In a move to equip the younger generation with essential financial literacy skills, the Federal Trade Commission (FTC) hosted a 30-minute “Financial Adulting 101” webinar designed to empower young people to make informed decisions as they navigate the complexities of credit and learn to protect themselves from identity theft and how to spot and avoid scams.
During the webinar, taught by Consumer Education Specialist Terri Miller, she explained what a credit report is, how to obtain a free copy of the report every 12 months from each of three credit reporting companies and why they’re important for detecting financial fraud.
“Your homework is to go to annualcreditreport.com or call 1-877-322-8228 and request your free credit report,” said Miller. “Once you have them in hand, go through each section, making sure your personal information is correct, the accounts listed are the ones you recognize and they accurately reflect how you’re paying your bills.”
An accurate credit report is important because it affects an individual’s ability to borrow money-and how much they’ll pay- to borrow money. It also may affect getting a job or insurance or renting a place to live. She told participants to look for signs of possible identity theft, such as inaccurate personal information or accounts they haven’t opened.
To dispute errors on the report, contact the credit bureau reporting the error and the business that supplied the information, who are required to fix it for free. The credit bureau has 30 days to investigate after a dispute is filed. Visit ftc.gov/credit for credit bureau contact information and sample letters.
“The bottom line here is the sooner you work on fixing the mistake the sooner you’ll see the results,” said Miller.
She also explained to teens that creditors use credit scoring systems to figure out if they’d be a good risk for credit cards, auto loans and mortgages. Credit scores usually fall between 300 and 850 and unfortunately, unlike a free annual credit report, there’s no free annual credit score. “A higher score equals “good” credit and a lower score equals “bad” credit and the higher score means you likely pay your bills on time and businesses look at that score for credit risk,” she said.
Individuals hoping for a quick fix to make their bad credit disappear should be wary of credit repair companies promising the world. “Fixing your credit is going to take time and anyone that makes grandiose promises is probably a scammer so walk away,” she said. “The best way to improve your credit score is to pay your bills on time every month and make sure you’re not taking on additional debt.”
If you’re considering using a credit repair company, red flags include: the company insisting you pay them before they help you, telling you not to contact credit bureaus yourself, disputing accurate information on your credit request and encouraging you to lie on your credit and loan applications.
The last website Miller shared was consumer.gov where individuals can find practical information about how to create a budget, tips for buying your first car and opening a bank account.