Aberdeen Proving Ground Army Community Service, Hearts Apart, hosted a free seminar April 1 to give attendees a basic understanding of the types of credit available and how to use them to their advantage.

Guest speaker Arcelio V. Alleyne, ACS financial readiness program manager, said that if there is one piece of advice that he could stress above all, it would be to always pay more than the minimum payment on credit cards.

"Don't be complacent with making the minimum payment, because all you're doing is making the credit card companies richer, and it's going to take you a very long time to pay off your debt," he said.

Phyllis Ethridge, ACS relocation readiness specialist, explained that the seminar is typical of what ACS is trying to accomplish through its Hearts Apart program.

"We want to expose and showcase the talents of our staff that we have here at Army Community Service so that Family members will know what types of services and resources they have at their fingertips," Ethridge said. "All of our services are free, and available to all Army military and civilian employees."

The wide range of services available through Hearts Apart include financial readiness counseling, relocation counseling, deployment and mobilization assistance and support, Family employment readiness and more.

"If someone comes to us in need of a service we cannot provide, then we can outsource or use another resource off the installation to get them the help that they need," Ethridge said.
For more information on Hearts Apart or other ACS programs, contact Ethridge, 410-278-2464 or e-mail phyllis.ethridge@us.army.mil

The following is a synopsis of Alleyne's seminar on using credit wisely.

What is credit'

Credit is one's reputation as a borrower. It's the answer to the question, "how likely is this person to make full and on time payments on their debt'" A person's credit score is a way for creditors to make a quick assessment.

Advantages, disadvantages of using credit
Using credit can be convenient and safe. It can come in handy in case of an emergency, and it can enable one to make large purchases that can be payed off over time that they would otherwise not be able to afford. Credit is also often necessary to make reservations or order items over the phone or online.

However, every time a person uses a card some of their financial flexibility is lost, obligating them to make the minimum monthly payment on the balance now owed. There can also be a false sense of financial security when credit is used too often leading one to believe that he or she can afford something when they cannot. It is easy to overspend when using credit and one may come to find over time that they feel as though they are always paying for past financial mistakes.

Four basic types of credit
Service credit: a line of credit extended by a phone or other utility company. Service credit often requires a deposit and has penalty fees for late payments.

Loans: can be secured, requiring the borrower to put up collateral such as a car or home if payments are not made, or unsecured, requiring no collateral. Payment terms vary from days to years, and may require regular payments over time or a final payment of one lump sum.

Installment credit: also known as an easy payment plan, a borrower can take goods home with the promise to pay later, in scheduled installments. The items purchased may be used as security for the loan.

Credit cards: may be issued by financial institutions, individual retailers or businesses. They can be looked at as interest free loans if paid in full each month. (Note that a debit card is not a credit card, though it can be used the same way. With a debit card, funds are drawn directly from one's checking account as items are purchased.)

Establishing credit
The process of establishing good credit requires borrowers to take out lines of credit and prove, over time, that they can make full and on time payments. To establish credit a person must first open a checking or savings account. Once that's done they can apply for a department store credit card, gas card, bank credit card, short term cash loan from a bank or a secured credit card. One lesser known way is to have a land line telephone installed and billed in your name.
Some institutions may require a cosigner when a person is building up credit. If you are ever asked to cosign for someone, remember that you are assuming 100 percent of the financial responsibility and not 50 percent. That line of credit will now appear on the cosigner's credit report and any late payments made will adversely affect the cosigner's score just as much as it would if it were in one name only.

Questions to ask before applying for credit
Can I afford the monthly payments'
Can I pay more than the minimum balance'
What's the interest rate'
How much do I spend on living expenses each month'
How much do I save each month'
Things to watch for when shopping for credit

Acceleration clauses: these allow creditors to demand payments of an outstanding balance or additional collateral in the event different circumstances, such as failure to make payments, bankruptcies or loan covenants, which are restrictions on the credit holder's freedom to incur more debt.

Repossession: allows a creditor to repossess purchased merchandise due to failure to make payments.

Balloon clause: requires a large last payment, often more than double the average payment amount.

Prepayment penalty: credit holder incurs penalties for paying off debt early.
Interest rate/annual percentage rate (APR)

Method of finance charge calculation
Grace period
Signs credit is not being used wisely
Exceeding credit limits, paying no more than the minimum on monthly payments, not being able to handle minor emergencies, requesting increased credit limits, missing payments and not knowing how much is owed are all signs that the use of credit is out of control. Wage garnishment is a sign that an individual has reached the end of the road. Don't wait until then to take necessary measures to clean up credit; seek counseling through Hearts Apart.

Cleaning up bad credit
First, a person should pull their credit report annually at a minimum and dispute any inaccuracies.
Alleyne does not recommend turning to a company that claims that they can clean up a person's credit.

"They can't do anything that you can't do yourself," he explained. "If a line of credit is yours, then there is nothing that they can do to get it removed. If it is not, then they'll just do the same thing you would do, which is dispute the account and wait for the investigation to take its course. It usually takes about thirty to forty-five days to get the results of the inquiry."

Communication with creditors is always encouraged, as creditors may be willing to work with the credit holder to make payments more manageable when a credit holder is experiencing financial hardship.

In the case that there is something a person would like creditors to know when deciding whether or not to issue credit, a 100-word statement can be added to an individual's credit file to explain a specific situation of an account.

The return on savings is usually a fraction of what the interest is on different forms of credit, especially credit cards. If one has savings, they should consider paying off any high interest credit that they have.

Credit holders should always know their rights and should familiarize themselves with the Fair Credit Reporting Act and Fair Credit Billing Act. Free financial advice is provided through Hearts Apart and is just a phone call away for anyone with questions.

Advice on wise credit use
Above all, watch for warning signs of credit over use.

Everyone should check their credit every so often to know what's on the report and to be able to challenge any inaccuracies. Individuals can visit www.annualcreditreport.com annually for a free copy of their credit report. Remember that there are three major credit reporting agencies; Experian; Trans Union; Equifax. Be sure to check with all three, as they may not all report the same things.

When it comes to credit cards, avoid high interest cards, and don't use the card for day-to-day expenses; unless, that is, a person has the discipline to become what Alleyne calls a "professional credit card user."

"Remember that a credit card can provide you with an interest free loan provided that you don't carry a balance," Alleyne said. "Make your payments on time and within the grace period specific to your card, which is usually twenty-five to twenty-eight days, and you can reap the benefits."
Also check with credit card companies to see what type of cash back, mileage, or other benefits they may offer to their users.

For questions regarding wise credit uses or other financial guidance, contact Alleyne, 410-278-2450 or e-mail arcelio.alleyne@us.army.mil.