Program Managers

How is your financial fitness?

You can find out by taking the quizzes below
Financial Fitness Quiz
or
Financial Fitness Checkup

Topics

Additional Course Information

Credit

Credit is the provision of resources (such as granting a loan) by one party to another party where that second party does not immediately pay the first party for the resources in full, thereby generating a debt, and instead arranges either to pay for or to return those resources (or equivalent value) at a later date. The first party is called a creditor, also known as a lender. The second party is called a debtor, also known as a borrower.

You get credit when you get a loan to buy a car or when you get a credit card. This is referred to as establishing credit. The different types of credit are short and long term loans and credit cards. Credit cards are the most misused item when it comes to getting credit. They’re too easy to use and have caused a major problem with credit card debt in the United States.

Short term loans are normally for 48 months or less. An advantage of the short term loan is that it usually has a better interest rate. Another advantage means you pay less interest over the term of the loan. One disadvantage is that you have to make a higher monthly payment.

Long term loans are like a 30 year home mortgage. The advantage is that you will have lower monthly payments. Some disadvantages are that you will pay more interest and the loan could outlive the purchase. This is especially true when buying a car with a five year loan. By the time you pay the car off in the fifth year it won’t be worth what you paid over the length of the loan. You’ll see when you still owe on the car and try to trade it for a new one. What the car will get on trade-in will not be enough to pay off the loan and the difference will be added to the cost of the new car. This even gets worse in states like California who now will give you a nine year loan on a new car!

The bank needs to know some information about you before you can get credit. They will check your character which shows them if will you pay. They will check your income to see if you have the capacity to pay. Then they will see what you’re offering for collateral. What will the bank get if you fail to pay. For most loans the collateral is what you buy like your car or home. However inappropriate uses of credit are buying things like clothing, sports equipment, and entertainment on credit because the payments outlast the items.

You can be motivated to abuse your credit. If you see something and just have to have it it’s called impulse buying and you should avoid it at all costs. Another problem we all get into is in trying to keep up with the Jones. If your neighbor has something you just have to get it or go one better. You didn’t need it, but got it because someone else had it. Then there is the old retaliatory spending. Your spouse goes and gets something new so you do too just to get even. Then there is the spending just to feel good. This is where you get into the habit of buying something just to make you feel better. All of these things can put you into a situation of carrying too much debt and it will make it harder to get credit when you do need something important.

Listed below are some warning signs of credit problems:

• Carrying excessive credit card debt. Example, having seven credit cards and they’re all maxed out
• Increasing income commited to debt
• Falling behind on payments
• Needing a cash advance for essentials
• Paying the minimum each month
• Using credit for basic needs
• Lack of savings
• Needing income from a second job
• Skipping or rotating billpayments
• Using credit to pay credit
• Being denied credit

If you have done or are doing any of the above things with your credit you’re in trouble and need to get some help.

To help you with your credit there are some credit bureaus you can go to check your credit history. They are Experian at www.experian.com, TransUnion at www.tuc.com, and Equifax at www.equifax.com. These credit bureaus keep records on your credit history and make it available to you. Check your credit report at least once a year. It is free if you get it once a year, but there will be a cost for the report if you get it more often. The report components are your personal and employment history, your credit history, any public records on you, and any inquires made about you. You will see inquires if someone has looked at your credit report in the last six months. You want to ensure these reports are accurate and reflect you true credit history. Mistakes have been made on these reports.

You have protection under the law with consumer protection laws.

• The truth in lending act – says you must be told the annual percentage rate and the total finance charge prior to the transaction
• The fair credit billing act – this protects you from billing errors and allows you to dispute charges
• The fair credit reporting act – This provides you the right to know what is on your credit record and provides for the dispute and deletion of inaccurate or outdated information
• The fair debt collection practices act – This determines the means by which debt collectors can contact you.
• The equal opportunity act – provides for granting of credit regardless of race, gender, marital status, age, religion, color, or national origin
• The fair credit and charge card disclosure act – requires that credit card sloicitations inform you of their total cost
• The state protection laws – it is important to note that Federal laws do not regulate the amount of interest lenders may charge you. Some states have usuary laws, most of which limit interest rates to a 30% maximum, but many have no protection

In dealing with creditors you must stay in contact with them, be honest with them, and have a plan to pay your debts. Even when filing bankruptcy you might be able to get some relief if you just follow the advice. Don’t get debt consolidation loans. Most people who get one will need another because they can’t control their spending. You must change your spending habits.

Remember that you are the only one who can repair your credit. There are a lot of places out there who tell you they can fix your credit. All that will do is line their pockets and not fix anything for you. You really are the only one who can take care of your credit!

Assistance

Counseling

• Army - E-mail
  
  Anthony Powell – Ft. Bliss, TX
  Wk Ph:  915-568-4453,
  DSN:  978-4453
  Email:  anthony.powell1@us.army.mil

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• Navy - E-mail
  
  Mike Kempf – Pensacola, FL
  Wk Ph:  850-452-3228,
  DSN:  922-3228
  Email:  mikekempf@bellsouth.net

More information

• Important changes to credit reports for 2008
• Links to more information
• mysdcc.sdccd.edu

New Links 10-21-2008

• Boston.com
• The News Service
• mymoney.gov

Calculators

• Savings
• Monthly Cash Flow
• 401(k) Value
• Hidden Expense
• Life Insurance
• Loan Amortization
• Net Worth
• Retirement Planning
• Taxed and Non-Taxed Compounding

Glossary

• Common terms in financial planning

General Information

• SDCC has articulated the Navy PFM course for one college credit. Navy personnel who have graduated from the Navy PFM course qualify. Typically, it can be difficult to apply one credit and meet the requirements of a three credit semester long course at most colleges and universities. With that in mind, we have taken the initiative of developing a two credit online course that will be available upon completion of the Navy PFM course. Sailors who have completed the requirements of both the Navy PFM course and the online PFM course will be given credit for completing the three credit Consumer Studies 110 course offered by San Diego City College and Mesa College and transferable to any Servicemembers Opportunity College (SOC).

• For additional information or to see if you qualify contact a PFM counselor.