The Importance of Responsible Credit Usage

There has been a lot of focus in the media about credit scores lately because in some markets, the credit crunch has limited the availability of credit to only those with the top scores. That is not so much the case in our market and even less applicable at the credit union. We really do have money to lend, but we also want to make sure our members use credit responsibly.

After all, your credit score and your credit report can affect so much more than simply obtaining loans. Credit scores are often used to calculate insurance rates and many employers use credit reports to screen potential employees. Bad credit can have a negative impact on marriages and even personal health. Then, there is the cost in dollars of bad credit. People with bad credit will pay more for cars, credit cards and mortgages. For example, on a 30 year mortgage of $150,000, a member with poor credit can expect to pay $144,000 more than a member with excellent credit over the life of the loan (see table below).



Now that we have your attention, what are some ways to raise a credit score?

• Pay your bills on time, even if it is only the minimum amount.
• If you are past due get current and stay current.Keep your balances low on credit cards and lines-of-credit (revolving debts).
• Pay off your debt; don’t move it around. Make sure to pay the debt down instead of moving it from low rate card to low rate card.
• Don’t open a number of new credit cards that you don’t need, just to increase your available credit.
• Don’t open a lot of new accounts rapidly. Rapid account buildup looks risky if you are a new credit user.

If you have had past credit problems, what can you do?

• Pay your collection items
• Pay your judgments
• Pay your charged off debts
• Open new accounts and handle them responsibly. The credit union offers a credit saver loan which can help in this area. Paying old debts will not remove the item from your report. Responsible handling of new accounts will establish new history and risk patterns and eventually improve your score.

Should you have any questions about using credit responsibly, please feel free to contact us at info@gcefcu.org

Avoid the High Costs of Check Scams

It is important to know that checks don’t offer the same protections as credit cards and other forms of payments. Anyone can print what appears to be completely legitimate check and send it to you. Once you deposit that check into your account, you become liable for the funds. We accept your deposit on good faith. No one would be happy if we held every check that members deposited.

“Most Americans don’t realize they are financially liable when they fall for these scams,” said Susan Grant, vice president of the National Consumer's League, an Alliance partner. “There is no legitimate reason anyone would mail you a check or money order and then ask you to wire money in return,” Grant said. “People need to know that checks can take months to clear, even if the money initially looks like it’s in your account. The scammers know that, and most consumers don’t.”

The most common scams we see at the credit union are:

• Sudden Riches: The scammer claims the victim has won a foreign lottery or sweepstakes. The notice comes by mail, phone, fax or email. Consumers should know that winners of real cash prizes are notified by certified mail.
• Work-at-Home: The scams promise easy money by ‘processing’ checks. The victim deposits the checks and sends the money to the scammer, minus a small fee. Legitimate companies don’t do business like this.
• Overpayments: Scammers buy merchandise online, and then claim they mailed the wrong amount by mistake. The seller is asked to deposit the ‘wrong’ check anyway, and then return the ‘excess’ amount to the scammer. But the check doesn’t clear, and the victim has sent the scammer his own.

The cost of becoming the victim of one of these scams is always high. The victim ends up owing the credit union the funds which usually runs between $2000 to $5000. The victim usually ends up spending countless hours following up with authorities who are so overwhelmed that these cases are rarely solved. The victim suffers emotionally as well.

The only way to avoid these costs is to avoid the scams. If you would like more information, please feel free to send us an e-mail at info@gcefcu.org