The Credit Handbook


Top Ten Credit Tips

1. Remember that credit cards are just like a loan—you have to repay what you borrow.

2. Pay your bills on time. This will help your credit rating, and eliminate costly late fees.

3. Pay your bills in full if possible. This will eliminate finance charges.

4. Always pay more than the minimum payment. If you don’t, it will take forever to get caught up on your bills, and you will pay a lot of money in finance charges.

5. Reduce your reliance on credit. When you do use credit, keep track of how much you spend. Remember that impulse purchases add up fast.

6. Save your receipts. Then you can compare your receipts to your monthly bill and promptly report any problems.

7. Never lend your credit card or debit card to anyone. Don’t share your PIN either. You could just be setting yourself up for fraud.

8. Set a budget and stick to it so you don’t end up owing more than you can afford. This could damage your credit rating. A negative credit rating can make it harder to finance a car, rent an apartment, buy a house, or even get a job.

9. Check out your credit report at least once a year. Make sure it accurately reflects your financial situation, and check for potential fraud.

10. If you are overwhelmed by credit debt, seek help. Don’t delay. Facing up to your financial problems will help you begin solving them.

Glossary of Terms

341 Meeting:
A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, examiner, or the United States trustee about the debtor’s financial affairs.

Advance-Fee Loan Scam:
In this scam, con artists promise loans in exchange for up-front payment.

Annual Fee:
A flat, yearly charge imposed by credit card companies, similar to a membership charge.

Annual Percentage Rate (APR):
The measure of the cost of credit, expressed as a yearly rate.

Property that can be used to repay debt, such as a car or home.

Automated Teller Machine (ATM):
Electronic terminals that consumers can use to make deposits, withdraw money, and conduct other financial transactions.

Automatic Stay:
A temporary injunction that automatically stops lawsuits, foreclosure, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

A legal procedure in federal court for dealing with the debt problems of individuals and businesses.

Bankruptcy Code:
The formal name for Title 11 of the United States Code, (11 U.S.C. 101-1330), the bankruptcy law.

Bankruptcy Estate:
All legal or equitable interests of the debtor at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)

Bankruptcy Petition:
A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions.)

Bankruptcy Trustee:
An individual appointed in all Chapter 7 and 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

Chapter 7:
The chapter of the Bankruptcy Code that provides for liquidation of a debtor’s assets. The proceeds are distributed to creditors.

Chapter 13:
Also called personal reorganization, this type of bankruptcy allows a debtor to keep property and pay debts over three or five years.

A creditor’s assertion of a right to payment from a debtor or the debtor’s property.

Property offered to support a loan and subject to seizure if you default on the loan.

The first document in a lawsuit that notifies the court and the defendant of the grounds claimed by the plaintiff for an award of money or other relief against the defendant.

Approval of a plan of reorganization by a bankruptcy judge.

A person who signs a loan or credit contract with someone else, thereby assuming equal responsibility for the loan or agreement.

The right granted by a creditor to pay in the future in order to buy or borrow in the present.

Credit Reporting Agency:
An agency that keeps your credit record. The credit reporting agency creates credit reports about you based on your credit history.

Credit Card:
A card used over and over to borrow money or buy goods or services on credit.

Credit History:
The record of how you have used credit over time. This is usually reported by credit reporting agencies in the form of a credit report.

Credit Repair Scam:
A scam in which con artists promise to “fix” your credit report.

Credit Report:
Information provided by a credit reporting agency to someone with a legitimate business need. The report details how you have borrowed and repaid debts.

Credit Scoring System:
A statistical system used to rate credit applicants according to characteristics relevant to creditworthiness.

A person or business owed money by a debtor.

Past and future ability to repay debts.

Debit Card:
A plastic card that consumers use to make purchases, access cash, or make other types of electronic funds transfers.

Formally, a person who has filed a petition for relief under the Bankruptcy Code. Informally, anyone who owes money.

Failure to repay a loan or otherwise meet a credit obligation.

An individual against whom a lawsuit is filed.

A legal right to postpone payment on a student loan.

A release of a debtor from personal liability for debts.

Dischargeable Debt:
A debt for which the Bankruptcy Code allows the debtor’s personal liability to be discharged.

Information that must be given to consumers about their financial dealings.

Electronic Funds Transfer Systems:
Technology used to transfer funds electronically, rather than by cash or check.

The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (For example, if you have a home valued at $100,000 and you have a $60,000 mortgage on the home, you have $40,000 in equity.)

Exempt Property:
Property that a creditor is not allowed to take to repay a debt.

Property that state law or the Bankruptcy Code permits a debtor to keep from creditors.

Finance Charge:
The dollar amount you pay to use credit. This includes interest costs and all charges associated with the transaction.

Asking the lender for a temporary break or reduction in student loan payments.

The third party, often an employer or a bank, that holds your assets.

When a creditor wins a judgment against you in court and then collects it by taking money out of your bank account or paycheck.

Grace Period:
The number of days you have before a credit card company starts charging you interest on new purchases. Not all credit cards have grace periods. Also called a free period.

Joint Account:
An account held by two or more people so that all can use the account and all are responsible for paying any debts under it.

Joint Petition:
One bankruptcy petition filed by spouses together.

Late Payment:
A payment made after the due date. Additional penalties may be assessed.

A person who signs a lease to get temporary use of property.

A company that provides temporary use of property, usually in exchange for periodic payment.

A claim against a property designed to secure payment of a debt or performance of an obligation.

Liquidated Claim:
A creditor’s claim for a fixed amount of money.

A sale of a debtor’s property with the proceeds to be used to pay creditors.

Motion to Lift the Automatic Stay:
In bankruptcy proceedings, a request by a creditor to allow the creditor to take action against a debtor that would otherwise be prohibited by the automatic stay.

No-Asset Case:
A Chapter 7 bankruptcy case where there are no assets available to satisfy any portion of the creditor’s claims.

Nondischargeable Debt:
A debt that cannot be discharged in bankruptcy.

Objection to Discharge:
A trustee’s or creditor’s objection to a debtor receiving any discharge in bankruptcy.

Objection to Exemptions:
A trustee’s or creditor’s objection to a debtor’s attempt to claim certain property as exempt.

Open-end Credit:
A line of credit that may be used over and over again, including credit cards, overdraft credit accounts, and home equity lines of credit.

Overdraft Checking:
A line of credit that allows you to write checks or withdraw funds for more than your actual balance, with an interest charge applying to the overdraft.

Periodic Rate:
The interest rate the card issuer applies to your outstanding account balance to calculate the finance charge for each billing cycle.

Personal Identification Number (PIN):
A numeric password that you use to activate your ATM or debit card.

A person that sues someone by serving a formal complaint.

A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Point-of-Sale (POS):
The point at which a consumer makes a payment to a merchant, usually by having money taken electronically from their accounts and deposited in the merchant’s account.

The Bankruptcy Code’s identification and ranking of some unsecured claims. This determines the order in which certain unsecured claims that are considered priority claims are paid if there is not enough money to pay them all in full. Some examples of priority claims that may be ranked by the Bankruptcy Code are attorney’s fees, accountant’s fees, child support, and some tax debts.

Reaffirmation Agreement:
An agreement by a debtor who has gone through Chapter 7 to continue paying dischargeable debt after the bankruptcy, usually to keep the collateral or property.

This is a court action allowing a sheriff to conduct a repossession with a court order.

Lists submitted by the debtor in a bankruptcy case along with the petition showing the debtor’s assets, liabilities, and other financial information.

Secured Debt:
A debt for which the creditor has the right to pursue specific property upon default, like a house or car.

Property pledged to a creditor in case a consumer defaults on a loan.

Transaction Fee:
Some credit card issuers charge a fee for a cash advance, a late payment, or going over your credit limit.

Any means by which a debtor disposes of the debtor’s property.

Undersecured Claim:
A debt secured by property that is worth less than the amount of the debt.

United States Trustee:
An officer of the federal Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trusts, monitoring plans and disclosure statements, monitoring creditors’ committees, monitoring fee applications, and other duties.

Unlawful Detainer Action:
A lawsuit brought by a landlord to evict a tenant from rental property.

Unliquidated Claim:
A claim by a creditor in bankruptcy for which a specific value has not been determined.

Unsecured Claim:
A claim or debt for which a creditor holds no special assurance of payment. A debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.

Voluntary Transfer:
A transfer of a debtor’s property with the debtor’s consent.

Consumer Agencies

Office of Minnesota Attorney General Keith Ellison
445 Minnesota Street, Suite 1400
St. Paul, MN 55101
(651) 296-3353 (Twin Cities Calling Area)
(800) 657-3787 (Outside the Twin Cities)
(800) 627-3529 (Minnesota Relay)
(for help with consumer questions or to file a consumer complaint)

Better Business Bureau of Minnesota and North Dakota
220 South River Ridge Circle
Burnsville, MN 55337
(651) 699-1111 or (800) 646-6222 link icon
(for help with consumer questions, to file a complaint, or to check the complaint data about a company)

U.S. Government Publishing Office
(844) 872-4681
(to review and order hundreds of federal government publications)

Minnesota Department of Commerce
Financial Institution Divisions – Banking
85 7th Place East, Suite 280
St. Paul, MN 55101
(651) 539-1570 (local)
(800) 657-3602 (Greater MN only) link icon
(to file a complaint about a state chartered bank or other state chartered financial institution)

Minnesota State Bar Association
www.mnfindalawyer.comexternal link icon
(for attorney referrals statewide)

Dakota County (952) 431-3200
Hennepin County (612) 752-6666
Ramsey County (651) 224-1775
(for attorney referrals in the above counties)

Federal Trade Commission
Bureau of Consumer Protection
600 Pennsylvania Avenue NW
Washington, DC 20580
(877) 382-4357
TTY: (866) 653-4261 external link icon
(for help with entities regulated by the FTC, such as finance companies, stores, auto dealers, mortgage companies, and credit reporting agencies)

National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, VA 22314
(703) 518-6330 external link icon
(for help with federally chartered credit unions)

National Foundation for Credit Counseling
(800) 388-2227
www.nfcc.orgexternal link icon
(for help with money management, budgeting, and debt counseling)

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA. 30348
(877) 322-8228
www.AnnualCreditReport.comexternal link icon

P.O. Box 749241
Atlanta, GA 30348
(800) 525-6285
www.equifax.comexternal link icon

P.O. Box 2002
Allen, TX 75013
(866) 200-6020
www.experian.comexternal link icon

P.O. Box 1000
Chester, PA 19022
(800) 888-4213 external link icon

Consumer Financial Protection Bureau
P.O. Box 2900
Clinton, IA 52244
(855) 411-2372 external link icon
(for consumer information and help with entities regulated by the CFPB, such as banks, mortgage companies, and financial institutions)

Lutheran Social Services Financial Counseling
PO Box 306, Duluth, MN 55801
(218) 529-2227 or (888) 577-2227
www.consumer.govexternal link icon
(for consumer information from many federal government agencies)

Board of Governors of the Federal Reserve System
Federal Reserve Consumer Help Center
P.O. Box 1200
Minneapolis, MN 55480
(888) 851-1920 external link icon
(investigates consumer complaints against Minnesota chartered banks that are members of the Federal Reserve System)

Office of the Comptroller of the Currency
Customer Assistance Group
1301 McKinney Street, Suite 3450
Houston, TX 77010
(800) 613-6743
www.occ.govexternal link icon
(for help with banks it has the authority to regulate, such as banks with “national” in the name or N.A. after the name)

Federal Deposit Insurance Corporation
Consumer Response Center
1100 Walnut Street Box #11
Kansas City, MO 64106
(877) 275-3342 external link icon
(for help with banks it has the authority to regulate, such as state-chartered banks that are not members of the Federal Reserve System)