find Help?

Sometimes the Toughest Task is to Find and Ask For Help

People tend to be very closed mouth and secretive when it comes to their finances. They
don’t want others to know their business or the trouble they are in. Most wait until it’s
too late to seek counseling or outside advice. In the credit arena, it is really a shame
because there are numerous places to turn for help. Help is available both in government
and the private sector. No one is more aggressive in protecting the consumer than the
Federal Trade Commission (FTC); they constantly monitor the marketplace looking for
ways of preventing fraud. They publish numerous pamphlets to both inform and assist
the public. While there are numerous organizations and of course attorneys prepared to
give advice there are also private non-profit organizations that perform a valuable service
to thousands across the land.

National Foundation for Consumer Credit

The National Foundation for Consumer Credit is an umbrella group of not-for-profit
organizations throughout the country whose charge is to provide low-cost credit coun-
seling and financial advice. They have over 850 offices in fifty states. You can call them at
1-800-388-2227 and ask where their nearest affiliate is located.

Their affiliates are universally recognized as the best credit organizations available to the
general public. The trick is to avail yourself of their services before the situation
becomes critical.

Common Sense Approach

Let’s review some common sense approaches when the debt noose begins to tighten.
First develop a budget and then stick to it. Begin by adding up all your monthly income
sources. Then figure out all your necessary or fixed expenses: rent, mortgage, car pay-
ments, insurance, water, electric and telephone bills, and don’t forget food and health
care. Track every dime you spend, making sure that your essential expenses are always
covered. Then prioritize your remaining expenses on a pay as you go basis. Debt Counse-
lors of America, a member of the National Foundation for Consumer Credit, has a rule
of thumb for family budgets and it is as follows:
Page 102
Credit “How to Obtain, Increase and Preserve Credit”

Monthly Income
Category Percentage of take home pay
Housing 30%
Utilities 5%
Food 20%
Essential 2 to 4%
Medical 5%
Clothing 7%
Transportation 15%
Recreation 4%
Savings 8%
Mad money 2 to 4%

This is not an end all, but a mirror of what their experience shows a working family’s
budget should look like. Budgeting can be a trying effort, but it is the first step on the
road back.

Having Problems, Contact Your Creditors

If you know you are facing financial difficulties, don’t wait until you can’t meet your
obligations. Call all your creditors and explain the situation to them. You will be amazed
at how many will allow you some slack to stay above water. They would rather have you
pay less than not at all.

Debt Consolidation
You might be able to reduce your cost of credit by consolidating your debt. Be especially
careful if this entails a second mortgage or home equity line of credit. Don’t let your
secondary debt jeopardize your place to live.

Bankruptcy
Bankruptcy should always be a last resort because it has a long lasting effect. However, to
some it is the only recourse left. With bankruptcy at an all-time high, we wonder if too
many people are choosing this method as the easy way out. As a recent best-selling book
stated, “There is a life after bankruptcy.” You can survive and thrive, we show you how,
but it should only be used as your last resort. You should know that there are two differ-
ent types of bankruptcy, Chapter 7 and Chapter 13. Each must be filed in a federal court.

Chapter Seven
Chapter 7 bankruptcies involve liquidation of all assets that
are not exempt in your state, which is usually only work-
related tools and materials, and household furnishings. Per-
sonal bankruptcy does not erase certain obligations such as
child support, alimony, fines, taxes and certain student loans.

Page 103
Whitney Education Group, Inc.

Chapter Thirteen
Chapter 13 bankruptcy, which is referred to as reorganization, is just that. Under the
supervision of the court it allows you to restructure your debt into a plan to pay it off,
usually a three- to five-year plan. Under Chapter 13, you can keep items like your house
and automobile.

Credit Counseling
Credit counseling is the best bet for most. It allows you at a nominal cost to have highly
trained professionals work with you to assist in your trials. Sometimes just having some-
one to talk things out with is a major plus. But be careful whom you choose, make sure
they are members of the National Foundation for Consumer Credit. The Consumer Credit
Counseling Service is clearly one of the best. They can be reached at 1-800-873-2227.
They offer the following services:

• Budget Counseling: They will work with you to develop the best possible budget
tailored to your needs.
• Credit Report Review: They will get copies of your credit history and see what
they can do to make sure it is correct.
• Business Education: They conduct a series of financial meetings to train those they
counsel on the financial strategies they should know about and implement.
• Debt Management: They completely restructure your debt, talking to your credi-
tors and insuring that you are able to handle your debt.
• Housing Program: They are certified by HUD as approved housing counseling agen-
cies and offer assistance to renters, homeowners and future homeowners.
• Strategies: They will structure a monthly financial plan designed to meet your indi-
vidual needs.

Help on the Federal Level

Knowing what federal agencies regulate what industry is a big help in contacting the
appropriate agency. In fact, in making a complaint to any business entity, you should
always make it a practice to copy the appropriate federal agency. You will soon find that
your response rate will improve dramatically and so will your success rate. Institutions
are very sensitive about the number of complaints that are referred to the federal gov-
ernment because they know if the numbers mount, the agency is likely to go to Con-
gress, outline the problem, and seek remedial legislation. That is how many of the con-
sumer protection laws got their start.

Credit and Consumer Problems

The Federal Trade Commission is your best bet for all incidents of fraud, lease, and credit bureau
problems. They have a long track record of dogged determination in protecting the consumer.

Page 104
Credit “How to Obtain, Increase and Preserve Credit”

Federal Trade Commission

Bureau of Consumer Protection Office of Consumer and Business Education. The Toll Free
telephone number for all FTC offices: 1-877-382-4357 Call 9am to 5pm EST, Monday - Friday.

And their local offices:

Federal Trade Commission Southeast Region Federal Trade Commission Southwest Region
60 Forsyth St. SW 1999 Bryan St.
Suite 5M35 Suite 2150
Atlanta, GA 30303 Dallas, TX 75201-6808

Federal Trade Commission Northeast Region Federal Trade Commission Western Region
1 Bowling Green 901 Market Street, Suite 570
New York, NY 10004 San Francisco, CA 94103

Federal Trade Commission Midwest Region Federal Trade Commission Northwest Region
55 East Monroe Street, Suite 1860 2896 Federal Building
Chicago, IL 60603-5701 915 Second Avenue
Seattle, WA 98174
Federal Trade Commission East
Central Region
1111 Superior Ave, Suite 200
Cleveland, OH 44114-2507

On questions regarding a violation of the Equal Opportunities Law, one would seek out the
Department of Justice.

If your problem involves a credit union:

Department of Justice
Federal Credit Union Civil Division
National Credit Union Administration Office of Consumer Litigation
1775 Duke St. 950 Pennsylvania Ave. NW
Alexandria, VA 22314-3428 Washington, DC 20530-0001
703-518-6300 202-514-2000

Page 105
Whitney Education Group, Inc.

Questions regarding a bank can get complicated because the responsibility for regulating banks
is split between numerous federal agencies. That becomes important because while you might
have a problem with a credit card, it is the issuing bank that must bear the responsibility. If you
have a doubt about where to file your complaint, we suggest you contact the Board of Gover-
nors of the Federal Reserve System and they will forward your complaint to the proper author-
ity. However, taking the time to find out who is the direct responsible party will greatly speed
up your response time.

National Banks
Office of the Comptroller of the Currency Federal Reserve Bank of Cleveland
Customer Assistance Unit Community Affairs
1301 McKinney St., Suite 3710 1455 East 6th St.
Houston, TX 77010 Cleveland, OH 44114
1-800-613-6743 ( 9am to 3pm CST ) 216-579-2000

Federal Savings and Loans Banks Federal Reserve Bank of Dallas

The Office of Thrift Supervision Community Affairs Office
Office of Consumer Programs 2200 North Pearl street
1700 G Street NW Dallas, TX 75201-2272
Washington, DC 20552 214-922-5377
1-800-842-6929 800-333-4460, Ext. 5377

Federal Reserve Bank of Kansas City

State Banks That are Members of Community Affairs
the Federal Reserve System 925 Grand Blvd.
Board of Governors of the Federal Reserve Kansas City, MO 64198-0001
System 816-881-2000
Division of Consumer and Community
Affairs Federal Reserve Bank of Minneapolis
20th and C street, NW Mail Stop 801 Community Affairs
Washington, DC 20551 90 Hennepin Ave. PO Box 291
202-452-3693 Minneapolis, MN 55480-0291
612-204-5000
Federal Reserve Bank of Atlanta
104 Marietta Street, NW Federal Reserve Bank of New York
Atlanta, GA 30303-2713 33 Liberty Street
404-521-8500 New York, NY 10045
212-720-6134
Federal Reserve Bank of Boston
PO Box 2076 Federal Reserve Bank of Philadelphia
Boston, MA 02106-2076 Public Affairs Department
617-973-3000 PO Box 66
Philadelphia, PA19106
Federal Reserve Bank of Chicago 215-574-6115
PO Box 834, 230 South La Salle St.
Chicago, IL 60690-0834
312-322-5111

Page 106
Credit “How to Obtain, Increase and Preserve Credit”

Federal Reserve Bank of Richmond FDIC Dallas Regional Office

Public Affairs 1910 Pacific Avenue, Suite 1900
PO Box 27622 Dallas, TX 75201
Richmond, VA 23261 972-754-0098
804-697-8109
FDIC Kansas City Regional Office
Federal Reserve Bank of St. Louis 2345 Grand Avenue, Suite 1500
Public Affairs Kansas City, MO 64108
PO Box 442 816-234-8000
Saint Louis, MO 63166
314-444-8808/8809 FDIC Memphis Regional Office
5100 Poplar Avenue, Suite 1900
* Federal Reserve Bank of San Francisco Memphis, TN 38137
Public Information Department 901-685-1603
PO Box 7702
San Francisco, CA 94120 FDIC New York Regional Office
415-974-2163/2246 452 Fifth Avenue, 19th Floor
New York, NY 10018
* Alaska and Hawaii are included in this 212-704-1200
district.
FDIC San Francisco Regional Office
Non-Member Federally Insured State 25 Ecker Street, Suite 2300
San Francisco, CA 94105
Banks
415-546-0160
The Federal Deposit Insurance Corporation
Division of Compliance and Consumer
There are many state and local consumer pro-
Affairs
tection agencies that provide assistance. How-
550 17th Street NW
ever, the primary agency we recommend is
Washington, DC 20429
the state attorney general. Almost every state
1-800-934-FDIC
has passed legislation that mirrors the federal
law. Some have even made their laws tougher.
FDIC Atlanta Regional Office
The reason that they passed a law that mir-
One Atlantic Center, Suite 1600
rors federal laws is that it enables state offi-
1201 West Peachtree Street, NE
cials to get involved in the prosecution of
Atlanta, GA 30309-3415
those cases. In recent years, most attorneys
404-817-1300
general have taken their consumer protection
duties much more seriously and have mounted
FDIC Boston Regional Office
aggressive anti-fraud campaigns. If the prob-
15 Braintree Hill Office Park
lem you are having involves an intra-state
Braintree, MA 02184
firm, you will probably be better off seeking
781-794-5500
assistance with your local AG. We have pro-
vided a list of their offices to assist in your
FDIC Chicago Regional Office
efforts:
500 West Monroe Street, Suite 3600
Chicago, IL 60661
312-382-7500

Page 107
Whitney Education Group, Inc.

State Attorney General Colorado

Honorable Ken Salazar
Alabama
Attorney General of Colorado
Honorable Bill Pryor
Office of the Attorney General, Department
Attorney General of Alabama
of Law
Office of the Attorney General
1525 Sherman Street, 7th Floor
State House
Denver, CO 80203
11 South Union Street, Third Floor
303-866-4500
Montgomery, AL 36130
334-242-7300
Connecticut
Honorable Richard Blumenthal
Alaska
Attorney General of Connecticut
Honorable Bruce M. Botelho
Office of the Attorney General
Attorney General of Alaska
55 Elm Street
Post Office Box 110300
Hartford, CT 06106
Diamond Courthouse
860-808-5318
Juneau, AK 99811-0300
907- 465-3600
Delaware
Honorable M. Jane Brady
American Samoa
Attorney General of Delaware
Honorable Toetagata Albert Mailo
Office of the Attorney General
Attorney General of American Samoa
Carvel State Office Building
Office of the Attorney General
820 North French Street
684-633-4163
Wilmington, DE 19801
302-577-8300
Arizona
Honorable Janet Napolitano
District of Columbia
Attorney General of Arizona
Honorable John M. Ferren
Office of the Attorney General
District of Columbia Corporation Counsel
1275 West Washington Street
Office of the Corporation Counsel
Phoenix, AZ 85007
441 4th Street NW
602-542-5025 or toll free 888-377-6108
Washington, DC 20001
Arkansas
Florida
Honorable Mark Pryor
Honorable Robert A. Butterworth
Attorney General of Arkansas
State of Florida
Office of the Attorney General
The Capitol
323 Center Street, Suite 200
Tallahassee, FL 32399-1050
Little Rock, AR 72201
850-487-1963
501-682-2007 or toll free 800-482-8982
Georgia
California
Honorable Thurbert E. Baker
Honorable Bill Lockyer
Attorney General of Georgia
Attorney General of California
Office of the Attorney General
Department of Justice
40 Capitol Square, SW
P.O. Box 944255
Atlanta, GA 30334-1300
Sacramento, CA 94244-2550
404-656-3300
916-445-9555
Page 108
Credit “How to Obtain, Increase and Preserve Credit”

Guam
Honorable John F. Tarantino Kansas
Guam Office of the Attorney General Honorable Carla J. Stovall
Judicial Center Building Kansas Office of the Attorney General
120 West O’Brien Drive 120 S.W. 10th, 2nd Floor
Agana, GU 96910 Topeka, KS 66612-1597
671-575-3324 785-296-2115

Hawaii Kentucky
Honorable Earl I. Anzai Honorable Albert Benjamin “Ben” Chandler
Attorney General of Hawaii III
Office of the Attorney General Attorney General of Kentucky
425 Queen Street 1024 Capitol, Center Drive
Honolulu, HI 96813 Frankfort, KY 40601
808-586-1282 502-696-5300

Idaho Louisiana
Honorable Alan G. Lance Honorable Richard P. Ieyoub
Attorney General of Idaho State Capitol
Office of the Attorney General Attorney General of Louisiana
Statehouse 22nd Floor
Boise, ID 83720-1000 Baton Rouge, LA 70804-9005
208-334-2400 225-342-7013

Illinois Maine
Honorable Jim Ryan Honorable Andrew Ketterer
Attorney General of Illinois Attorney General of Maine
Office of the Attorney General 6 State House Station
James R Thompson Center Augusta, ME 04333
100 West Randolph Street 207-626-8865
Chicago, IL 60601
312-814-3374 Maryland
Honorable J. Joseph Curran Jr.
Indiana Maryland Office of the Attorney General
Honorable Karen Freeman - Wilson 200 Saint Paul Place
Office of the Indiana Attorney General Baltimore, MD 21202-2202
Indiana Government Center South 410-576-6300
IGCS -Fifth Floor - 402 West Washington
St. Massachusetts
Indianapolis, IN 46204 Honorable Tom Reilly
317-232-6201 Attorney General of Massachusetts
Office of the Attorney General
Iowa One Ashburton Place
Honorable Tom Miller Boston, MA 02108-1698
Attorney General of Iowa 617-727-2200
1305 East Walnut St.
Des Moines, IA 50319
515-281-5926
Page 109
Whitney Education Group, Inc.

Michigan
Honorable Jennifer M. Granholm Nevada
Michigan Office of the Attorney General Honorable Frankie Sue Del Papa
G. Mennen Williams Bldg., 7th Floor Nevada Office of the Attorney General
525 West Ottawa Street 100 North Carson Street
P.O. Box 30212 Carson City, NV 89701
Lansing, MI 48909-0212 775-684-1100
517-373-1110
New Hampshire
Minnesota Honorable Philip T. McLaughlin
Honorable Mike Hatch New Hampshire
Minnesota Office of the Attorney General Office of the Attorney General
102 State Capitol 33 Capitol Street
St. Paul, MN 55155 Concord, NH 03301
651-296-6196 or toll free 800-657-3787 603-271-3658

Mississippi New Jersey

Honorable Mike Moore Honorable John J. Farmer
Mississippi Office of the Attorney General New Jersey Office of the Attorney General
Post Office Box 220 Justice Complex
Jackson, MS 39205-0220 25 Market Street, CN 080
601-359-3692 Trenton, NJ 08625-0080
609-292-3508
Missouri
Honorable Jeremiah W. (Jay) Nixon New Mexico
Missouri Office of the Attorney General Honorable Patricia Madrid
Supreme Court Building New Mexico Office of the Attorney General
207 West High Street Post Office Drawer 1508
P.O. Box 899 Santa Fe, NM 87504-1508
Jefferson City, MO 65102 800-678-1508
573-751-3321
New York
Montana Honorable Eliot Spitzer
Honorable Joseph P. Mazurek Attorney General of New York
Montana Office of the Attorney General Office of the Attorney General
Justice Building, 215 North Sanders Department of Law-The Capitol, 2nd Floor
Helena, MT 59620-1401 Albany, NY 12224-0341
406-444-2026 518-474-7330

Nebraska North Carolina

Honorable Don Stenberg Honorable Michael F. Easley
Nebraska Office of the Attorney General North Carolina Office of the Attorney
2115 State Capitol General Department of Justice
Lincoln, NE 68509 Post Office Box 629
402-471-2682 Raleigh, NC 27602-0629
919-716-6400

Page 110
Credit “How to Obtain, Increase and Preserve Credit”

North Dakota Rhode Island

Honorable Heidi Heitkamp Honorable Sheldon Whitehouse
North Dakota Office of the Attorney Gen- Rhode Island Office of the Attorney General
eral 150 South Main Street
State Capitol Bldg. Providence, RI 02903
600 East Boulevard Avenue 401-274-4400
Bismarck, ND 58505-0040
701-328-2210 South Carolina
Honorable Charlie Condon
Ohio South Carolina Office of the Attorney
Honorable Betty D. Montgomery General,
Attorney General of Ohio Post Office Box 11549
Office of the Attorney General Columbia, SC 29211-1549
State Office Tower 803-734-3970
30 East Broad Street,17th Floor
Columbus, OH 43215-3428 South Dakota
614-466-4320 Honorable Mark Barnett
South Dakota Office of the Attorney General
Oklahoma 500 East Capitol
Honorable W.A. Drew Edmondson Pierre, SD 57501-5070
Oklahoma Office of the Attorney General 605-773-3215
2300 North Lincoln Blvd, Suite 112
Oklahoma City, OK 73105 Tennessee
405-521-3921 Honorable Paul G. Summers
Tennessee Office of the Attorney General
Oregon 425 5th Ave. North
Honorable Hardy Myers Nashville, TN 37243-0485
Oregon Office of the Attorney General 615-741-5860
Justice Building
1162 Court Street NE Texas
Salem, OR 97310 Honorable John Cornyn
503-378-6002 Attorney General of Texas
Office of the Attorney General
Pennsylvania Post Office Box 12548
Honorable Mike Fisher Austin, TX 78711-2548
Pennsylvania Office of the Attorney Gen- 512-463-2100
eral Strawberry Square, 16th Floor
Harrisburg, PA 17120 Utah
717-787-3391 Honorable Jan Graham
Attorney General of Utah
Puerto Rico State Capitol, Room 236
Honorable Jose A. Fuentes-Agostini Salt Lake City, UT 84114-0810
Attorney General of Puerto Rico 801-538-9600
Office of the Attorney General
Post Office Box 192
San Juan, PR 00902-0192
809-721-0940
Page 111
Whitney Education Group, Inc.

Vermont
Honorable William H. Sorrell But remember, you can never be sure
Vermont Office of the Attorney General your credit report is correct.
109 State Street
Montpelier, VT 05609-1001
802-828-3171

Virginia
Honorable Mark L. Earley
Virginia Office of the Attorney General
900 East Main Street
Richmond, VA 23219
804-786-2071

Virgin Islands
Honorable Julio A. Brady
Virgin Islands Office of the Attorney General
Department of Justice
G.E.R.S. Building, 2nd Floor
Charlotte Amalie, U.S., Virgin Islands,
00802
340-774-5666 or 340-773-0295

Washington
Honorable Christine O. Gregoire
Attorney General of Washington
Office of the Attorney General
P.O. Cox 40100
1125 Washington Street, SE
Olympia, WA 98504-0100
304-558-2021

Wisconsin
Honorable James E. Doyle
Wisconsin Office of the Attorney General
Wisconsin Department of Justice
P.O. Box 7857
Madison, WI 53707-7857
608-266-1221

Wyoming
Honorable Gay Woodhous
Wyoming Office of the Attorney General
123 Capitol Building
200 W. 24th St.
Cheyenne, WY 82002
307-777-7841

Page 112
Credit “How to Obtain, Increase and Preserve Credit”

It’s a Never Ending Process

You Can Never Assume That Your Credit is Safe
Some surveys have actually stated that it was their belief that over 50 percent of con-
sumer credit reports had errors in them. Can you ever be complacent and feel that yours
is in good shape? The same authority said that it was their belief that 20 percent had
errors that would cause the consumer to get denied credit. Who checks to make sure the
reports are correct? No one does, so if you want to make sure yours is correct the only
person that’s going to do so is you.

Is the problem really that severe? Well, the most complaints filed with the Federal Trade
Commission for a three year period involved credit bureau complaints. The same source
said that the consumer had already spent an average of 23 weeks trying to resolve the
complaint themselves, with no satisfaction.

How Often Should You Check?

There are varying theories on how often one should check their credit reports. The
Consortium of Consumer Attorneys advocates checking them every three months. We
don’t feel that is necessary, and quite frankly could possibly work to your disadvantage.
Some lenders could become leery of applicants who have checked their report that of-
ten. Remember all credit reports list how often the report has been accessed, and by
whom. They might be nervous that you have a problem coming down the pike. It’s the
same as applying for credit all over the lot. The average lender doesn’t know that you
are shopping around for a deal, only that you had to contact a number of lenders. They
assume that the others probably turned you down for credit. Or you are taking on more
liability than you can handle.

Once a Year is Fine

If you check the reports once a year you should be fine. Remember, however, that if
you are about to undertake a major investment you might want to check the reports
before the lenders do. Since it will take a few months to correct an erroneous item, plan
your actions accordingly.

Page 113
Whitney Education Group, Inc.

There is Another Threat on the Horizon

District Attorney Denis Dillon of New York’s Nassau
County had recently issued a consumer alert concerning
the growing problem of unauthorized use of individuals’
personal information to obtain credit. The DA says his
office, as well as other law enforcement agencies, have
received numerous complaints from victims from every
walk of life. According to Dillon, often the crime involves
the theft of personal information such as a person’s name,
social security number and date of birth from a computer
database. The information is then used by the criminal to
obtain credit cards, lines of credit, car loans and in some
extreme cases home mortgages or equity loans. During
the process the criminal usually arranges for a change of
the consumers’ address, so that mailings arising out of the fraud are not received by the
victim. Since the consumer only discovers the fraud when they apply for credit or are de-
nied credit, this type of activity can go unnoticed for years. If they were checking their
report once a year, most of this activity would be stopped. What does the DA recommend?
Check your credit history on a regular basis.

The Risk of Buying On-Line

Many people are wary of making credit card purchases on the Internet. Although this
practice is still not foolproof, advancements in technology have eliminated many of the
risks. As “e-commerce” became more popular, the companies handling electronic trans-
actions devised secured credit card transaction methods that encrypt and shield informa-
tion passing from the credit card holder. The advantage of these online transactions is
that it allows the purchase to be made in “real time,” with the customer receiving an
approval code in seconds. Besides the speed of the transactions, it eliminates piles of
paperwork, mail delays and postage. Despite the great strides made in technology, there
still remains the rare and occasional instance where a hacker can unravel the security of
a system. Our advice to you is to be certain that the credit card transaction site you use
on the Internet is secure before you make your purchase. And be sure to closely monitor
the charges on your credit card bills. No matter how small the charge is, make sure it is
legitimate. It is up to you to make a decision by weighing the risk factor against the
convenience, selection and discounts provided by online shopping. Bear in mind too that
because of the great technological strides made in Internet security, the Senate, House
and the President signed a bill into law at the beginning of the millennium, making “e-
signatures” legal endorsement on documents.

The Educational System Has Failed Us

One of the most glaring omissions from what is currently being taught in high school
and college is how to make and manage money. There are numerous courses on economic
theory, but nowhere is there Making Money 101. Even more important, we are not
preparing our youngsters on how to manage their money. Consumer debt has soared 39
percent in the last five years and now exceeds $1 trillion according to the National Credit
Counseling Services. In a survey done for them by the Opinion Research Corporation
Page 114
Credit “How to Obtain, Increase and Preserve Credit”

International, one in four Americans face problems in managing debts. Nearly half of
those polled would go back to school to learn the ABC’s of money management. Unfor-
tunately most did not recognize their lack of money management skills until faced with
a financial crisis.

Envision a Stop Sign

Every time you want to use a credit card or enter into debt, envision a giant stop sign in
front of you. Then stop for a moment and think, “Is this the right financial step for me
to take?” Just stopping to reflect will make a difference. We are not urging you to become
cautious, just careful. To make wealth and become finan-
cially independent, you must take risks. Just make sure
they are measured risks.

Remember the Credit Creed

Never use borrowed money for items that will go down
in value. Building wealth is not any one thing you do right
but the sum total of all the little things you do. And how
you handle your credit will be a major factor in determin-
ing whether you make it or not.

Page 115