Credit Cards

Credit is an increasingly important part of medical student financial life.  There are stories of students seeking loans and finding that their adverse credit ratings preclude their eligibility.  This is particularly true of students who have been working for some years, but even in college it is possible to have developed a bad credit rating. 

Limiting the amount of credit used is the most important strategy.  One credit card is enough and bills should be paid on time.  Charging more than can be paid in one month is a bad habit and can lead to problems as the interest accrues. Additional financial aid will not be awarded to pay off debts. Students are responsible for any debts incurred prior to matriculation at the School of Medicine.

If a student cannot obtain a loan because of a negative credit rating, School of Medicine funds will not be awarded to replace that loan.  Therefore it is recommended that you obtain a copy of your credit report before matriculation to ensure that all information being reported is correct.  Under a law passed several years ago consumers will now be able to get free copies of their credit report every year.  

The fastest way to get your free credit report is over the Internet. Go to www.annualcreditreport.com and complete the request form.  You must give them your Social Security number, but the line is supposed to be secure.  You will be asked a number of questions that only you would know the answers to. This information is already on your credit report. Once you are on the site, you can get your credit reports from all three of the major credit reporting agencies at once or you can stagger your requests, say every four months, to get current copies. Each credit reporting agency must give you one free credit report a year at your request. When you order online, be prepared to print it out. Your one visit will be the only time you can get it free.

You may also get your free credit reports by telephone or mail. You can call (877) 322-8228 or ask for a form at Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Do not contact the three nationwide consumer reporting companies directly. They are providing reports only through the above-mentioned methods.

You will want to look for inaccurate information on your credit report. The instructions for correcting a report will be part of the report you receive. If you wish to correct something, write to the credit reporting agency and ask that the information be corrected. The agency has 30 days to check it out and report back to you. If your request results in a change, they must send you a corrected version of your credit report free of charge. Be warned that while you are entitled to one free credit report a year from each agency, the companies will try to sell you additional services. If you agree to those services, you will be charged. Your credit report will not have your credit score. For that, you will have to pay a fee. And so you know, negative information can stay on your credit report for seven years and 10 years for a bankruptcy. There is no time limit on reporting information about criminal convictions.

Any credit troubles are highlighted on your report by either an asterisk or a box.  They are considered “derogatory remarks” for which most lenders will demand explanations before granting credit.  Repairing a credit report usually requires a written explanation about why a particular account wasn’t paid or was paid late.  If you don’t have any reasonable explanations, you will have to establish a track record of 12 to 24 months of timely payments.  Credit will also be an issue when loan repayment begins.  Lenders charge a stiff collection fee on top of principal and interest if loan payments are not made on time.  Defaulted loans will be reported to credit bureaus and adversely affect eligibility for credit cards, car and home loans, and loans associated with setting up a private practice.

Tips for Maintaining Good Credit ©2003 by Access Group, Inc.

The following tips can help you develop and maintain a strong credit record; one that should allow you to borrow the funds you’ll need to fulfill your educational dreams and successfully achieve your other long-term goals.

  1. Identify and write down your financial goals.
    How much will you need to earn to achieve your goals?  And remember, major goals like buying a house probably will require that you have good credit so that you can obtain a mortgage at a reasonable cost.
  2. Develop and follow an affordable monthly budget. Live below your means while you’re a student; learn to stretch your dollars; be thrifty.
  3. Pay all your bills on time. Just one late or missed payment can have a noticeable negative impact on your credit score, and the negative influence of that missed payment can last for a number of months after you’ve brought your account current.  Most items remain on your credit report for at least seven (7) years, and if they’re on your report they can influence your credit score.
  4. Minimize your credit card debt.  Avoid charging more than you can afford to repay in full each month.  Keep credit card balances to no more than one-third of you available credit limit.  Get in the habit of using cash, not credit cards, whenever possible.  Credit card debt that carries over from month to month can be very costly and may lower your credit score.
  5. Check your credit report for accuracy at least once a year. Promptly notify the reporting agency of any errors; it can take several months to correct those errors.
  6. Maintain accurate financial records. Keep copies of all documents relating to your financial activities.  At a minimum you should retain all loan documents until the corresponding loan is fully repaid.  These documents should include the application, promissory note, disbursement and disclosure statements, loan transfer notices, and lender correspondence.
  7. Notify your creditors immediately whenever your address changes. Typically you can provide information updates by phone or via the creditor’s web site.  But remember, it’s your responsibility to keep them informed.
  8. Borrow the minimum amount needed to achieve your goals. You’ll have to repay all that you borrow with your future income.  Will that income be enough to cover all your future living expense, including estimated monthly education loan payments?  Minimizing your in-school borrowing will increase the chances that you’ll be able to afford the financial future you desire once you have your degree.
  9. Limit the number of credit card accounts you maintain. You probably don’t need more than three major credit card accounts.  Avoid opening new department/retail store charge accounts; they typically can only be used at the store that issued the card and they tend to have the highest interest rated of any credit card.
  10. Be careful about opening new credit card accounts and closing older ones. It’s beneficial to have the longest possible history regarding the age of your credit card accounts.
  11. Save before you spend. Set aside at least a small amount at the beginning of each month before you start spending your money for other things, so that you’ll be prepared for an emergency if one occurs.

 

A Final Word About Using Credit Cards ©2003 by Access Group, Inc.

You should be very careful about how you use credit cards.  In fact, it’s probably best if you use cash rather than credit cards when making purchases.  Consumer credit is not an investment; it’s simply a means of improving your standard of living on a temporary basis.  Credit card and other consumer debts should be paid off as quickly as possible.  You also need to understand that you won’t be able to borrow additional education loan funds (over and above the cost of attendance established by your school) in order to pay your outstanding credit card debt.

Although it may seem that credit cards can make life easier, that convenience can create a whole host of problems.  Those problems can include credit-related issues such as missed payments (resulting in a poorer credit score) as well as other difficulties when stress caused by the credit card debt begins to adversely affect academic performance and other aspects of your life.  Therefore anyone thinking about using credit cards should know and understand the “Credit Card ABCs.”
            A credit card is helpful in emergencies, but emergencies rarely happen at the mall!
            Buying something on SALE is still SPENDING—not SAVING!
            Credit card debt is not an investment; in fact, in reduces your ability to invest!
            Debt from credit cards can make it more difficult to achieve your financial goals!

 

Credit Scoring ©2003 by Access Group, Inc.
 
Another measure that oftentimes is used to quantify how well individuals have managed their credit obligations is credit scoring.  Credit scoring is a quick, accurate, consistent, and objective method of determining the likelihood that someone will repay a future loan.  Fair Isaac and Company (FICO) first developed the credit scoring methodology and currently is the largest provider of credit scores to lenders.  The “credit score” is a numerical forecast based on information in a person’s credit report that focuses on individual borrower behavior. The higher the score, the better.

Factors that influence a credit score include:

  • Promptness in paying bills
  • Total debt
  • Amount owed on all credit card accounts
  • Age of credit accounts
  • Number of credit card accounts
  • Total available credit card limit
  • Proportion of credit card balances to total available credit card limit
  • Number of credit card accounts opened in past 12 months
  • Number of finance accounts
  • Occurrence of negative factors such as serious delinquency, derogatory public records, past due accounts that have been turned over to collection agencies, bankruptcies, student loan defaults, and foreclosures

 

Students Beware of Identity Theft: The Fastest Growing Crime in Our Nation Today ©2003 by Access Group, Inc.

What is Identity Theft?  Identity theft occurs when an imposter takes your personal data – usually your name, Social Security Number (SSN), driver’s license number, address and/or birth date – and use it for his or her own financial gain.  This person may apply for telephone service, credit cards or loans, buy merchandise, lease cars or apartments, and apply for a mortgage.  They might even use your identity to gain employment – working as you.

What s considered sensitive information?  Social Security Number (SSN), driver’s license number (DLN), address, date of birth (DOB), mother’s maiden name, bank account numbers, and employee numbers.

Anyone can become a victim of identity theft.  Here are some common sense actions that you can take to lower your risk and exposure of this crime.

  • Cross-cut shred sensitive papers before they go in the trash.  This includes pre-approved credit card offers, checks, insurance benefit statements, bills, statements, anything with barcodes.
  • Guard your SSN – don’t carry it and resist giving it out unless necessary.  Don’t put SSN on checks.
  • Check you credit report once a year.
  • Block your name from pre-approved credit card lists – 888-5OPTOUT.
  • Keep wallets and purses secured.
  • Guard your personal information.  Carry as little as possible in your wallet.  Get credit cards with your picture on them.  Make sure that conversations cannot be overheard when exchanging sensitive information.  Cancel credit cards you no longer use.
  • Password protect your computer.  If you leave it unguarded even for a minute, close the program you were working on.  Watch out for internet scams.
  • Avoid placing personal mail with checks, SSN or account information in the unlocked outgoing mailbox (i.e.: receptionist’s desk).

What should I do if I become an identity theft victim or believe I might be?

  • Call the three credit reporting agencies to assess the damage.  Place a fraud alert on your Social Security Number and have them send you copies of your reports.  Look them over carefully for any fraudulent activity or inaccuracies.  There are three major automated credit-reporting services nationwide from which banks get reports.  Each has a local bank or uses a local firm to provide credit data.  The three major companies are:
Equifax 
(216) 234-7004
www.equifax.com
Trans Union Corp
1-800-888-4243
www.tuc.com
Experian
1-888-397-3742
www.experian.com
  • Call the police where you live.  They need to take a report and give you a copy.  Send a copy of this report with any fraud forms you send to creditors.
  • Call and write all the creditors who have opened fraudulent accounts.  Send all correspondence certified, return receipt requested.  Tell them this is a case of ID theft.  Request copies of all application and transaction information on the account.

Identity Theft Resource Center

Voice:  858-693-7935   
            Web:    www.idtheftcenter.org
            Email:  itrc@idtheftcenter.org