Teens Should be Financially Literate

The month April has been declared as the National Financial Literacy Month. The purpose of this is to educate teenagers to be financially literate. It is very important for your young teenagers to know about credit rating before they are allowed to have credit cards. They have to know that lenders are investigating credit information before they issue credit cards. Educating teenagers to be financially intelligent would help them properly manage their finances in the future.

Avail of your free credit report. You can get a free credit report from the three big nationwide credit bureaus, Experian, TransUnion, and Equifax. These three bureaus have a common website at www.annualcreditreport.com. The free credit report is provided once every 12 months. You can also link to the Federal Trade Commission website at www.ftc.gov for free credit report.

Review with your teen the credit report. Evaluate your own credit report with your teen. Discuss with him or her every detail of information reflected in the report so that he or she can avoid financial pitfalls in the future. Discuss   most especially the importance of paying on time.

Essential information you need to discuss:

The credit report compiles the following information: Payment behavior of consumers, current balances and other information related to consumers’ credit cards and loans. Bankruptcies and liens are also compiled in the credit report. This information is reported by financial institutions to the three big credit bureaus.

What is the purpose of credit report? Credit report is the basis of lenders in approving or denying a loan or a credit card. It is also the basis of determining the rate of interest. A good credit history allows borrowers to get a new loan at favorable interest while a bad credit history requires a higher interest rate or it can even lead to a loan rejection.

Pay your bills before the due date. Credit report records every payment made. Payment made on or before the due date is a major factor in building an excellent credit rating. When the credit rating is excellent, consumers get the best interest rate for future loans, credit card and mortgage.

Why do College Students Decide to Drop Out of School?

Fruzsina Eordogh is a graduating journalism student at Loyola University in Chicago. But last spring she decided to drop out of school. It was a hard decision on her part but she decided to quit because of her $50,000 student loan. Instead of pursuing her studies, she quit and took the opportunity of getting a job.

Since June, Eodorgh at 26, has been working as a full time on line reporter. While her former classmates have pursued their graduate school, she is busy working at Daily Dot, a digital publication which covers culture through internet. She has to work in order to pay her student loan.

There are other cases similar to what happened to Eodorgh. In fact, some of them are Bill Gates, Steve Jobs and Mark Zuckerberg. These drop outs made good but the majority of those who dropped out from school were not successful. According to Harvard’s analysis, the U.S. has the highest rate in dropout among industrialized countries. The data for analysis came from the Organization for Economic Cooperation and Development.

U.S. Tops In School Dropout Rates

In 2011, Harvard graduate School of Education through its study known as “Pathways to Prosperity” has recorded that 56 percent of college students taking up four-year course could make it in six years and only 29 percent of those who are enrolled in a two-year course could finish their course in three years.

The Organization for Economic Co-operation and Development in its report at “Education at a Glance” supports the analysis of Harvard that among the 18 countries with dropout rates the United States tops the list. In Japan 89 percent of students finished college, Slovakia’s record is 63 percent, Poland 61 percent while U.S has only 46 percent.

Student Loans Create The Financial Hole

“Is College worth it?” This is the question commonly asked by students according to Pew Research Center report in 2011.

The cost of college has tripled for the past two decades, from 1980 to 2010. The study shows that the average student loan on the average is $23,000. This is the reason why many students decide to drop out from school and instead pursue a job to pay their loan.

Credit Card Firm Security Breach Puts Canadians at Risk

A warning is given by Better Business Bureau that Canadian consumers might be affected by a security breach in United States.

According to Global Payments, a payment card processing company located in United States, its system has been hacked last Friday. As a result, both Visa and MasterCard are examining operations from the month of January to February.

Avivah Litan, a security analyst, said that the hackers could have possibly taken roughly ten million or more worth of cards.

According to Mark Fernandes, spokesperson of Better Business Bureau, B.C. consumers, especially those who shopped in the United States just this year, must check their financial statements during the last two months for any doubtful changes. If there is something you cannot recall doing, then it is highly possible that it is a false transaction.

Moreover, Fernandes said that it is still likely that the Canadians are in danger despite the fact that Global Payments is located in United States. This is because these types of firms are multinational and handle millions of payment transactions.

According to Andrea Woroch from Verizon Business, people must get in touch with their card issuers as soon as possible if they see something doubtful on their statements.

Based on an interview from the previous year, Woroch said that consumers often neglect little charges on their bills. Unfortunately, this is how others repeatedly take advantage of them.

Credit card scams are approximately just as profitable as the drug trade, warns the Canadian Anti-Fraud Centre. To avoid these scams, only give your card numbers through phone or Internet to trusted firms and always watch over your pin. Also, be cautious of emails that require account information.

Additionally, experts warn that the hacking of the Global Payments’ system could followed by another scam. Fernandes said that any emails allegedly from Global Payments concerning the breach might be a phishing attempt. On Monday, it is anticipated that Global Payments will give more information on the level and extent of the security breach.

Capital One Discontinues Some Loans

According to spokesman Steven Thorpe, Capital One Bank has indeed stopped offering both not secured, CD-backed loans and savings-backed loans in the Baton Rouge market.

Thorpe stated it was a decision that was not easy and concluded after much deliberation. In addition, he said that they will still offer consumer lending products at reasonable rates in the market, such as secured credit cards, equity loans, auto loans and mortgage loans.

Last Monday, Capital One stopped receiving applications for the loans that the bank stopped offering. Patrick Mendoza, the regional spokesman of Capital One, said that loans they stopped offering where only a small segment of their business in the part of Baton Rouge.

Moreover, the directors of Capital One have decided that the income from this line of business is not enough to secure the investment expected to expand the business. The change will not have a huge impact on the consumers who have these loans.

Willie Staats, LSU professor in banking and finance, was a bit shocked at the discontinued loans of Capital One. However, he says that all financial institutions have a new outlook brought about by the Dodd-Frank Act.

Since the main objective of banks is to have greater profits and efficiencies to compensate for their expenses, products which do not meet this objective will be discontinued. Also, Staats estimates that other banks will also make modifications in their own products.

As of the moment, banks have two choices, either to increase their fees or to be more efficient, and strengthen the products they are good at.

In the previous month, Capital One has declared the positions of Steve Lousteau and Scott Ridley will end at May 1. They are both group executives for retail and business banking in their branch at Greater Baton Rouge.

The dismissals of the positions are only a part of a bigger reorganization plan by the bank that will result to dismissal of more or less 30 other executive positions nationwide.

Understanding Co-signed Loans

Because of the numerous dangers that can result from co-signing a loan, both the primary borrower and the co-signer must be completely aware of the possible consequences of co-signing. Although the advantages might seem clear and best for the short-term, there can be harmful effects in the long run.

Co-signed loans can help borrowers, who would not normally be eligible for a loan, build their credit. These borrowers are individuals who have small or no credit at all, who have bad credit history and credit score, who have high debt-to-income ratio, or who are trying to buy something more than their authorized loan amount.

For these types of borrowers, a co-signer, or guarantor, might be expected by the lenders of the loan. Basically, the co-signer guarantees that payments will be made on time by the primary borrower until the maturity date of the loan. Otherwise, the co-signers will be held responsible for paying the outstanding debt.

However, it will be troublesome for borrowers who only have co-signed credit and never purchased anything without help.

As borrowers get high credit score through co-signed loans, they gain confidence to independently apply for a mortgage or loan. In spite of this, there might still be harmful effects in applying for loans.

There might still be some reluctance on the part of the lenders to give a new line of credit to borrowers with a minor credit history. For instance, a fully paid co-signed auto loan might not convince the lenders that the borrower is trustworthy for new credit.

Besides co-signed-loans, another option for individuals who have poor credit history and credit score is a secured loan. As collateral for a loan, secured loans require borrowers to present an asset, for instance, a house or a car. If the borrower fails to pay the secured loan, the lender can take legal action and acquire the asset’s collateral value in order to regain the loss from the unpaid loan.

It is less difficult to get approval for a secured loan than a co-signed loan because of its collateral feature. In addition, co-signed loans will not appear in the borrower’s credit report, therefore, not giving a negative impact to the lenders.

When deciding whether to take a co-signed loan or a secured loan, the borrower must take into consideration both the short-term and long-term consequences.