|CREDIT CARDS: |
BLESSING OR CURSE?
May 30, 1997
Your questions were answered by Independent financial advisor, Dave Ramsey, and by the American Bankers Association.
Should we pay off our debt or declare bankruptcy? How can bad credit be repaired? Should I take out a loan to pay off my credit cards? At what age should parents allow children to have credit cards? Should there be more restrictions on who can get a credit card? How do banks assess who can get credit, and who monitors the banks?
November 29, 1996
Economics correspondent Paul Solman analyzes rising consumer debt in the U.S.
American Bankers Association
Financial advisor Dave Ramsey
The Federal Trade Commission working paper on choosing and using a credit card.
The Federal Trade Commission working paper on solving credit problems
Consumer Handbook to Credit Protection Laws written by the Board of Governors of the Federal Reserve System.
Victims of Credit Reporting, a non-profit group, has a list of interesting credit related links.
Nerdworld has a library of credit/debt management links.
A question from Kamili Magee,
New Orleans, LA:
How do I repair my credit?
I am 25 years old with bad credit. I applied for my first credit cards as a sophomore in college when I was 19 years old and did not make consistent payments. Several of those accounts were closed by my creditors. At that point, I paid off the balances but not, of course, before the damage had been done.
I was able to remain in good standing with creditors for my gas card, a department store card and a visa.
I have been interested, however, in transferring the balance on my visa which charges 21% interest (the consequences of which I paid little attention to while in college) to a bank that offers a lower interest rate card, but my history has prevented me from doing that. My credit report keeps new creditors at bay and I have found it to be impossible to be granted any credit by new creditors.
I am interested in finding out what measures I may take so that in a few years I may have a good credit rating and not be inhibited by the ignorance of my youth. I understand that I have to wait seven years before my credit can be cleared, but what proactive things can I do in the meantime and who do you contact when the seven years are up? What literature should I read? Or what type of advisor should I consult?
The American Bankers Association responds :
Unless you filed for bankruptcy, you may not have to wait seven years. If you pay your bills on time for two consecutive years, banks will consider you as an acceptable risk for most types of loans. With two or more years of on-time payments, you'll qualify for lower interest rates and higher credit limits.
If you are looking for an organization to help you manage your debts, try the local Consumer Credit Counseling Service. They are a non-profit organization that has a good track record helping in-debt consumers back on their feet. Call their national office at 800-388-2227 to find the location nearest you.
Financial Advisor Dave Ramsey responds :
Kamili, I've got great news. Bad credit is a blessing in your life. After years of experience, my opinion is that you do not need any credit. The best thing that you can do for your finances for long term wealth building is to stay away from consumer debt. You are blessed that you are not getting more credit cards. You are blessed that they are not hounding you at every stereo and department store you walk into to loan you money.
The only possible reason you would want your credit clean is to purchase a home. You need three years of good credit by paying your landlord or current bills on time or early between your bad credit for a mortgage loan. Past that, the myth that is perpetrated by financial institutions of this country is that good credit is as necessary as air. It is not.
Also, please be aware that nothing can be removed from your credit report before seven years, unless they are things that are inaccurate. Anyone that tells you otherwise has lied to you and has violated the law. Please, please, please do not go and pay stupid interest rates from a lender or, worse yet, get a secured card in an effort to "rebuild" your credit. That is a myth and it is the best way I know get kicked while your down. Get on a budget, save money, and stay out of debt.
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